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Classified pricing. A structure of prices that differ according
to category of use. In Federal and some State milk marketing orders,
regulated processors are required to pay a minimum price for Grade
A milk according to the class in which it is used. States, like
California, have price structures analogous to the current Federal
milk marketing orders (as of January 1, 2000) that have four classes
(uses):
- Class I. Grade A milk used in all beverage milks.
- Class II. Grade A milk used in fluid cream products, yogurts,
or perishable manufactured products (ice cream, cottage
cheese, and others).
- Class III. Grade A milk used to produce cream cheese and
hard manufactured cheese.
- Class IV. Grade A milk used to produce butter and any
milk in dried form.
Pooling. With a classified pricing system such as that used
in Federal and State orders, processors pay different prices for
milk in each category of use (classes I-IV). Producers are paid
a weighted average, or "blend," price for all uses of milk in a
particular order or market. Processors pay into or draw out of the
pool on the basis of their utilization of milk relative to market
average utilization. Producers participating in the pool receive
identical uniform blend prices, with adjustments for butterfat content
and location of the plant to which the milk is delivered. In markets
with multiple component pricing, adjustments also are made for protein
and other solids.
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