USDA Decision to Expedite Cost Adjustments in Milk Pricing Formulas

Delay is costing dairy product manufacturers $26 million a month.

Published on: Sep 5, 2006

The U.S. Department of Agriculture's released a decision to speed the agency's review of proposals to amend the Class III and Class IV milk price formula manufacturing allowances for all Federal Milk Marketing Orders. The Department has announced plans to reconvene a national public hearing in a limited nature to receive new manufacturing cost data compiled by Cornell University. The hearing will be held September 14 in Strongsville, Ohio.

"We're thrilled that USDA heard the outcry from Congress to do the right thing and quickly reconvene the hearing," says Chip Kunde, International Dairy Foods Association senior vice president.

Created through a federal order reform process mandated by Congress in the 1996 Farm Bill, the make allowances established on January 1, 2000, fix the margins USDA permits processors to apply to cover the manufacturing costs of turning raw milk into a finished dairy product. These margins currently are based on industry manufacturing cost data from 1997-99 and are grossly below today's true costs, IDFA says.

Earlier this summer, IDFA expressed shock when USDA announced in June that it planned to reconvene a national public hearing, because a prolonged delay to a final decision on make allowances would have a devastating effect on the U.S. cheese makers and the dairy industry overall. An emergency hearing had already been held by USDA in January to address the need to update make allowances. Many in Congress and the industry, including IDFA, viewed the delay as unwarranted and unnecessary, given the amount of data the agency gathered at the January meeting.

"We appreciate the bipartisan efforts of Chairman of the House Agriculture Subcommittee for Dairy Gil Gutknecht, R-Minn., and Chairman of the House Agriculture Committee Chairman Bob Goodlatte, R-Va., who joined Representative David Obey, D-Wis., and 28 congressional leaders in the House of Representatives and Sens. Norm Coleman, R-Minn., and Herb Kohl, D-Wis., who led 15 senators from across the country to urge USDA to promptly update make allowances," says IDFA President and CEO Connie Tipton.

"We truly appreciate the support offered by these members of Congress. The delay is still costing dairy product manufacturers $26 million a month, so we look forward to a swift decision from USDA to bring the industry much- needed relief," Tipton says.