From the National Mastitis Council Newsletter "Udder Topics", June 1998

Multiple component pricing (MCP) programs continue to evolve and influence the dairy industry in the U.S., significantly impacting the way producers are compensated for their marketings. MCP programs are incorporated in some Federal Milk Orders (FMO) while others are industry-sponsored. Trends in MCP have been reported by FMO Market Administrators since 1985. The results pertain only to producer milk marketed under the FMO program during the applicable survey month. Data from the most recent report pertains to May 1997.

Thirteen of the 32 FMOs in operation during May 1997 included MCP provisions. In addition to these FMO MCP programs, producers marketing milk under 19 FMOs were subject to some form of industry-sponsored MCP. Overall, producers in 27 of 32 FMOs were eligible for either FMO or industry-sponsored MCP payments. This compares to 21 out of 44 markets in May 1985.

During May 1997, 81.1% of all producers in the 27 orders with either FMO or industry-sponsored MCP programs were eligible for MCP payment. The percentage of all producers in the 27 orders that actually received MCP payments (or reduction in pay prices) through FMO or industry-sponsored plans was 73.5% -- or 90.6% of all MCP-eligible producers. This compares to only 25.7% of all MCP-eligible producers in 1985. A major factor in the large gain in MCP recipient producers has been due to the establishment of FMO MCP programs during the last few years.

Five of the 19 federal order markets with industry-sponsored MCP plans reported proprietary handlers operating MCP plans during May 1997, while 18 markets reported cooperatives using MCP plans. Protein was the nonfat component priced in 16 of the 19 markets. Solids nonfat (SNF) payment programs were used in only two markets. Five markets reported payment plans which either indirectly priced components through another mechanism such as product yield formulas, or priced multiple nonfat components. Over 30% of the industry-sponsored payment plans included both positive and negative price adjustments.

The relative incidence of SNF, protein and "other" MCP programs varied among states and regions. Protein pricing was the only type of industry-sponsored plan in 14 of 40 states with MCP plans, and was the most prevalent in 25 states. "Other" MCP plans were the most prevalent in 10 states. Overall, of all the producers eligible for either FMO or industry-sponsored MCP payment, 38.5% were eligible for protein payment, 9.2% were eligible for SNF pricing, and 52.3% were eligible for some "other" program.

Quality standards are often employed in conjunction with industry-sponsored programs. During May 1997, over 56% of the industry-sponsored plans applicable to FMO producers utilized quality standards as a prerequisite for MCP payment eligibility. Somatic cell count was included in 48.3% of industry plans -- of these, 85% specified maximum SCC levels. The most commonly cited maximum SCC level was 400,000 (range varied from a low of 200,000 to over 500,000). Tests for antibiotics were used in 41.7% of industry-sponsored MCP plans, as well as tests for added water (23.3%); standard plate count (16.7%); sediment (18.3%); psychrotrophic count (15%); and others (10%).

Note: In May 1997, the 13 FMO with MCP provisions were: Middle Atlantic; Chicago Regional; Ohio Valley; Eastern Ohio-Western Pennsylvania; Southern Michigan; Indiana; Nebraska-Western Iowa; Upper Midwest; Eastern South Dakota; Iowa; Pacific Northwest; Southwestern Idaho-Eastern Oregon; and Great Basin.

Source: "Multiple Component Pricing Programs Applicable to Federal Milk Order Producers, May 1997 Update" Market Administrator's Office, Tulsa, Oklahoma (May 1997)