CONTAINS CONFIDENTIAL — ATTORNEY EYES ONLY MATERIAL … Hearings/Oct 2018/Documents... · 2018-09-24 · CONTAINS CONFIDENTIAL — ATTORNEY EYES ONLY MATERIAL REDACTED PURSUANT

CONTAINS CONFIDENTIAL — ATTORNEY EYES ONLY MATERIALREDACTED PURSUANT TO PROTECTIVE ORDER DATED AUGUST 10, 2018

TESTIMONY OF

GINO TOSI

Appearing on behalf of the Pennsylvania Association of Milk Dealers

Cooperative Milk Procurement Costs Hearing

All Milk Marketing Areas

November 5, 2018

Submitted: September 20, 2018 PAMD Exhibit D6

CONTAINS CONFIDENTIAL — ATTORNEY EYES ONLY MATERIAL

REDACTED PURSUANT TO PROTECTIVE ORDER DATED AUGUST 10, 2018

Testimony of Gino Tosi

My name is Gino Tosi. I am appearing today on behalf of the Pennsylvania Association of Milk

Dealers (PAMD) in opposition to the adoption of a mandatory cooperative-only charge on Class I milk to

compensate cooperatives for costs they incur in their function as intermediary between actual dairy

producers and a milk plant.

I. Background

I am retired from Dairy Programs, Agricultural Marketing Service, United States Department of

Agriculture with 31 years of Federal service. I live in Berea. OH, a suburb of Cleveland. I hold a Bachelor

of Science and Master of Science degrees in Agricultural Economics from the Ohio State University. I am

a veteran and a member of the VFW. I began my service with the US Department of Agriculture, first as

a temporary loan officer with the Farmer's Home Administration immediately after graduate school.

While in graduate school, I was recruited by the Foreign Agricultural Service (FAS) as an economist to

work in Washington DC. During my service in FAS I worked on credit programs and food assistance

programs for countries in Latin America; the then US-Canadian Free Trade Agreement; and foreign

market development for US dairy, livestock and animal genetics.

Over 20 years of my Federal service was in the Order Formulation and Enforcement Branch of

Dairy Programs. During my years in Dairy Programs, I participated in a broad range of events and

actions affecting literally all aspects of Federal milk marketing orders (FMMOs). I consider the most

noteworthy to include: the 43-day National Hearing held in six cities in 1990 (the first major event that

considered a number of changes to how the FMMO system operates); numerous separate rulemaking

proceedings of several marketing orders before the reform of all milk marketing orders effective January

1, 2000; when specific FMMO decisions became the subject of law suits, I assisted attorneys of the

J ustice Department by writing portions of briefs explaining FMMO policy and how requirements of the

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Agricultural Marketing Agreement Act are incorporated into FMMO provisions,; in helping prepare

J ustice Department attorneys, I consider my most notable experiences to include the successful defense

of the Federal milk order system in the mid-1990's against lawsuits brought about by interests in the

upper Midwest, and the invitation by the Justice Department to participate as a program expert in what

has commonly referred to as the "Hillside Dairy" case that went before the Supreme Court of the United

States which led to the finding that certain features of the California milk order system to be in violation

of the Commerce Clause of the U.S. Constitution; the four-year reform effort resulting in the current

Federal milk order system of, among other things, larger consolidated milk marketing orders; explaining

program features and rulemaking decisions on Capitol Hill to congressional staff; and I was the primary

author of nearly every Federal order decision during the 10-year period since implementation of the

then 11 consolidated and now 10 orders in 2000 until my retirement in November 2010. Some of the

decisions that I authored were not published and brought to final implementation until after my

retirement.

I am now employed part-time by the Cuyahoga Community College as an instructor. I also

volunteer as a teaching assistant for GED classes for people seeking to earn their high school diploma in

Cleveland's inner city and English as a second language for new immigrants.

