USDA Asks For More On Make Allowances From IDFA, WCMA
USDA is asking two dairy industry organizations to provide additional information regarding specific make allowance values to assist the secretary of agriculture in deciding whether to initiate a federal milk marketing order (FMMO) rulemaking proceeding on the make allowance issue.
Late last month, the Wisconsin Cheese Makers Association (WCMA) and International Dairy Foods Association (IDFA) submitted petitions asking USDA to hold a hearing to address make allowances in FMMO Class III and Class IV pricing formulas.
USDA, in letters sent to IDFA and WCMA, notes that the IDFA petition cites manufacturing cost study numbers calculated by the Dairy Institute of California, as well as a cost study currently being updated, but not yet completed, by Mark Stephenson, who recently retired from the University of Wisconsin. Meanwhile, the WCMA petition cites information obtained from a recent WCMA survey and indicates WCMA anticipates including the most current studies of Stephenson published by USDA last year, Stephenson’s new study, and a study by William Schiek of the Dairy Institute of California as evidence to revise make allowances.
As precedent for requesting a hearing without specific, proposed make allowances, IDFA and WCMA cited two FMMO hearings held in the mid-2000s without specific make allowance values noticed for consideration, USDA notes.
While the referenced hearings were requested without noting specific make allowance values, rulemaking procedures have changed as a result of the 2008 Farm Bill, USDA notes.
That change directed the secretary of agriculture to issue supplementary rules of practice defining the guidelines and time frames for the rulemaking process relating to amendments of orders.
Specifically, the secretary must evaluate a proposal and determine how to proceed within 30 days of its receipt. As part of the evaluation, USDA assesses potential impacts of adopting the proposed regulatory change.
“Without specific make allowance values to analyze, USDA cannot conduct such an analysis for use in evaluating potential impacts of the proposal,” USDA states in its letters to IDFA and WCMA.
Therefore, the agency is requesting additional information regarding the specific make allowance values to be considered to assist the secretary in deciding whether to initiate a FMMO rulemaking proceeding on this issue.
The IDFA and WCMA petitions were criticized by the National Milk Producers Federation (NMPF) and several dairy cooperatives. They asked USDA not to grant a national FMMO hearing on the single issue of updating make allowances.
NMPF this week submitted to USDA its comprehensive proposal for modernizing the FMMO system, the product of two years of examination and more than 150 meetings held to build consensus behind updates to a program that last saw significant changes in 2000.
“Dairy farmers and their cooperatives need a modernized federal milk marketing order system that works better for producers,” says NMPF President and CEO Jim Mulhern. “By updating the pricing formulas to better reflect the value of the high-quality products made from farmers’ milk, by rebalancing pricing risks that have shifted unfairly onto farmers, and by creating a pathway to better reflect processing costs going forward, we are excited to submit this plan as a path toward a brighter future for dairy.”
Upon official acceptance, USDA will have 30 days to review NMPF’s plan and decide whether and how to move forward with a federal order hearing to review the plan. Highlights include:
- Updating dairy product manufacturing allowances (the “make allowance”) contained in USDA milk price formulas;
- Discontinuing the use of barrel cheese in the protein component price formula;
- Returning to the “higher of” Class I mover;
- Updating milk component factors for protein, other solids, and nonfat solids in 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.
NMPF notes it will pursue two other components of its federal order proposal, approved unanimously by the organization’s board of directors in March, outside of the federal order hearing process, as they don’t involve changing federal order regulations. The recommendations, which remain essential parts of NMPF’s modernization plan, are:
- Extending the current 30-day reporting limit to 45 days on forward-priced sales of nonfat dry milk and dry whey to capture more exports sales in USDA product price reporting, which can be implemented through federal rulemaking; and
- Developing legislative language for the farm bill to ensure the make allowance is regularly reviewed by directing USDA to conduct mandatory plant cost studies every two years.
Mulhern urges USDA to grant a hearing on the entire NMPF proposal, noting how the effectiveness of some components is dependent on the inclusion of others. Mulhern also thanked other organizations that have helped NMPF forge necessary producer consensus by sharing views and insights throughout the process, saying that the spirit of unity and good-faith discussion will help FMMO modernization move forward more quickly.
“From state and regional dairy associations to the American Farm Bureau Federation, dairy farmers have had many allies and friends throughout this process,” Mulhern says. “As (USDA) Secretary (Tom) Vilsack has stated, consensus is necessary for successful modernization. We have that producer consensus, and we look forward to working together toward the adoption and implementation of our plan.”
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