NMPF Hearing Granted For Establishing New Milk Pricing formula

US - The U.S. Department of Agriculture, at the request of NMPF, will hold a hearing next month to consider new pricing formulas for Class I and II milk, the department announced Monday.
calendar icon 20 November 2006
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In October, NMPF asked the USDA to hold an emergency hearing on a proposal to adjust the Federal Milk Marketing Order pricing formulas for Classes I and II. NMPF's proposal would establish a direct relationship between dairy product prices and the Class I and II price. Because the cost of supplying Class I (fluid milk) and II (ice cream, yogurt) milk have risen, NMPF's request would also add up to 73 cents per hundredweight to the prices that move, or support, Class I and II prices – resulting in higher prices for dairy farmers.

The USDA said yesterday that the hearing will be held starting Dec. 11th in Pittsburgh, PA.

Jerry Kozak, President and CEO of NMPF, said the decision to allow a hearing on Class I and II pricing “is the logical and welcome next step toward the fullest possible review of how Federal Order pricing levels need to be adjusted. We appreciate USDA's willingness to look at the big picture, and their doing so in a timely manner. ”

The current Class I and II prices are equal to manufacturing milk prices, plus several cost and competitive factors, based on data from 1998 and earlier. Class II products are priced off of the Class IV (butter and powder product) price, and Class I is priced off either Class III (cheese and whey products) or Class IV, whichever price is higher in a given month.

Also on Monday, the USDA issued its long-awaited tentative final decision to adjust upward the manufacturing allowances for Class III and IV products. The agency had been considering updates to the formulas that specify what processors are paid under the Federal Order system to manufacture raw milk into Class III (cheese, whey) and Class IV (butter, skim milk powder) products.

The new formulas, which are expected to be implemented next February or March assuming they are approved by producer referenda, are:

Cheese: 16.82 cents/pound, up 0.32 cents from the current allowance.

Whey: 19.56 cents/lb., up 3.66 cents.

Butter: 12.02 cents/lb., up 0.52 cents.

NFDM: 15.70 cents/lb., up 1.7 cents.

NMPF is currently analyzing the potential impact of these altered allowances on producer prices.

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