It is my opinion the adoption of a "cooperative-only" premium is unnecessary and would set

precedents that are unintended and would be "bad policy." It is unnecessary in that Federal milk

marketing order pricing already reflects the marketing and balancing costs for which the coops seek

compensation. Compensation anew is tantamount to paying twice for the same costs and can

reasonably be viewed as "double dipping" in that compensation for marketing and balancing would be

provided anew. It is bad policy in that its adoption would establish the unwarranted precedent of

favoring one business model, the cooperative, over all other alternative business models. It should

never be the role of government to prefer one business model over another. The cooperatives

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complaint is that the current Pennsylvania regulatory system results in a differential impact between

their business model and the business model employed by dairy farmers who choose to ship to fluid

milk plants as independent dairy farmers. But even if there is this differential impact that results from

the cooperative membership, one cannot ignores all of the financial and non-financial benefits

associated with being a member of a cooperative that change and I believe ameliorate the calculus of

differential impact asserted by PADC. The solution the cooperatives seek is differential treatment. And

thus, in this case, government action would result in unduly enhancing the power of larger cooperatives

over others — including independent dairy farmers. And it is critical that the cooperative proposal and

complaint not be viewed in isolation as the big picture is actually much different.

It is important to note that historically there are more independent dairy farmers in this region

of the United States than elsewhere. As I discuss below, the cooperatives have sought to address their

concerns about the results of their business model by seeking financial benefits (known as marketwide

service payments) from the Federal Milk Order System. The most recent request was denied by USDA

partly because adoption of such a program would favor the use of the cooperative business model over

others — both independent dairy farmers and smaller cooperatives and proprietary plants that provide

equivalent services to the market.

Cooperatives often own and operate plants that exist primarily to produce manufactured dairy

products such as cheese, butter and non-fat dry milk. Cooperatives are permitted to meet FMMO

pooling requirements collectively on behalf of their dairy farmer members. After meeting minimum

performance requirements, cooperatives are assured receipt of a Federal order blend price on all their

milk. And if the cooperatives serve the Pennsylvania Class I market, they receive whatever mandated

premiums are called for under PMMB regulation. Because these cooperatives own these plants and

have milk across the broad geographic region, it is possible for them to pool all their dairy farmers' milk

and receive the blend price even on the milk delivered to their own non-Class I plants.

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Dairy farmers who are cooperative members have advantages from their business model that

are not captured or addressed in the cooperative submission.. For instance, they get management and

administrative support for profitability, trouble shooting, news and education, forward contracting,

entity-wide profit sharing, including from the operation of the plant assets and a guaranteed market for

their milk, with pro rata access to the Class I market. This last point is especially relevant given recent

events when a number of independent dairy farmers in this region lost their fluid milk market after

market dislocations resulting from new plant assets being opened outside Pennsylvania.

And in my experience, if fluid milk plants have higher milk costs imposed as a result of the

cooperative proposal, that money has to come from somewhere other than the procurement costs of

the fluid milk plants — the fluid market competitive arena is not going to permit that simply to be

absorbed even in Pennsylvania with its regulatory structure. The most likely result will be that

Pennsylvania regulated handlers, with a mix of independent and cooperative milk, will have to reduce

any over-price premium they pay to their independent milk producers. So adoption of the cooperative

proposal will result in differential treatment favoring cooperatives at the expense of those fluid milk

plants that purchase independent milk and their independent producers.

What is important here is that government involvement needs to be neutral, that is, all dairy

farmers, whether independent or a cooperative, receive at least the same determined minimum prices.

It is the receipt of the blend price that is the reward for being a part of supplying the Class I needs of the

market.

The Federal order blend price is the result of plants accounting to the Federal order pool at

different class prices and the money from all classes then being divided equally to establish a statistical

uniform or "blend" price. For the month of July 2018 for the Northeast Order, the base zone Class I

price was $18.61 per cwt and the Class III and Class IV prices were $14.10 and $14.14 per cwt; the

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Northeast statistical blend price was $16.14 per cwt. For the month of July 2018 for the Mideast Order,

the base zone Class I price was $17.36 per cwt and the Class III and Class IV prices were the same $14.10

and $14.14 per cwt; the Mideast statistical blend price was $15.22 per cwt. So cooperatives serving the

Class I market or demonstrating a willingness to serve the Class I market by meeting minimum

requirements, but otherwise processing their members' milk into cheese, nonfat dry milk or butter,

were able to collect from the fluid milk processors on all their milk pooled on these two milk orders

$2.00 and $1.08 over the Class IV in the Northeast and Mideast Orders. I will discuss the breakdown of

this financial benefit in a moment.

