Dairy Outlook. There was a major cash in the dairy industry during March. On March 5 the Basic Formula Price (BFP) took a record-setting $6 drop. The reason: Grade B milk prices averaged just $14.72 in January in the Mid-west. Subtract from that a decline in cheese and other commodity values of $4.45. The net result was a $10.27 BFP.

The good news is that if the February base month price ends up higher than $10.27 and cheese prices hold, the March BFP will recover some and could be in the mid $11 range.

The irony in all of this: Had Federal Order reforms been in place, the February BFP might have fallen to just $12. That's because the new BFP will be calculated using end-product pricing, not Minnesota-Wisconsin Grade B pay prices.

On the retail side, the BFP price drop was equal to $.52 per gallon. However, all of this decline will not likely be seen in retail prices. Retailers did not pass all of the record high milk prices seen late last year and earlier this year and they will not pass along all of the lower prices. (Bill Thomas)

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