At expiration, no milk is actually delivered or received; instead contract prices are forced to the corresponding announced Class III or Class IV price for that month. A unique characteristic of the milk market is the announcing of prices for the previous month on or around the 5th of the following month. There is a spot market for milk other than Grade A and for some Grade A milk not associated with a regulated market. However, for milk associated with a regulated market, prices are announced monthly.
Currently, two futures and options contracts are currently traded on the CME (Chicago Mercantile Exchange). The “Milk” contract corresponds to the USDA Class III price, and the other is called the Class IV. The standardized futures contracts are for delivery of 200,000 lbs. of Grade A milk testing 3.5 percent butterfat. Futures contracts for both Class III and Class IV milk, trade every month, up to 18 months in advance. Futures and options prices are quoted in dollars per hundredweight (cwt). For every one-cent change in a futures contract price the value of the futures contract changes $20.00. One option contract equals one futures contract in size.