Whether joining a cooperative is a choice (because many for instance choose security of a

market) or is born of necessity (because proximity to a fluid market may not be ideal), I membership in a

cooperative offers advantages that compensate for not receiving directly premiums associated with

serving the Class I market. Note that even those serving Class I plants directly only receive the blend

price. Cooperatives that own manufacturing plants operate them with the intent to earn a profit on the

sale of products being produced. It is the profitability of the plant that offers the cooperative the ability

to return additional income to its members, and it is the commitment or demonstrated willingness to

supplying the Class I needs of Federal order fluid milk plants that results in the cooperatives receiving

the higher blend price on all their pooled milk. Cooperative profitability is determined by plant

operating efficiency, the sale of products being produced, receiving premiums for milk, and charging

fees above minimum regulatory prices for milk. Producers acting collectively, can achieve other

advantages, for example securing insurance that otherwise would be beyond the reach of a producer,

purchasing inputs through cooperative buying power and achieving other overall efficiencies.

Government should not attempt to micromanage each of these different costs and efficiencies that

result from choice of business model.

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II. Class I Differentials Compensate for Marketing Costs:

Prices established under the terms of Federal milk marketing orders already reflect marketing

and balancing costs. I note that specifically that in 1998 and as implemented in 2000, in the 4-year

reform effort of all Federal milk marketing orders, USDA found that a Class I differential of $1.60 per cwt

should be the minimum starting point for Class I differentials. Milk in the New England and other

marketing areas, Recommended Decision, 63 FR 4802, 4909 (January 21, 1998).

USDA explained that the base Class I differential included three components, costs of

maintaining Grade A status, marketing costs and a competitive cost factor, described as follows:

There are several requirements for producers to meet to convert to a Grade A

dairy farm and then maintain it. A Grade A farm requires an approved water

system (typically one of the greatest conversion expenses), specific facility

construction and plumbing requirements, certain specifications on the

appearance of the facilities, and specific equipment. After achieving Grade A

status, producers must maintain the required equipment and facilities, and

adhere to certain management practices. Often, this will require additional

labor, resource, and utility expenses. It has been estimated that this value may

be worth approximately $0.40 per hundredweight.

Traditionally, the additional portion of the Class I differential reflects the

marketing costs incurred in supplying the Class I market. These marketing costs

include such things as seasonal and daily reserve balancing of milk supplies,

transportation to more distant processing plants, shrinkage, administrative

costs, and opportunity or "give-up" charges at manufacturing milk plants that

service the fluid Class I markets. This value has typically represented

approximately $0.60 per hundredweight.

Originally recognizing these two factors in the base zone was sufficient to bring

forth enough milk to meet Class I demands given the abundant volumes of milk

and the abundance of manufacturing plants. However, recognizing just these

two factors at the values specified may no longer be adequate to ensure

sufficient supplies of Class I milk in the Upper Midwest region...

Thus, Option 1A establishes an additional competitive factor into the

development of the base zone Class I differential. Option 1A values this

competitive factor to be worth about $0.60 per hundredweight. This value

reflects approximately two-thirds of the actual competitive costs incurred by

fluid plants to simply compete with manufacturing plants for a supply of milk.

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63 Fed. Reg. at 4908 (footnotes omitted).

USDA provided this analysis and that breakdown in the Recommended Decision to Federal

Order Reform as the basis for what it called Option 1A for the Class I price structure. In the final

decision, published on April 2, 1999, USDA did not repeat this analysis discussion supporting Option 1A

and instead attempted to adopt Option 1B structure. After a number of court actions, Congress

intervened and directed USDA to adopt Option 1A. Thus the economic logic and discussion by USDA in

the Recommended Decision supporting Option 1A stands to this day.

