Is Your Milk Check Healthy?
By: Mel Wenger, DVM
Helping a producer understand health challenges their herd might be facing can be challenging. Often we have to look beyond what cows are telling us to analyze data and herd information to discover what the issues are.
Like most veterinary practices, our main business centers on helping our producer clients manage the health of their herd. But herd health is critical to herd performance, which directly impacts the health of the business, and we certainly do all we can to help our clients stay profitable. For these reasons, we’re going to talk about the health of your milk check.
A few years ago, I attended a conference where milk pricing and the milk check details were discussed. I discussed these details with my producers and many of them were unaware of what was in their check, much less understood the details. Most were only aware of the amount deposited in their bank account.
To help understand the details of the milk check I began doing a biannual analysis and comparison of milk checks for my producers. I put the details on a spreadsheet so as to compare apples to apples.
Market Administrator
There are three main sections in a milk check. The first area is published each month by the market administrator. Each producer pays 5¢ per cwt for this service. They also receive a bulletin that publishes the new monthly producer prices that everyone in your federal order is paid for: fat, protein, other solids, SCC and producer price differential (PPD). These numbers are the most significant portion of the milk check each month. Some don’t realize how much difference it makes when fat or protein test drops.
The PPD represents the remaining value of the milk pool (all classes) after paying the components based on Class III prices. When there is a negative PPD it usually means prices are on the rise because cheese price is on the way up. The base price is the combination of the Class III component prices and the PPD.
Processor Additions
The second section is the processor additions featuring quality premiums or incentives programs. These additions vary by how much milk is in demand and how much the processor wants to retain a producer. This where money is left on the table by not reaching quality premiums or over order incentives.
Deductions
The most significant deduction is the rate the processor pays the hauler out of your milk check. This varies based on the hauler’s agreement with the processor and the producer. Some processors will subsidize the hauling rate to get milk moved to another area. The hauling rate varies by about 50¢ per cwt in my practice. There is also a standard 15¢ per cwt deduction for marketing, in addition to other deductions such as loan payments, co-op costs, poor quality deductions, etc.
I found deductions a producer had forgotten but had been continually drawn from a milk check. In one case a loan payment was set up to be paid through the milk check, but when the loan was paid off the amount continued to be deducted. Fortunately, all funds were recovered.
Net pay varied by more than $1.20 per cwt between producers in my practice. This is significant when the margins are low. Sometimes minor changes can make a difference. Being educated in what is available allows for more opportunity. On your milk check, review these areas and look for opportunities in the details. Sometimes, a few changes in herd health can lead to a healthier milk check.
Mel Wenger is the president of Orrville Veterinary Clinic Inc. Wenger grew up on a dairy farm in Dalton, Ohio and joined the Orrville Veterinary Clinic in 1981 after graduating from Ohio State University College of Veterinary Medicine.
Note: This article appears in the October 2017 magazine issue of Dairy Herd Management.
