Week four of the Federal Milk Marketing Order hearing in Carmel, Indiana was mostly about the make allowance. The following proposals were put in the record:
Proposal 7. The National Milk Producers Federation (NMPF) proposal raises the Class III make allowance by about 58 cents per cwt. and the Class IV make allowance by 53 cents per cwt. Remember, increasing the make allowance results in a corresponding decrease in producer price.
Proposal 8. The Wisconsin Cheesemakers proposal raises the make allowances in four annual increments. In year one, the Class III make allowance goes up 77 cents and the Class IV make allowance goes up 67 cents. In year two, the Class III make allowance goes up another 26 cents and the Class IV make allowance another 23 cents. In year three, Class III goes up another 26 cents, and Class IV goes up 22 cents. In year four, Class III goes up another 26 cents and Class IV goes up another 22 cents. The total make allowance increase in four years is $1.55 for Class III and $1.34 per cwt. for Class IV.
Proposal 9. The International Dairy Foods Association (IDFA) proposal is identical to Proposal 8 with the added provision that if USDA adopts new make allowances based on mandatory and audited make costs, then these automatic increases would be superseded by the new numbers.
Witnesses from a number of NMPF cooperatives testified in favor of Proposal 7 and against proposals 8 and 9. Witnesses from IDFA processor members testified in favor of proposals 8 and 9 and against proposal 7. And in between, Dr. Mark Stephenson, a recently retired dairy economist from the University of Wisconsin, was on the witness stand for parts of two days testifying about the manufacturing cost studies he had done in 2006, 2021 and 2023. He explained how he requested manufacturing plants to voluntarily provide him with their cost of processing data, and then he explained the methods he used to compile and report that data. His recent studies do show that there have been significant increases in costs for dairy manufacturing plants since make allowances were last changed in 2008. Of course, there was lots of cross-examination of Dr. Stephenson about his study and his opinions on other related milk pricing policy issues.
Next week we will likely hear from Select Milk Producers about proposals 10, 11 and 12, which seek to tweak the formulas with regards to farm-to-plant “shrink” and to add a value to the Class IV formula to account for buttermilk solids, which were ignored in the establishment of the current formula. With 21 total proposals to be considered, there is a lot more hearing to come.
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