Before explaining that $0.60 of the base Class I differential was intended to address marketing

costs, USDA further explained that $0.40 was identified as that amount necessary to maintain Grade A

status (providing an approved water system and supply; facility construction and appearance

requirements, plumbing requirements and specific equipment and providing for the need of additional

labor and utility expenses). And the other remaining $0.60 was needed to ensure sufficient supplies of

milk due to competition for a milk supply in marketing areas where milk for manufacturing uses was

predominant. In total, the $1.60 was perceived to be the lowest value for Class I milk necessary under

supply and demand conditions to maintain stable and viable pools of milk for Class I use in markets that

are predominantly manufacturing oriented. In order for this determination USDA had to believe that

the Class I differential was covering the costs of marketing, maintaining Grade A status and attracting

milk away from manufacturing plants.

Most importantly for this hearing, marketing costs, valued at $0.60, explain one of the three

components of the base Class I differential. And USDA expressly explains that marketing costs include

such things as seasonal and daily reserve balancing of milk supplies, transportation to more distant

processing plants, shrinkage, administrative costs, and opportunity or 'give-up' charges at

manufacturing milk plants that service Class I milk demands.

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It is my opinion that the costs that the coops are seeking to have included in their cooperative-

only premium are addressed in the Class I differential. Marketing for instance is a broad concept and

has been discussed in the context of cooperatives to include such categories of activity as "transferring

title and in moving goods from producer to consumer, including among other things buying, selling,

storing, transporting, standardizing, financing, risk bearing, and supplying market information." Treasure

Valley Potato Bargaining Association v. Ore-Ida Foods, Inc., 497 F.2d 203 (9th Cir. 1974) citing the

Webster's New Collegiate Dictionary, 1953 edition.

To this basic $1.60 differential amount, USDA then added an amount for each county in the

United States to account for location value of milk. For instance, here in Harrisburg, PA, $1.20 is added

and the Class I differential is $2.80.

The Class I differential and compensation for marketing is thus reflected in the blend price based

on the percentage of Class I utilization in a given FMMO. The blend price is collected for all of its milk —

both the milk actually shipped as Class I, the non-Class I uses at the plants to which Class I milk is

shipped and on 100% of the pooled milk that it ships to manufacturing plants that it owns. Attached to

my testimony are two tables that show the relative value of the Class I differential in Pennsylvania for

both the Northeast and Mideast milk marketing orders. The tables compare the Class I prices to the

Class III and Class IV prices. The differences between the prices show the value of being pooled on the

orders. It is obvious to any producer in Pennsylvania that being pooled on either milk marketing order

provides pricing returns that are more than adequate to cover the costs associated with marketing. I

have also included the Class I percentages for both orders. The average Class I utilization for both orders

for the most recent year is just over 32%. So for starters, the cooperatives received this marketing

portion of the Class I differential on just the Class I use (32% X 60 cents) at just over 19 cents per cwt.

But they also received that 60 cents on the remainder of the milk not processed as Class I. Based upon

my decades of experience at USDA, it is my opinion that in this region of the country, the cooperatives'

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CONFIDENTIAL — ATTORNEY EYES ONLY MATERIAL

SUBJECT TO PROTECTIVE ORDER DATED AUGUST 10, 2018

share of the Class I market is likely less than the market average; however, using just the market average

would mean that they also received that 60 cents on all their milk which means they actually got the full

60 cents per cwt, far more than the 28 cents they claim is necessary. They are in essence requesting to

receive the payment for the same service both from the FMMO minimum price and now a second time

from Pennsylvania.

But I would go further and propose that one can look at it another way. The overall benefit is

the blend price on their milk versus the alternative use in manufacturing. I think the most relevant

manufacturing use here would be Class IV since nonfat dry milk and butter are usually considered the

products of last resort. Looking at Tables 1 and 2, I have provided the difference between the blend

price and the Class IV price for both the Northeast and Mideast orders again for the most recent year.

