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  October 11, 2010

The effect of adopting California fluid standards across the U.S. is an increase in nonfat solids use in fluid products of around 350 million pounds, depending on the year of the analysis. This increase in nonfat solids use is the primary reason for the increase in nonfat dry milk prices shown in table three. The increase in nonfat dry milk prices would have been even larger had it not been for the reduction in skim milk powder exports. Roughly 65 percent of the increase of nonfat solids use in fluid milk products through fortification is offset by lower skim milk powder exports.

The higher nonfat dry milk price is responsible for the rise in farm-level milk prices shown in table three.

The additional supplies of milk for non-fluid products resulting from both additional milk production and reduced fluid milk consumption drive cheese and butter prices lower in the analysis.

The largest increase in milk price of $0.27 per cwt. occurs in the first year of the analysis and is reduced in subsequent years as milk production grows due to producer response to higher milk prices.

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