The Seasonal Pricing Plan for Milk

Seasonal pricing of milk is practiced in most fluid milk markets in the United States to provide producers with an incentive for keeping supplies in line with fluid needs. The effect of present seasonal pricing systems on producers' annual returns may be less than it is believed to be. An analysis in which Boston blend prices were used to price 12 New England seasonal patterns showed little variation in annual returns regardless of the production pattern. A new system is suggested for determining each producer's contribution to market imbalance. A graded deduction from payments to those who contribute the most to imbalance is used to make premium payments to those who more nearly conform to market needs. The suggested system goes far in separating seasonal pricing from other price changes, increases the incentive for a balanced supply, and rewards or penalizes individuals on the basis of their contribution to the market supply.