Over-order Obligation and Producer Payments

For the period between July, 1997 and June, 2000 the compact over-order obligation imposed on Class I milk resulted in the collection of $159.2 million from processors supplying the New England fluid milk market. During the same period, $146.4 million was paid to approximately 4200 farmers in New England and New York who supply the market. (Attachment 1a).

By design of the price regulation, the obligation charged to processors and the payments made to farmers are larger when the underlying federal price is low, and smaller (or nonexistent) when the market order price is high. In the first four years, the total annual obligation amounts ranged on average from $19.9 million to $64.4 million, with an overall annual average of $37.6 million. The total annual producer payments ranged from $16.7 million to $59.7 million on average, with an overall annual average total payment of $34.8 million. (Attachment 1a).  

Per gallon, the over-order obligation was on $0.116 cents on average for the period, ranging from 0 cents for 9 months to a high of 30 cents in one month.  The average annual over-order producer payment was $0.53 per hundred pounds (cwt), ranging from $0.00 for 9 months and $1.43 in one month.