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IDFA Staff, Members Testify at USDA Hearing on Proposed Class I Changes

May 07, 2007

IDFA Senior Research Analyst John Rutherford testified last week, along with three IDFA member representatives, at a U.S. Department of Agriculture (USDA) hearing in Tampa, Fla., to review proposed amendments to Class I differentials in the Appalachian, Florida and Southeast marketing areas. In testimony offered on behalf of the Milk Industry Foundation (MIF), Rutherford explained why the proposed increases in Class I differentials are unnecessary and demonstrated that there was no need for USDA to consider the amendments on an emergency basis.

"A key purpose of the Federal Milk Marketing Order system is to ensure an adequate supply of milk for Class I needs," Rutherford said. "None of the MIF members responding to our survey about this hearing indicated they are having trouble obtaining an adequate supply of milk for these areas."

While acknowledging that milk production has been declining for years in the three marketing areas, Rutherford pointed out that the current market for milk is national, and the industry's improved transportation system allows processors to buy from many distant locations, if necessary. Using the federal order system to compensate producers for declining production in select areas could cause problems throughout the entire system, he warned, adding that higher prices would only discourage Class I sales within the three areas.

"I am not aware of any study of fluid milk sales that does not find a decline in sales volume when prices rise," Rutherford said.

Also testifying at the hearing were representatives from Dean Foods Company, The Kroger Company and National Dairy Holdings. They joined MIF in opposing the suggested increases, agreeing that the declining production in these markets has not presented a supply emergency because an adequate national supply of milk already exists. They also expressed concern that increasing the differentials in select marketing areas could create problems for plants that border other marketing areas as well as among plants within these marketing orders.

The hearing gathered additional evidence on proposed amendments to change the diversion percentage limits, producer delivery days, transportation credit provisions of the Appalachian and Southeast orders, and maximum rates that can be charged for administering the order in these markets.

As a next step, USDA will review the evidence and decide whether to treat the proposals on an emergency basis, which would expedite the decision-making process.

To read Rutherford's testimony, click here. To read the Federal Register announcement containing the proposals under consideration, click here.

For more information, contact Rutherford at or (202) 220-3514.


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