The average differences are 72 and 42.6 cents respectively for the Northeast and Mideast orders. So the

FMMO benefit of pooling milk generates 72 and 42.6 cents per cwt for the cooperatives, again far in

excess of the 28 cents they claim are necessary to compensate them in Pennsylvania. Meanwhile the

independent farmers who ship to Class I plants are from FMMO regulation sharing their dollars with the

cooperatives.

Class IV Make-Allowance Factor Compensates for Seasonal Balancing Costs

Even as the cost of balancing was included as a factor in the Class I differential, the costs of

balancing that are associated with seasonal fluctuation in utilizing plant capacity are also already

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compensated in the Class IV product-price formula make allowance used in all milk marketing orders.

USDA in Federal Milk Order Reform and in three subsequent hearings that set and reset Class III and IV

prices established make allowances which included balancing the seasonal fluctuation balancing costs.

For Instance, in a 2006 Tentative Final Decision on this subject USDA concluded: "[t]he record reveals

that balancing functions and balancing costs differ between California and non-California butter and

NFDM plant contained in the CPDMP and RBCS cost survey.. . .The CPDMP study noted that seasonal

fluctuations in utilizing plant capacity affects costs, but these costs are not allocated separately as

"balancing costs line items." Milk in New England and other marketing areas, 71 Fed. Reg. 67467, 67485

c.1-2 (November 22, 2006).

Similarly, in rejecting requested marketwide service payments for the Northeast Order in 2005,

USDA stated: "As already stated, the Class III/1V formulae include a factor to offset the cost of balancing

performed by butter-powder manufacturing. ... In the context of this proceeding, "balancing" refers to

those actions performed by handlers that add or remove milk from their supply to accommodate the

fluctuating needs of Class I." Milk in the New England Marketing Area, 70 Fed. Reg. 4932, 4952, c1 and

4946, c1 (January 31, 2005). In my experience and understanding when drafting these USDA decisions, I

learned that these costs include both the cost of operating the plant at less than peak capacity and the

costs of paying premiums to attract more milk. And also the cost of disposing of distressed milk, such as

the cost of shipping that milk to out of market plants that likely then paid less than the Class price to the

cooperative accounting for the milk at class prices. These are the plant side costs, which mirror the

marketing costs such as transportation and logistics for delivering milk to Class I plants.

Moreover, both general and administrative costs and a return on investment (ROI) are similarly

accounted for in both Class I I I and Class IV make allowances. For instance, in 1999 USDA included an ROI

in the nonfat dry milk make allowance of 1.59 cents per pound produced. Milk in New England and

other marketing areas, 64 Fed. Red. 16026, 16097, c.3 (April 2, 1999). Further in 2002 USDA, included in

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the Class III protein make allowance General and Administrative costs of 1.9 cents and an ROI of 1.03

cents per pound produced. Milk in New England and other marketing areas, 67 Fed. Reg. 67906, 67926,

c.3 (November 7, 2002). It does not appear that these offsetting revenues (in the form of reduced costs

to produce manufactured products resulting from balancing Class I market) have been included in the

cooperatives analysis.

The bottom line is that plant balancing costs are already compensated for by USDA's make

allowance just as the non-plant marketing and balancing costs are compensated for in blend price with

the blended Class I differential, all of which speaks to the calculus of how cooperative members are

affected in totality.

IV. Cooperatives Charge Fees to Recoup Marketing and Balancing Costs

In a past Northeast hearing seeking market-wide service payments for marketing and balancing

related costs it was shown that handlers are charged give-up fees, over order premiums, and other

named charges which essentially further compensate for marketing and balancing costs. USDA found

that persuasive explaining: "But the record is clear, however, such fees are charged in various ways and

forms. Because balancing costs are recoverable and, in fact, are recovered in various ways, the record

cannot support the notion that whatever cost burden is being borne by any financially interested

business entity is so in inequitable that it necessitates having the Federal government establish a

provision to supervise the transfer of funds from one set of business entities to another." Milk in New

England and other marketing areas, 71 Fed. Reg. at 4952, c.1-2. I think this Board should consider

evidence of cooperative self-help as an additional reason why a separate mandated cooperative

premium does not make sense. Although current market conditions would indicate extra order

premiums would be scarcer, Mr. Stonesifer has observed cooperative premiums that sound like handling

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charges. In addition, unless this is a decision that is limited to this particular point in time, the Board

should not make a decision based on todays marketing condition alone.

