USDA: Milk price changes take effect; make allowance fees going up

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WASHINGTON — USDA has announced manufacturing allowances will be increased in all federal order markets, beginning with September milk.

The change affects all classes, including the advanced prices announced Aug. 22. (The August prices to be announced Sept. 5 will be calculated with the old formulas.)

The tentative decision raises the manufacturing (“make”) allowances for all four products whose price enters into the formula.

What it means

The cheese make allowance is raised from 1.682 cents per pound to 20.03 cents, lowering the Class III formula price by 31 cents per hundredweight, according to an analysis by the National Milk Producers Federation.

The butter make allowance goes 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.

The nonfat dry milk make allowance is raised from 15.7 cents per pound to 16.78 cents, lowering the Class IV formula by 10 cents.

Dry whey’s make allowance is raised from 19.56 cents per pound to 19.91 cents per pound, lowering the Class III formula by 2 cents.

These milk price impacts can differ by a penny in some months, due to the rounding in the class price formulas.

Butterfat yield changed

The butter yield factor of the butterfat price is also 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.

Not happy

This rule is based on testimony in hearings that began in February 2007. It is an interim final rule, because the make allowance and yield factor changes are subject to comment and revision in another final rule.

The dairy subcommittee of the National Family Farm Coalition, together with Ohio Farmers Union, submitted a comment to the USDA Aug. 18, saying the tentative rule decision is a “devastating blow” to U.S. milk producers.

No voice

“It is unconscionable for USDA to decide to increase processors’ profits while taking it directly out of our milk checks,” said coalition dairy subcommittee member and Ohio Farmers Union vice president Bryan Wolfe, an Ashtabula County dairy farmer.

“I attended all the hearings on the make allowance decision and farmers basically had no voice in the debate.

“If the federal government is going to consider processors’ cost of production, it must do same thing for dairy farmers,” Wolfe said, citing Section 608(c)18 of the 1937 Agriculture Marketing Agreement Act.

All milk classes impacted

John Bunting, a New York dairy farmer, said the impact will be huge.

“USDA’s own economic analysis shows American dairy farmers stand to lose $156 million a year,” Bunting said, adding that those estimates might be “dreadfully low.”

The original concept of the make allowance was designed to support the price of milk through the purchase of manufactured dairy products, Bunting explained, but added that the current support price for dairy at $9.90 per hundredweight doesn’t come close to onfarm costs of production.

“The entire U.S. milk pricing system is broken and needs to be replaced,” Bunting said.

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