Milk marketing order pool riding vote under way

STRONGSVILLE Ohio – Milk producers in the Mideast milk marketing order can banish the pirates raiding the order’s pool of dollars by voting in a referendum under way through June 17.

Through a loophole in current regulations, milk producers outside the marketing area can “ride” the excess pool value in F.O. 33.

Milk producers in Ohio, Michigan, Pennsylvania and Indiana lost $98 million in income from June 2000 through April 2002 through local order pool loading, according to the latest estimate compiled by Cameron Thraen, Ohio State dairy marketing expert.

That’s roughly $10,000 in lost income per farm, to the 9,400 dairy farms “normally” associated with shipping milk in the federal order, he added.

The average change in the pool value – money typically paid to F.O. 33 producers that’s now being paid to someone else – was $4.2 million per month, Thraen said.

The loophole let producers from Wisconsin, New Jersey, Iowa, Kansas, Minnesota, North Dakota, South Dakota, Montana and Tennessee ship only a couple days’ production into the order to share in pool dollars.

Wisconsin is the biggest culprit, pooling as much as 422 million pounds of milk in June 2001 alone.

‘Faulty’ standards. The USDA agrees with milk producers who think current pooling standards in the Mideast milk marketing order are unfair. Amendments to the existing federal order will change what plants are pooled and what producers are pooled under the order.

A department recommendation, published June 11, found “the milk of some producers is benefiting from the blend price of the Mideast order while not reasonably demonstrating a service to the Class I needs of the Mideast marketing area. This finding is attributable to faulty pooling standards.”

“…[I]t is reasonable to expect that only those producers who consistently supply the market’s fluid needs should be the ones to share in the distribution of pool proceeds,” the USDA’s written decision said.

Based on testimony and comments presented at a hearing in Wadsworth Oct. 25-26, 2001, the USDA’s Agricultural Marketing Service has determined the situation has “emergency” status, which means it can dispense with formal rule-making steps and eliminate the comment period after the referendum is done.

According to F.O. 33 Market Administrator David Walker, if producers approve the amendments, the revised order could take effect as early as Aug. 1.

Walker hopes to have a final tally by June 21. The final order, if amended by a two-thirds majority, must be signed by U.S. Secretary of Agriculture before being implemented.

The referendum. Dairymen will be voting on the entire federal order, not just the proposed amendments. In other words, a “no” vote will terminate the entire order.

The referendum would include current rules regulating the handling of milk in the Mideast marketing area with the following changes:

* The decision adopts amendments to the pool plant provisions that would:

1) Eliminate automatic pool plant status for the six-month period of March through August;

2) Eliminate milk shipments to a distributing plant regulated by another federal milk order as pool-qualifying shipments under the Mideast order;

3) Eliminate the “split plant” feature;

4) Eliminate the inclusion of diversions to pool distributing plants made by a pool supply plant located outside the marketing area as part of the supply plant’s qualifying shipments; and

5) Establish a “net shipments” provision for supply plants.

* For the producer milk provisions, the decision adopts amendments that would:

1) Increase the number of days that the milk of a producer needs to be delivered to a pool plant;

2) Establish year-round diversion limits, adjusted seasonally, for producer milk of distributing plants pooled under the Mideast order; and

3) Exclude from receipts the diversions made by a pool plant to a second pool plant from the calculation of the diversion limitation.

June 17 deadline. Ballots were mailed June 5, Walker said, and completed ballots must be postmarked by June 17. Qualified cooperatives can cast bloc votes on behalf of their members.

Dairy farmers who pooled milk on federal order 33 in October 2001 are eligible to vote. Producers who did not receive a ballot through the mail and who feel that they are eligible to vote should call the USDA Referendum Agent at 440-826-3220.

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Related story:

Yet another loophole?

By Susan Crowell

SALEM, Ohio – Even if Federal Order 33 milk producers approve the proposed amended order, there’s still another wrinkle that this vote doesn’t completely iron out.

Most recently, California shippers – newly banned in the Upper Midwest order from “double dipping,” or pricing their milk simultaneously on the federal order and on their own state order – are now pricing their milk on the F.O. 33 pool, too.

In March, four California producers pooled a total of 109,000 pounds on the Mideast order; by April, that had jumped to 22 producers and 12.1 million pounds of milk.

“We could expect that to grow,” said Ohio State’s Thraen. “We need to watch it.”

Even though shippers would need to ship more actual product under a revised order than is required now with paper marketing and the economics are less advantageous, Thraen still expects to see some of that milk come East.

The amended F.O. 33 order will not address that issue because it was not presented in any of the proposals or testimony.

The twist, Thraen said, is that the USDA’s Agricultural Marketing Service just ruled that “double dipping” was “disorderly” and closed the door on shippers’ ability to simultaneously pool milk on the Upper Midwest milk order when the same milk is already pooled on a state-operated milk order that has marketwide pooling, such as California.

“If it’s a contrary action in the Upper Midwest, it should be a contrary action here,” Thraen said. “They’re not entitled to a penny of it.”

“It’s disruptive and contrary to the intent of the order,” Thraen said.

F.O. 33 Market Administrator David Walker said the amended order, if approved, will increase performance requirements that will affect all milk trying to pool on the order, including California milk.

While he could not predict what level of California milk will continue to come east, Walker said the only way to close this loophole is through another hearing request and order amendment process.