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Producer Prices for Raw MilkMilk production in Israel is carried out under a quota system. Regarding
payment to producers, it should be noted that the payment system refers only
to milk produced within the limits of quota, while production above quota
will be paid according to the marginal market prices actually received for that
milk (mainly exports). Producer prices include the following elements: ¤ A basic price (target price). ¤ Payment according to fat and protein contents. ¤ Payment according to bacteriological quality and somatic cell count.
Basic Price
The basic price, or target price results
from a triple agreement between government, farmers and dairy plants regarding the monthly
price which the industry should pay for the raw milk produced and collected
each month. The general agreernent is, that the price should reflect the
average cost of production plus an agreed return for the farmer's labour and
capital invested in the process of milk production. The average cost of production is established by conducting a country-wide
survey of costs once every two years. This survey includes a very detailed
cost analysis for a randorn sample representative of all dairy farms. The
most recent one had been conducted for the year 1999, while currently a survey
is underway for the year 2000/1. As a rule, these surveys are available six
months after the end of the fiscal year surveyed, and from that time on used
as a 'basket of inputs' for monthly calculations of the basic price to
producers. This routine goes on until the results of the next survey come along.
The production unit to which costs are referred regards the cow plus her
share of replacement heifers maintained on the average farm. All incomes
other than derived from milk are subtracted -thus leave net costs for milk.
For example, in 2000, 8.4% of income derived from cull cows sold to slaughter,
male calves etc. Costs of production calculated and taken into account for milk price to
producers for the year 2000 are as follows (based on 1999 survey):
The thus elaborated milk price is announced as the monthly target price and
is being used as a 100 point index of reference for all other advance
payments. Payments for fat and protein contents
Basic or normative contents are established in correlation to the period
costs surveyed at the actual levels of contents received for all milk
delivered. For example, while the basic price rests upon the 1999 cost
survey, normative fat and protein contents are the actual levels for the year
-3.376% for fat and 3.142% for protein. Contents are priced by a ratio
of 1:3 for fat and protein, respectively, accounting together for 105% of
the basic milk price. This means a penalty of 5% tor excess of fluids in the
raw milk delivered. According to the normative levels mentioned above, content price coefficients are 8.529 for fat and 25.587 for protein. These coefficients multiplied by the monthly basic price (at the farm gate) give the reference prices for bonuses and reductions for actual levels of contents in comparison to current normative levels. Every month, ICBA Issues a letter of information to its affiliated
members. The prices published are not binding, but are intended to serve as
a general guideline to farmers and their organizations. As an example,
an except of the most vital information for the month of June, 2000 is
given below. All figures given are net prices, exclusive of VAT (17%), to be paid or received by the farmer, in terms of Israeli New Shekels. In June 2000, one new shekel (NIS) was equivalent to app.. US$ O.243.
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