Over the years, those engaged in the marketing of dairy products have developed terminology peculiar to the trade. Numerous terms and phrases having special meanings are in frequent use. Dairy Market News reports are intended to convey useful information to readers regarding important phases of market situations and are best understood by the trade if words and expressions employed are in common usage. The following terms, definitions and abbreviations are used in describing dairy markets and market situations.
AMS - Agricultural Marketing Service: An agency of the U.S. Department of Agriculture. This agency's responsibilities include administering marketing order programs, standardization, inspection and grading, market news, and the research and promotion programs.
BARREL - A single commercial unit of cheese weighing 500 pounds.
BLOCK – A single commercial unit of cheese weighing either 40 or 640 pounds.
BULK BUTTER - Packed 68 pounds or 25 kg, net weight, in corrugated boxes.
BUTTERFAT / MILKFAT - The fat portion of whole milk.
CCC - Commodity Credit Corporation: An agency of the U.S. Department of Agriculture. This agency is authorized to assist agricultural producers through loans, purchases, payments and other operations, and makes available materials and facilities required in the production and marketing of agricultural commodities.
CIF - Cost, Insurance, and Freight.
CLASS AND COMPONENT PRICES AND PRODUCT PRICE FORMULAS: Prices are derived from National Dairy Products Sales Report collected by the Agricultural Marketing Service on a weekly basis. Average monthly weighted prices of NDM, whey, butter, and cheese are calculated and used in the Federal milk order program product price formulas. View the Class prices file (pdf) for formulas.
CME GROUP – Derivatives marketplace for agricultural, energy, equities, and other markets. CME Group also operates cash spot markets for many
COLD STORAGE HOLDINGS - Products normally held for 30 days or more in public, private, and semiprivate refrigerated storage facilities. Does not
include products in wholesalers' and retailers' storage facilities, which are normally held less than 30 days.
COMMERCIAL DISAPPEARANCE - Commercial disappearance includes civilian and military purchases of milk and dairy products for domestic and
foreign use, but excludes farm household use and USDA donations of dairy products. Disappearance is a residual figure and therefore can be affected by any inaccuracies in estimating milk production, on-farm use, stocks, and imports.
COMMERCIAL STOCKS - Total U.S. stocks or holdings, minus Government-owned stocks or holdings.
COMPONENT PRICE – Value of milk’s major components - butterfat, nonfat solids, or protein and other solids. The component prices are derived from
weekly prices published in the National Dairy Products Sales Report (collected by AMS) for the major dairy products made from the components - butter, NDM, cheese, and dry whey.
CONTRACT SALES - Contract sales (oral or written) include product that is earmarked for a regular established outlet. The contract may cover a specified period of time or volume. The price may be fixed or based on negotiated differentials over or under some base price or index.
DAIRY MARKET NEWS – DMN: A program administered by USDA, Agricultural Marketing Service which collects and provides timely and accurate
information pertaining to supply and demand conditions for milk and dairy products. The program provides weekly/biweekly dairy market information to
assist industry participants in making current buying and selling decisions and aid in future planning.
- CENTRAL - Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Texas, and Wisconsin
- NORTHEAST - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont
- SOUTHEAST - Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia
- WEST - Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming
- EU-27 – Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden
- EASTERN EUROPE - Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Republic of Cyprus, Romania, Slovakia, and Ukraine
- WESTERN EUROPE - Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom
- OCEANIA - Australia and New Zealand
- SOUTH AMERICA – Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Paraguay, Peru
DELIVERED EQUIVALENT - Prices are derived by using an f.o.b. price, plus an adjustment to reflect the cost of transporting the product to a specified area.
DELIVERED PRICE - F.O.B. price plus transportation and handling.
DEMAND - The desire to possess a commodity, coupled with the willingness and ability to pay.
- VERY GOOD – Offerings or supplies are rapidly being absorbed.
- GOOD – Firm confidence on the part of buyers that general market conditions are good. Trading is more active than normal.
- MODERATE – Average buyer interest and trading.
- LIGHT – Demand is below average.
- VERY LIGHT – Few buyers are interested in trading.
ERS - Economic Research Service: An agency of the U.S. Department of Agriculture. This agency's responsibilities include providing economic research and forecasting.
EX DOCK - Often seen as "Ex Doc, Duty Paid." Imported product that has cleared customs and all paperwork has been completed. Product is available for pickup by the buyer.
EX WORKS - A trade term that describes when a seller makes a product available at a designated location, and the buyer of the product must cover the
EXCHANGE - An organization which establishes and enforces rules of trade in a market (cash and futures markets). Terms used by DMN which are
associated with exchange trading.
- BID - Refers to the price a buyer is willing to pay for a product. May raise the trading level.
