USDA delays implementing revised Class III and IV make allowances

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WASHINGTON — The USDA has delayed implementation of its interim final rule on Class III and IV make allowance adjustments by one month, in response to a lawsuit filed on behalf of seven dairy farmer cooperatives, two other farm operators and a state dairy farmers association.

The suit claims USDA was obliged by the passage of the new farm bill to determine producer feed and energy costs, and take those into consideration in any hearing, and USDA did not do this when making its decision on the rule.

Make allowances

The revised new make allowances were to take effect Sept. 1, for all classes, increasing make allowances for cheese, butter, nonfat dry milk and dry whey, and revising the butterfat yield factor.

Barring action by a judge, those changes will instead take effect Oct. 1, 2008. The revised formulas were to be applied to the Aug. 22 announcement of advanced prices (Class II skim and Class I skim and butterfat) for September, and to the Oct. 3 announcement of Class III and IV prices.

As a result of USDA’s action last week, the application of these changes will be put off until at least October, with the new formulas to be applied no earlier than the Sept. 19 announcement for October’s advanced pricing, and the Oct. 31 announcement for October’s Class III and IV prices.

The rule, as published on July 31, would have raised the manufacturing (“make”) allowances for all four products whose price enters into the formula.

Cheese

The cheese make allowance was to be raised from 16.82 cents per pound to 20.03 cents, lowering the Class III formula price by 31 cents per hundredweight, according to National Milk Producers Federation’s analysis.

Butter

The butter make allowance would go from 12.02 cents per pound to 17.15 cents, lowering the butterfat price by 6.2 cents per pound, the Class IV price by 22 cents per hundredweight and the Class III price by 3 cents per hundredweight.

Dry milk

The nonfat dry milk make allowance was to be raised from 15.7 cents per pound to 16.78 cents, lowering the Class IV formula by 10 cents. Dry whey’s make allowance would rise from 19.56 cents per pound to 19.91 cents per pound, lowering the Class III formula by 2 cents. (These milk price impacts could differ by a penny in some months, due to the rounding in the Class price formulas.)

Butterfat

The butter yield factor of the butterfat price was also to be raised from 1.20 to 1.211. Because this is multiplied by the butter price in calculating the butterfat value, the impact of the change depends upon the butter price.

At June’s average butter price, the yield factor change would raise the butterfat price by 1.5 cents and the Class IV price by 5 cents per hundredweight.

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