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Dairy Facts 2016

IDFA Members Oppose Changes to Class I Differentials in Mideast Region

Aug 25, 2008

Several IDFA members attended last week's U.S. Department of Agriculture hearing in Cincinnati to oppose a proposal to change certain Class I differentials in the Mideast milk marketing order. The members outlined the negative economic and marketing consequences that the proposed changes would bring and demonstrated that there was no need to consider the proposal on an emergency basis.

Proponents of the proposal claim that the adjustments are needed to counter the market changes brought about by USDA's tentative decision earlier this year that adjusted milk pricing in three Southeastern federal marketing areas. In his testimony, Evan Kinser, director of dairy policy and commodities, Dean Foods Company, argued against addressing federal order issues on a piecemeal basis, noting that each regional change will continue to affect other market areas.

"These impacts become like the ripples in a pond after a rock has been tossed in. They just keep spreading and spreading," Kinser said. "Soon, we will have completed the circle and we'll be back in the Southeast looking for more relief – but not coordinated price levels."

Kinser urged USDA to return to a national pricing surface for Class I products and to abandon the temporary adjustment in Class I differentials included in the Southeast decision. To read his testimony, click here.

IDFA opposed the Southeastern adjustments in testimony last year, noting that raising differentials in these markets would create problems in surrounding market areas, such as the Mideast.

"They raised the cost of milk in the Southeast to bring more milk into the region, and now they are considering raising prices elsewhere to make it stay put. How crazy is that?" said Connie Tipton, IDFA president and CEO.

According to the new proposal, changes to the Class I differentials for plant locations in the Mideast marketing order would range from an increase of 15 cents per hundredweight to an increase of 40 cents per hundredweight. The affected areas would be Indiana, Kentucky, Ohio and West Virginia.

The proposal was submitted by Dairy Farmers of America, Inc.; Dairylea Cooperative Inc.; Foremost Farms USA Cooperative, Inc.; Land O' Lakes, Inc.; Michigan Milk Producers Association, Inc.; and National Farmers Organization Inc. To read the previous News Update story, "USDA Announces Hearing to Consider Class I Adjustments in Mideast States," click here.

In addition to Kinser, other member representatives who testified were John Hitchell, general manager, manufacturing procurement, The Kroger Co.; Mike Meyers, general manager, H. Meyer Dairy, National Dairy Holdings; and Patty Stroup, group manager, dairy, Nestle USA.

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

For more information, contact Bob Yonkers, IDFA vice president and chief economist, at or 202-220-3511.


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