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USDA Reconvenes Hearing to Gather Additional Data on Manufacturing Costs

Sep 18, 2006

USDA Reconvenes Hearing to Gather Additional Data on Manufacturing Costs

Last Thursday, the U.S. Department of Agriculture (USDA) reconvened its hearing on amendments to the Class III and Class IV milk price formula manufacturing allowances to gather new evidence on plant manufacturing costs. The hearing was held September 14-15 in Strongsville, Ohio.

In response to requests from key members of Congress as well as industry leaders and organizations, USDA announced earlier this month its decision to reconvene the hearing quickly and limit the evidence to new manufacturing cost data compiled by Cornell University and other publicly available data.

Dr. Mark Stephenson, a Cornell University faculty member in the department of applied economics and management, opened the hearing with testimony on the USDA-funded research compiled by Cornell. The study surveyed a sample of cheese, dry whey, nonfat dry milk and butter manufacturers to determine the current average cost to make these products.

USDA announced that the transcript, along with exhibits entered into the hearing record, would be available early this week. The agency is accepting post-hearing briefs through October 2. IDFA plans to submit its brief to USDA next week and will continue to press for quick action.

In presenting his testimony, Stephenson noted that the Cornell study included a disproportionate number of large, more efficient plants, so the data on averages for plants in the study were not the same as estimates for the average manufacturing costs for plants of all sizes. While Cornell was able to adjust the results for cheese plants by using individual plant-volume data provided by USDA, Stephenson acknowledged that this type of data is not available to make similar adjustments for dry whey, nonfat dry milk and butter plants.

During cross examination by IDFA's legal counsel, Stephenson also noted that the Cornell study did not include costs of sales and marketing of manufactured dairy products. However, he said the study did update the sample data, which was based largely on actual plant cost data prior to July 2005, to account for higher energy costs in the second half of 2005.

Members who want to submit individual post-hearing briefs may contact IDFA Chief Economist Bob Yonkers, or 202-220-3511, for more information.

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Posted September 18, 2006

Dairy Delivers