V. Adoption of the Cooperative-only Premium Discriminates

A cooperative only premium discriminates against other entities that provide balancing

functions that will not be eligible to collect these fees on the marketing side. But because a cooperative

is one entity from marketing to manufacturing, this money could be used to make cooperative

manufacturing more competitive. There are 26 nonpool plants in Pennsylvania under the Northeast

milk marketing order area and; there are 9 nonpool plants supply plant in Pennsylvania under the

Mideast milk marketing order. In 2005, USDA concluded that the totality of all the small plants also

provided an important balancing function. Milk in the New England marketing area, 71 Fed. Reg. at

4952, c.1. Allowing this charge to be collected only by cooperatives, when there are other, almost

always smaller, entities providing the same, or similar, services, would have a discriminatory impact on

those businesses that are not able to collect through the regulations the charges for the same services.

The bottom line is that cooperatives are not unique with respect to providing marketing and

balancing in this market. And they should not be entitled to a cooperative only benefit when there are

plenty of other business entities providing these kinds of services.

VI. Role of Government

Pricing under Federal milk marketing orders and PMMB regulation ensure that the minimum

pricing provisions of regulation are neutral among producers. No distinction is made in the

determination of minimum prices between independent vs dairy farmers who are cooperative

members.

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Cooperatives have numerous opportunities to recover costs they associate with procurement,

marketing and balancing when their costs exceed what USDA has determined is a market clearing level

and incorporated in the Class I differentials. When milk supplies are plentiful, fees can be charged and

often are charged for handling and hauling. When a Class I handler diverts milk, they account to the

Federal order pool at the appropriate Class price, but the price the cooperative manufacturing plant

pays to that handler diverting the milk. can be, and oftentimes is, lower. This lower price offers the

ability of the products produced at manufacturing plants to be sold more profitably. When milk is in

short supply, the cooperatives have and do take the opportunity to raise over-order premiums, which

often include a competitive component as well as a handling component.

Milk marketing orders gave dairy farmers a degree of marketing power that because of the

economics of dairy farming was not possible before. Marketing orders employ classified pricing, the

framework for the orderly flow of milk to its highest valued use first. The prices established are

minimum prices. All market participants know in minimum terms what their competitors are paying and

what dairy farmers are being paid. But FMMO minimum prices are not actual prices. In the transaction

between plant and producer, producers have been able to charge amounts above the FMMO minimums

as adjusted by market circumstances, hence the term over order premiums. This also reflects

competitive premiums and handling and service charges from cooperatives. To the extent that Federal

order minimum prices are insufficient to attract milk, the market will result in adjusted prices higher

than minimums.

From a producer viewpoint, it is perfectly understandable that coops want to pay their members

more for milk. And it is a wonderful thing when government does the negotiating for you as a dairy

farmer in the prices it mandates. What is important here is that the role of government to ensure that

the prices it establishes are applied uniformly and without discrimination among producers. To do

otherwise is tantamount to providing a preference to one producer over another as I summarize below.

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The claimed issue is one that arises from the choice of a business model that explains any

differential impact under the Pennsylvania regulations. The cooperatives' claim also ignores: (1) all the

benefits of cooperative membership versus independent producers; (2) the Class Ill and IV make

allowances and associated benefits, (3) the benefits of both mandatory and voluntary premiums plus

handling charges; and (4) finally and especially the critical fact that Federal Order blend price benefits

specifically geared to the claimed costs greatly exceed the claimed costs.

