The National Milk Producers Federation on Monday petitioned USDA on Monday to consider a comprehensive proposal to overhaul the way milk is priced under federal milk marketing orders. 

The NMPF petition includes proposals for updating make allowances, “discontinuing the use of barrel cheese in the protein component price formula; returning to the ‘higher of’ Class 1 mover, updating milk component factors for protein, older solids and nonfat solids in the Class III and Class IV skim milk price formulas; and updating the Class I differential price system to reflect changes in the cost of delivering bulk milk to fluid processing plants,” the group said. 

The issue of updating dairy product manufacturing allowances contained in the USDA milk price formulas was the focus point of the petition request by the International Dairy Foods Association and Wisconsin Cheesemaker Association filed in late March.

NMPF says that request should have been combined with other issues NMPF’s members felt needed to also be addressed.

IDFA proposed that USDA consider an updated version of the 2022 USDA-commissioned study, “Cost of Processing Study for Cheese, Whey, Butter and Nonfat Dry Milk Plants,” by Mark Stephenson, director of the Dairy Policy Analysis and Center for Dairy Profitability at the University of Wisconsin. In addition to Stephenson's study, William Schiek, CEO of the Dairy Institute of California, previously presented to USDA in November projections of where levels should be set. Those projections called for increasing the make allowance for cheese from 20 cents to 30 cents per pound and calls for a similar 10-cent boost in the make allowance for whey. 

USDA followed up the IDFA petition by asking the group on Friday for more information about its proposal, including findings from a new cost study by Stephenson, said Matt Herrick, IDFA senior vice president. 

"Once the cost study by Dr. Mark Stephenson is complete in May, IDFA intends to respond to USDA with the information they have requested, at which point the Department has 30 days to review and respond to IDFA’s petition," Herrick said.

NMPF’s proposal would increase the cheese make allowance to 24 cents per pound and the dry whey rate to 23 cents per pound. NMPF proposed to increase the make allowance to 21 cents per pound for butter and nonfat dry milk, also at levels more moderate than the estimated cost proposal from Stephenson, but 3 to 4 cents higher than the current levels.

The NMPF petition says the increases do not fully correct for the increases in butter, non-fat dry milk, cheddar cheese and whey costs since 2008, when the current make allowances were implemented. "Instead, these make allowance increases represent a fair balance between the product impact of higher make allowances and the processor impact of make allowances more closely reflecting the current cost of manufacturing commodity style butter, NFDM, cheddar cheese and whey.”

The petition said if make allowances were raised above levels they’re proposing, it would “reduce producer prices to levels that would narrow margins and negatively impact the availability of adequate supplies of milk, and thereby create disorderly marketing.” 

Outside of the federal hearing process, NMPF is proposing to put a provision in the next farm bill to provide for regular reviews of make allowances by requiring USDA to study plant costs every two years. 

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The Class I price mover is another high priority issue NMPF wants USDA to consider. A change that NMPF and IDFA agreed to in the 2018 farm bill backfired on producers in some regions of the country in 2020 because of market disruptions that resulted from the COVID-19 pandemic and a surge in cheese purchasing for the Trump administration’s Farmers to Families Food Box program.

Under that farm bill provision, the price paid for fluid milk (Class I) must be at least 74 cents per hundredweight over an average of the prices for Class III (milk sold for cheese) and Class IV (butter and milk powder). 

NMPF is proposing to revert to the previous formula where the Class I price is tied to the higher of the Class III and Class IV rates. NMPF says the change would increase producer revenue. 

NMPF also said it will request a pre-hearing information session to explain additional details of its proposal. This is one of many steps that could be taken before USDA issues any final changes to a FMMO.

NMPF President and CEO Jim Mulhern said several organizations helped NMPF develop producer consensus through a two-year process,

“From state and regional dairy associations to the American Farm Bureau Federation, dairy farmers have had many allies and friends throughout this process,” Mulhern said in the release. “As Secretary Vilsack has stated, consensus is necessary to successful modernization. We have that producer consensus, and we look forward to working together toward adoption and implementation of our plan.”

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