Dairy Revenue Protection uses Federal Milk Marketing Order pricing factors to calculate milk component prices. The rules for the conversions are included in the Basic Provisions and the Commodity Exchange Endorsement. In the RY2025 CEE, the formulas in 2(d) and 3(f) are merely examples, which reflect the rules that were in place prior to January 21, 2025. The controlling language is found in CEE 2(c):
The daily CME futures prices for butter, cheese, nonfat dry milk, and dry whey for the months within the Quarterly Insurance Period are used in the Expected Butterfat Price, Expected Protein Price, Expected Nonfat Solids Price, and Expected Other Solids Price using USDA milk pricing calculations for the Sales Period during which you purchased coverage for the applicable Quarterly Coverage Endorsement.
The CEE for RY2027 will contain updated examples. For clarity, the formulas that are currently in force for RY2025 and RY2026, for all component pricing offer endorsements purchased on/after January 21, 2025, are the following:
(i) Expected Butterfat Price =
(Expected Butter Price – Butter Make Allowance) × Butter Manufacturing Yield
= (Expected Butter Price – 0.2272) × 1.211
(ii) Expected Protein Price =
((Expected Cheese Price – Cheese Make Allowance) × Cheese Manufacturing Yield Casein) + ((((Expected Cheese Price – Cheese Make Allowance) × Cheese Manufacturing Yield Butterfat) – Expected Butterfat Price × Butterfat Retention Rate) × Butterfat-to-Protein Ratio)
= ((Expected Cheese Price – 0.2519) × 1.383) + ((((Expected Cheese Price – 0.2519) × 1.589) – Expected Butterfat Price × 0.91) × 1.17)
(iii) Expected Other Solids Price =
(Expected Dry Whey Price – Dry Whey Make Allowance) × Dry Whey Manufacturing Yield
= (Expected Dry Whey Price – 0.2668) × 1.03
(iv) Expected Nonfat Solids Price =
(Expected Nonfat Dry Milk Price – Nonfat Dry Milk Make Allowance) × Nonfat Dry Milk Manufacturing Yield
= (Nonfat Dry Milk Price – 0.2393) × 0.99
Likewise, for actual component prices:
(i) Actual Butterfat Price =
(Actual Butter Price – Butter Make Allowance) × Butter Manufacturing Yield
= (Actual Butter Price – 0.2272) × 1.211
(ii) Actual Protein Price =
((Actual Cheese Price – Cheese Make Allowance) × Cheese Manufacturing Yield Casein) + ((((Actual Cheese Price – Cheese Make Allowance) × Cheese Manufacturing Yield Butterfat) – Actual Butterfat Price × Butterfat Retention Rate) × Butterfat-to-Protein Ratio)
= ((Actual Cheese Price – 0.2519) × 1.383) + ((((Actual Cheese Price – 0.2519) × 1.589) – Actual Butterfat Price × 0.91) × 1.17)
(iii) Actual Other Solids Price =
(Actual Dry Whey Price – Dry Whey Make Allowance) × Dry Whey Manufacturing Yield
= (Actual Dry Whey Price – 0.2668) × 1.03
(iv) Actual Nonfat Solids Price =
(Actual Nonfat Dry Milk Price – Nonfat Dry Milk Make Allowance) × Nonfat Dry Milk Manufacturing Yield
= (Actual Nonfat Dry Milk Price – 0.2393) × 0.99