The American Farm Bureau Federation notified USDA Wednesday that the nation's largest farm group has “grave concerns” with proposals by the International Dairy Foods Association and Wisconsin cheese processors to reform the federal milk marketing order system.

In a letter to Ag Secretary Tom Vilsack, AFBF President Zippy Duvall said the narrow proposals outlined in petitions submitted by IDFA and the Wisconsin Cheese Makers Association “threaten to undercut trust between farmers who produce the milk and the processors who turn it into the dairy products we all know and love.”

IDFA, which represents an array of processors that includes cheese, yogurt and ice cream companies as well as major supermarket chains, is proposing only to update calculations of production costs, known as the “make allowance," which helps determine the return to processors.  WCMA’s petition also focuses on make allowances, but takes a different approach to determine the formula.

“This one-sided approach to updating federal order pricing would be devastating to America’s dairy farmers,” Duvall wrote Vilsack.

The National Milk Producers Federation, whose membership includes cooperatives that process milk, also is calling for broader reforms than IDFA and the Wisconsin group and will be filing a petition of its own. 

USDA has until April 29 to decide how it will proceed on the petitions filed by IDFA and WCMA. Agriculture Secretary Tom Vilsack could expand the hearing process to include issues raised by other industry groups. 

Farm Bureau has been active in the FMMO reform discussion, including through the hosting of a meeting to convene various stakeholders in October.

NMPF, which also participated in that meeting, plans to submit a more comprehensive reform proposal.

“Like NMPF, we are also concerned about the limited scope of the hearing requested by IDFA and WCMA,” Duvall said. “The last major update to the FMMO system occurred in 2000. We believe it is time to consider improvements that better reflect today’s milk markets across a much wider range of topics than just make allowances.”

Duvall also spelled out some specific provisions Farm Bureau would support in an FMMO reform process, including mandatory reporting of data used to set make allowances; adjustments of pricing formulas for Class I (fluid milk) and Class II (soft dairy products) skim milk price formulas; updates of the differentials for the same classes, and a return of the Class I base price formula to the “higher-of” the Class III (spreadable cheese or product made for shredding or grating) or Class IV (butter or milk products in dry form) formula.

“All of these other adjustments to class price formulas would help offset the negative impacts of increased make allowances to our dairy farmers,” Duvall said. “We understand the importance of make allowances in encouraging growth and maintenance of processing capacity, but the numbers must reflect the current marketplace in its entirety, not just a biased sample of processing cost data.”

A spokesperson for the International Dairy Foods Association pointed out make allowances have been unchanged for 15 years, "and meanwhile the costs of manufacturing dairy products have risen significantly, as IDFA’s petition to USDA clearly lays out.

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"The submission of IDFA’s petition marks the beginning of what is likely a lengthy rule-making process at USDA which should address the make allowance issue," the spokesperson added. "We are aware that other dairy stakeholder groups will submit petitions, and that is what the USDA process is meant to manage. Rather than comment on every development, IDFA intends to remain constructive in our engagement with our members and USDA as these issues advance."

In an interview with Agri-Pulse, WCMA Executive Director John Umhoefer echoed the need for changes to make allowances submitted in both petitions but also noticed the group is not opposed to additional subjects being on the table. 

"WCMA did not restrict or ask for a restriction on other issues in its petition to USDA," he said. "We fully expect USDA to offer the industry opportunity to submit proposals for ideas to reform federal milk marketing orders."

Story updated with comments from IDFA and WCMA.

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