- CARLOT – CME Group –
- Cheese = 40,000 - 44,000 pounds
- Butter = 40,000 - 43,000 pounds
- NDM = 41,000 – 45,000 pounds
- Dry Whey = 41,000 – 45,000 pounds
- OFFER - Refers to the price an owner is willing to accept for a product. May lower the trading level.
- SALE - A bid filled or an offer covered.
FAS - Foreign Agricultural Service: An agency of the U.S. Department of Agriculture. This agency's responsibilities include providing foreign agricultural
information, administering import regulations, and assisting in the export of U.S. farm products.
FEDERAL MILK MARKETING ORDERS – Federal Milk Marketing Orders (FMMO) are authorized by the Agricultural Marketing Agreement Act of 1937.
Under this law, the Secretary of Agriculture may establish Federal Orders that apply to buyers (handlers) of milk. Basically, a milk order is a legal document issued to regulate the minimum prices paid to dairy farmers by handlers of Grade A milk in a specified marketing area. Milk under the Federal Milk Marketing Order system is separated into four separate classes:
- CLASS I - Milk used for beverages including eggnog and ultra-high temperature (UHT) milk.
- CLASS II - Milk used for soft products. This includes cottage cheese, ricotta cheese, pot cheese, Creole cheese, milk shake and ice milk mixes, frozen desserts, aerated cream, frozen cream, sour cream, half and half, yogurt, custards, puddings, pancake mixes, batter, buttermilk biscuit mixes, infant or dietary formulas packaged in hermetically sealed containers, candy, soup and bakery products for general distribution to the public including sweetened condensed milk used for manufacture of aforesaid products, and fluid cream or any product containing artificial fat or the fat substitutes that resemble fluid cream.
- CLASS III - Milk used in the manufacture of cream cheese and other spreadable cheeses, and hard cheese of types that may be shredded, grated, or crumbled. It also includes plastic cream, anhydrous milkfat, and butteroil.
- CLASS IV - Milk used to produce butter, any milk product in dry form and evaporated or sweetened condensed milk in a consumer-type package.
FDA - Food and Drug Administration: An agency of the U.S. Department of Health and Human Services.
FLUID GRADE MILK (GRADE A) - Milk eligible for sale for use in fluid milk products. This milk must be produced under strict sanitary conditions which
meet U.S. Public Health Service standards. Fluid grade milk may be used to make manufactured dairy products.
F.O.B. - Free on Board: Seller places product sold in a railcar, truck, or other form of transportation. The buyer then assumes transportation costs.
FSA - Farm Service Agency: An agency of the U.S. Department of Agriculture. This agency's responsibilities include administering the dairy and other farm commodity price support programs.
FUTURES TERMS - several common terms used by traders in futures markets.
CFTC - The Commodity Futures Trading Commission as created by the Commodity Futures Trading Commission Act of 1974. This government
agency currently regulates the nation’s commodity futures industry.
CME Group – A derivatives marketplace.
CONTRACT - Unit of trading for a commodity future. Also, actual bilateral agreement between the parties (buyer and seller) of a futures or option
on futures transaction as defined by an exchange.
CONTRACT MONTH - The month in which futures contracts may be satisfied by making or accepting delivery.
DELIVERY - The tender and receipt of an actual commodity or cash in settlement of a futures contract.
LONG - An investor expecting a futures price to increase may decide to go long or buy a futures contract.
SHORT - An investor expecting a futures price to decline may go short or sell a futures contract.
OPEN INTEREST - Total number of futures or options on futures contracts that have not yet been offset or fulfilled by delivery. An indicator of the
depth or liquidity of a market (the ability to buy or sell at or near a given price) and of the use of a market for risk and/or asset-management.
SETTLEMENT PRICE - A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement
prices are used to determine gains, losses, margin calls, and invoice prices for deliveries.
VOLUME - The number of transactions in a futures or options on futures contract made during a specified period of time.
INTERMODAL CONTAINER – standardized bulk shipping container designed to fit truck/rail/ship conveyances
LTL - Less than truckload quantity. Prices on LTL trades are not reportable prices for DMN.
MAILBOX PRICES - Net pay prices received by dairy farmers for milk. Prices reflect all payments received for milk sold and all costs associated with marketing the milk.
MANUFACTURING GRADE MILK (GRADE B) - Milk eligible for sale for which use is limited to manufactured dairy products. This milk must be
produced under conditions which meet state and local standards, but these standards are less stringent than those for fluid grade milk (Grade A).
MARKET - A term with several meanings:
- A geographic location where a commodity is traded.
- The price, or price level, at which a commodity is traded.
- To sell a commodity.
MARKET ACTIVITY - The rate at which sales are being made. Often stated as: active, moderate, slow, or inactive.
- BROKER/TRADER - A middleman activity involved in facilitating sales between producers and other levels in the marketing chain. Typically does not take title to product.
