In November 2018, a Federal Milk Marketing Order was implemented in California, replacing the state order. With this change, Class III and Class IV prices directly relate to the California federal order blend price. This provides our members with the Western Area with better risk management options to protect future milk check prices.
As part of a continuing effort to bring flexible and innovative programs to you, the DFA Risk Management team is introducing a new Target Blend forward contract specifically for the Western Area. This program targets a blended price similar to the price you receive in your milk check. Use of the program can help you better predict future milk prices, better plan your future revenue streams and also allows you opportunities to lock into profit margins.
The Western Area Target Blend contract price is meant to mimic the California federal blend price – but not replace it. As such, the contract does not settle against the announced blend price and there is some basis risk between the contract price and the announced blend price.
- The target blend contract is based on the Los Angeles zone
- Minimum term of six consecutive months for a contract
- The contract will settle monthly
- Just like other forward contracting programs, members will receive the full value of their component values above the standard component tests (i.e., 3.5% butterfat, 2.99% true protein and 5.69% other solids), quality and other premiums
To learn more about the Western Area Target Blend price program or about the computation of the California Federal Order blend price, please give us a call at 1-877-424-3343.
View updated pricing for the program here