Nearly a year after the USDA’s Agricultural Marketing Service started reviewing over 12,000 pages of testimony and evaluating 21 different proposals during a 49-day national hearing in Carmel, Indiana, the organization has issued a Recommended Decision to amend the uniform pricing formulas for all 11 Federal Milk Marketing Orders.
The adjustments increase the value returned to farmers for bottling milk by enhancing location values and making some formula changes. Importantly, it restores the higher of the cheese or butter powder values in the bottling milk price, replacing the average plus price formula used since 2019. However, the reforms also have downsides, including substantial reductions in all class prices to account for higher processing costs, despite insufficient data to demonstrate these costs.
The USDA’s Recommended Decision includes a series of amendments based on the evidence from the proceeding. These proposed changes are:
- Milk Composition Factors: Update factors to 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids.
- Surveyed Commodity Products: Remove the price of 500-pound barrel cheddar cheese from the Dairy Product Mandatory Reporting Program survey, relying solely on the price of 40-pound block cheddar cheese to determine the monthly average cheese price used in formulas.
- Class III and Class IV Formula Factors: Update manufacturing allowances to: Cheese: $0.2504; Butter: $0.2257; NFDM: $0.2268; and Dry Whey: $0.2653. Also, update the butterfat recovery factor to 91%.
- Base Class I Skim Milk Price: The base Class I skim milk price would be the higher of the advanced Class III or Class IV skim milk prices for the month. Additionally, a rolling monthly Class I extended shelf life (ESL) adjustment will be adopted to provide better price equity for ESL products.
- Class I Differentials: Update the Class I differential values to reflect the increased cost of servicing the Class I market, with county-specific Class I differentials detailed in the decision.
A comment period on the final rule is now open. Comments will likely be due by mid-September, with the USDA expected to issue a final rule by mid-November for a vote by producers and co-ops. In the meantime, farmers should contact their members of Congress to expedite the new farm bill, which includes an audited, mandatory survey of processors’ costs to help correct these make-allowances and return more money to farmers.
National Milk Producers Federation president and CEO Gregg Doud responded to the recommended decision:
“Based on our initial reading, NMPF is heartened that much of what we proposed after more than two years of policy development, and another year of testimony and explanation, is reflected in USDA’s recommended Federal Milk Marketing Order modernization plan.”
“Crafting an effective milk-pricing system for farmers is complex and requires a careful balance. USDA’s plan acknowledges that complexity and, while not matching our proposal in every detail, looks largely in keeping with the comprehensive approach painstakingly determined by the work of dairy farmers and their cooperatives over the past three years. We look forward to examining this proposal topic-by-topic, gathering input regarding the various needs of our members nationwide, and adding their insights as this process moves toward a vote of producers,” Doud concluded.
American Farm Bureau Federation President Zippy Duvall also commented:
“We appreciate that USDA held this hearing, recognizing some of our concerns related to milk pricing. We are pleased with the intent to return the Class I skim milk price to the ‘higher-of’ formula as we called for. That said, we’re disappointed in changes that will benefit processors without regard for producers at a time when dairy farmers are struggling and many have gone out of business. USDA missed opportunities to improve and update price formulas.”
“We also strongly believe make allowances should not be changed without a mandatory, audited survey of processors’ costs. Our dairy farmers deserve fairness in their milk checks and transparency in the formula, but the milk marketing order system can’t deliver that unless make allowances are based on accurate and unbiased data.”
