Recent Trends in Northeast Farm Prices

Figure 25 shows the Suffolk County, Massachusetts, Class I prices and the Statistical Uniform Prices, or blend prices, for the past seven years. The blend prices have been lower than $15.00 per hundredweight in about 60 percent of the months between January 2000 and May 2007. There have been a few good periods such as late spring and early summer 2004, and it appears we are in the midst of another surge in prices. The announced Suffolk County ( Boston) Class I prices for June and July were $21.09 and $24.16, respectively. These Class I prices should boost producers’ blend prices for June and July above $20 per hundredweight.

Class I prices are directly related to the greater of the Class III price or the Class IV price. Currently, Class IV prices are a driving force behind the Class I and blend prices. The Class IV prices are related to the national market prices for butter and nonfat dry milk by a formula. Figure 26 shows that, butter prices have been most highly correlated with the Class IV price. Over time, nonfat dry milk prices have remained fairly stable (standard deviation of 0.13) when compared with butter prices (standard deviation of 0.32). Thus, variations previously seen in the Class IV prices were due to variations in butter prices. Recently, both butter and nonfat dry milk prices have increased causing the dramatic increase in the Class IV price. Class I prices are tied to the butter and nonfat dry milk market prices, so they’ve risen sharply in response to the changes in butter and nonfat dry milk prices. And, as a result, the blend prices that farmers receive have increased. Tying farm prices to market prices and limiting government control was one objective of the 1996 Farm Act. However, these changes can also result in increased variability