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IDFA Urges Members to Engage in Responding to Disappointing USDA Decisions

Dec 04, 2006

IDFA Urges Members to Engage in Responding to Disappointing USDA Decisions

IDFA, congressional leaders and others have expressed disappointment and concern regarding the U.S. Department of Agriculture's (USDA) recent decision on make allowances in the Class III and Class IV product price formulas; and the decision to hold an emergency hearing to consider proposals to change the Class I and Class II milk price formulas. IDFA is calling on members to submit comments to USDA, urging the department to reconsider its decision on make allowances, and to help defeat the Class I and II pricing proposals.

"Not since federal order reform have we been faced with such serious challenges to the Federal Milk Marketing Order pricing system. We need industry involvement to help us convincingly address these challenges," said Connie Tipton, IDFA president and CEO. "These issues will have a very real bottom line impact on milk procurement costs."

IDFA believes the emergency hearing on Class I and II price formulas is unnecessary and unwarranted. IDFA is urging industry members to testify at the upcoming USDA hearing in Pittsburgh, Pa., on December 11 to demonstrate that the proposals to change Class I and Class II milk price formulas would distort milk prices, reduce fluid milk consumption, increase milk production, and widen regional and class differences in farm milk prices. Members interested in participating are asked to contact IDFA Chief Economist Bob Yonkers, who will coordinate IDFA activities for the hearing, at

Members can oppose the tentative final decision on make allowances, issued on November 20, and ask USDA to increase the proposed make allowances to reflect true manufacturing costs. Members can submit comments to USDA during the 60-day comment period that ends January 22.

"The decision, which amends the make allowances for cheese, butter, nonfat dry milk and dry whey, provides inadequate relief for dairy processors even though USDA received overwhelming evidence that manufacturing costs have risen significantly," said Chip Kunde, IDFA senior vice president.

USDA said it based the revised allowances on the record of the first session of an emergency public hearing held in Alexandria, Va., on Jan. 24-27, 2006, and a second session held in Strongsville, Ohio, on Sept. 14-15, 2006.

In a joint news release, U.S. Representative Dave Obey (D-WI) and Senator Herb Kohl (D-WI) have called on USDA to reconsider its decisions on make allowances and the emergency hearing on federal orders. The legislators warned that these decisions could potentially reduce milk checks for dairy farmers in the Upper Midwest by millions of dollars while raising prices for farmers in places like Texas.

"The USDA took far too long to reach a decision on what turned out to be a modest 'make allowance' adjustment for cheese plants. Then they announced the adjustment in tandem with a proposal that — in the long run — could be very detrimental to dairy farmers in Wisconsin," said Kohl. "I am very disappointed with the department and urge them to reconsider this approach as they prepare for the December 11 hearing."

IDFA agrees with the congressmen and applauds their efforts to draw USDA's attention to the inequity of the recent decisions.

"USDA's recommended decision stands in stark contrast to California, which recently implemented higher state make allowances within four months. Unless the Federal Milk Marketing Order system is streamlined now, we will see further regional price distortions and erosion of marketplace advancements," said Kunde.

To read the news release from the congressmen, click here. To read IDFA's statement, click here.

As part of a two-step process, USDA plans to hold a public session tomorrow in Washington, D.C., to discuss unrelated proposals to amend additional aspects of the Class III and Class IV price formulas. This session is designed to help industry members prepare testimony and evidence for future hearings on these issues. IDFA staff and several member representatives will attend this session. For more information on this hearing, click here.

To read USDA's news releases regarding the controversial decisions, click on these links. and

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Posted December 4, 2006

Dairy Delivers