- FOOD SERVICE - A marketing channel which includes purchases of dairy products by hotels, restaurants, fast food outlets, schools, and institutions.
- INDUSTRIAL - A marketing channel which includes dairy products purchased as an ingredient in the production of food and nonfood products.
- RETAIL - A marketing channel which sells dairy products directly to the consumer for personal or household consumption.
- WHOLESALE - A middle link in the food distribution chain. Wholesalers assemble relatively large quantities of product and resell in smaller lots to various users such as the food service trade, small retail food stores, and jobbers. Major functions may include assembling, grading, warehousing, order taking, cutting, wrapping, printing, and delivery. Customer services such as merchandising aids and credit also may be provided.
MERCOSUR - An economic and commercial bloc of countries in South America composed of Argentina, Brazil, Paraguay, and Uruguay. Chile, Bolivia,
Colombia, Ecuador, and Peru are associate countries.
- KG / KILOGRAM = 2.2046 pounds
- MT / METRIC TON = 2,204.6 pounds
MICRO-FIXING – A manufacturing procedure to convert cold storage bulk butter into print butter.
MPC – Milk protein concentrate.
MOSTLY - The majority of sales within a reported price range. Transaction driven, not volume weighted.
NA - Not available, not applicable.
NASS - National Agricultural Statistics Service: An agency of the U.S. Department of Agriculture. This agency's responsibilities include providing official
USDA data and estimates of agricultural prices, dairy products, milk production, cold storage, and other items.
NC - No change.
NDM – Nonfat Dry Milk – See USDA standards.
NOMINAL PRICES – Prices that reflect buyers’ and sellers’ opinions of current values (bids, offers, grade, and regional differentials, etc.) when there is
limited trading of a commodity. Ordinarily, published prices are based on three or more separate, actual spot transactions. However, because of the practical uses made of pricing information by buyers and sellers, nominal prices are used to indicate where spot trades would occur. If a reporter is unable to gather enough information for nominal prices, then prices are reported as too few to report (TFEWR).
ORGANIC – Organic is a labeling term that indicates that the food or other agricultural product has been produced through USDA approved methods that integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used. To be labeled as “organic,” food must be certified as meeting USDA standards.
PRICE TREND – The direction in which prices are moving in relation to trading in the previous reporting period(s).
- HIGHER – The majority of sales are at prices measurably higher than the previous trading session.
- FIRM – Prices are tending higher, but not measurably so.
- STEADY – Prices are unchanged from the previous trading session.
- WEAK – Prices are tending lower, but not measurably so.
- LOWER – Prices for most sales are measurably lower than the previous trading session.
PRINT BUTTER - Butter which is packaged in one-pound or smaller pieces.
PRODUCT PRICE FORMULAS – Used to compute advanced prices as well as class and component prices that set the minimum price paid to milk producers in all federal milk orders. The formulas consist of weighted average product prices, make allowances, and yield factors. The product prices are those published in the National Dairy Products Sales Report (a mandatory survey conducted by AMS) for butter, NDM, cheese, and dry whey.
RAILCAR = approximately 130,000 to 160,000 pounds.
RESALE PRICES - Transactions that reflect product that has been purchased and resold (can be more than once). Trades can occur above, below, or at spot prices depending on current market conditions. These trades are not reported in spot price ranges but may be included in comments.
SMP – Skim Milk Powder
- An international market term often used interchangeably for NDM.
- A term used in the United States for a dry product made from a blend of condensed skim and another condensed dairy product(s) generally for export sales. This product does not meet USDA standards for NDM.
SOLIDS-NOT-FAT (SNF) - The solids in milk other than milkfat. Also known as nonfat solids.
SOUTHERN CONE - The region composed of Argentina, Chile, Uruguay, Paraguay and the Southeastern region of Brazil.
SPOT PRICES - The first sale, f.o.b. the producing plant, of product that has no regular or committed outlet and is sold on the open market for immediate
delivery or delivery within a few days.
SUPPLY/OFFERING - The quantity of a particular item available for current sale.
- HEAVY – When the volume of supplies is above average for the market being reported.
- MODERATE – When the volume of supplies is average for the market being reported.
- LIGHT – When the volume of supplies is below average for the market being reported.
TAMBO - A farm level dairy operation in some Latin American countries.
TFEWR - Too few to report - insufficient market information to determine a price.
TL - Truckload = approximately 40,000 - 44,000 pounds.
UNDERTONE/TONE - Situation or sense of market direction.
USPHS - United States Public Health Service: An agency of the U.S. Department of Health and Human Services. This agency’s responsibilities include the promulgation and administration of federal standards of identity (which define milk and dairy products) and administering the fluid Grade A milk program (which covers the sanitary aspects of milk and processing).
WET SOLIDS - another term for condensed skim.