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CONTAINS CONFIDENTIAL - ATTORNEY EYES ONLY MATERIAL

REDACTED PURSUANT TO PROTECTIVE ORDER DATED AUGUST 10, 2018Table 1: Northeast Milk Marketing Order

Value of the Class I Differential over the Class IV Milk Price

Month/Year Class I Class IIIBlendPrice Class IV

Blend

Minus

Class IV Class I %

Blend Minus

Class IV x

Class I %

Blend

Minus

Class III

Blend Minus

Class III x

Class I %

July 2018 $18.61 $14.10 $16.14 $14.14 $2.00 29.1% $0.580 $2.04 $0.594

June 2018 $18.50 $15.21 $16.70 $14.91 $1.79 29.3% $0.557 $1.49 $0.437

May 2018 $17.69 $15.18 $16.14 $14.57 $1.57 30.2% $0.474 $0.96 $0.290

Apr 2018 $17.35 $14.47 $15.46 $13.48 $1.98 30.8% $0.610 $0.99 $0.305

Mar 2018 $16.61 $14.22 $15.06 $13.04 $2.02 32.4% $0.654 $0.84 $0.271

Feb 2018 $17.50 $13.40 $14.88 $12.87 $2.01 31.7% $0.637 $1.48 $0.469

Jan 2018 $18.69 $14.00 $15.70 $13.13 $2.57 33.4% $0.858 $1.70 $0.568

Dec 2018 $20.13 $15.54 $16.71 $13.51 $3.20 34.4% $1.069 $1.17 $0.402

Nov 2018 $19.66 $16.88 $17.14 $13.99 $3.15 35.1% $1.106 $0.26 $0.091

Oct 2018 $19.69 $16.69 $17.44 $14.85 $2.59 34.3% $0.888 $0.75 $0.257

Sep 2018 $19.96 $16.36 $17.89 $15.86 $2.03 33.9% $0.688 $1.53 $0.519

Aug 2018 $19.97 $16.57 $18.33 $16.61 $1.72 31.6% $0.544 $1.76 $0.556

Source: Class and Blend prices are from price announcements by the Market Administrator

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CONTAINS CONFIDENTIAL - ATTORNEY EYES ONLY MATERIAL


Table 2: Mideast Milk Marketing Order

Value of Class I differential over the Class IV Milk price

Month/Year Class I Class III

Blend

Price Class IV

BlendMinus

Class IV Class I %

Blend Minus

Class IV x

Class I %

Blend

Minus

Class III

Blend Minus

Class III x

Class I %

July 2018 $17.36 $14.10 $15.22 $14.14 $1.08 29.0% $0.313 $1.12 $0.325

June 2018 $17.25 $15.21 $15.84 $14.91 $0.93 27.0% $0.251 $0.63 $0.170

May 2018 $16.44 $15.18 $15.33 $14.57 $0.76 30.5% $0.232 $0.15 $0.046

Apr 2018 $16.10 $14.47 $14.63 $13.48 $1.15 30.2% $0.347 $0.16 $0.048

Mar 2018 $15.00 $14.22 $14.24 $13.04 $1.20 33.6% $0.403 $0.02 $0.000

Feb 2018 $16.25 $13.40 $14.01 $12.87 $1.14 31.1% $0.355 $0.61 $0.190

Jan 2018 $17.44 $14.00 $14.84 $13.13 $1.71 33.2% $0.568 $0.84 $0.279

Dec 2018 $18.88 $15.54 $15.80 $13.51 $1.57 32.6% $0.512 $0.26 $0.085

Nov 2018 $18.41 $16.88 $16.24 $13.99 $2.25 37.7% $0.848 ($0.64) ($0.241)

Oct 2018 $18.44 $16.69 $16.57 $14.85 $1.72 36.3% $0.624 ($0.12) ($0.044)

Sep 2018 $18.71 $16.36 $17.00 $15.86 $1.14 33.2% $0.378 $0.64 $0.212

Aug 2018 $18.72 $16.57 $17.47 $16.61 $0.86 33.1% $0.285 $0.90 $0.300

Source: Class and Blend prices are from price announcements by the Market Administrator

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