USDA sets new milk formulas for Class III, IV


WASHINGTON – The USDA is finalizing its amendments to the pricing formulas for milk marketed for manufacturing use under all federal milk marketing orders.

The amended formulas use market prices of dairy products to establish minimum prices for milk used in the production of Class III products (cheese) and Class IV products (butter, dry milk products).

Long time coming. The final decision culminates a process that began with the 1996 farm bill.

Historically, USDA established minimum prices for milk used in manufacturing by surveying the prices paid for manufacturing grade milk by unregulated plants in Minnesota and Wisconsin. However, by the late 1990s, declining supplies of manufacturing grade milk necessitated that a new procedure be developed to determine the value of milk used in manufacturing.

As part of an effort to consolidate and reform federal milk marketing orders under the 1996 Farm Bill, USDA developed pricing formulas for Class III and Class IV milk based on wholesale prices of manufactured dairy products. These pricing formulas were implemented on Jan. 1, 2000, but Congress mandated that USDA review the pricing formulas following the reform effort.

A public hearing was held in 2000 to consider proposals to change the formulas.

Court gets involved. Effective Jan. 1, 2001, USDA issued revised formulas that were enjoined by a U.S. District Court at the end of January. In October 2001, following the court injunction, USDA issued a recommended decision again altering the pricing formulas.

Changes. The recent decision makes several minor changes in the recommended decision. This final decision differs from the recommended decision by modifying the Class III and Class IV formulas to recognize the loss of milk during delivery from farm to plant.

As proposed in the recommended decision, the make allowance for dry whey is increased from 14 cents to $0.159 per pound. All other make allowances remain unchanged.

Producers will vote. Each amended federal order must be approved by either two-thirds of producers supplying milk to the federal order or by producers who supply two-thirds of the milk to the federal order.

USDA will determine approval or disapproval of each amended order over the next four to six weeks.


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