WCMA Notes: Consensus Builds for Make Allowance Updates
The opportunity to update federal milk marketing orders rolls on with news April 28 that the U.S. Department of Agriculture (USDA) is seeking more information from Wisconsin Cheese Makers Association (WCMA) and International Dairy Foods Association (IDFA) as it considers our petitions for a national rulemaking and hearing on orders.
Specifically, USDA asked our organizations for “additional information regarding the specific make allowance values to be considered to assist the Secretary in deciding whether to initiate an FMMO rulemaking proceeding on this issue.”
Then, on May 1, National Milk Producers Federation (NMPF) jumped into the pool, offering a 49-page request for a national federal order hearing. They also requested an update for make allowance values. Clearly this is an issue the dairy industry has united around.
A quick look back: In March, WCMA filed a petition with USDA to initiate an update of federal orders. Our organization focused on our No. 1 priority – updates for the manufacturing allowances used in the Class 3 and Class 4 milk pricing formulas. Certainly, other improvements for orders should be considered, but make allowances have remained unchanged for 15 years and today these inadequate values for the true cost of making cheddar cheese, dry whey, nonfat dry milk and butter have changed (wiped out) milk price premiums, spurred deductions on milk checks, and sparked the spread of milk pricing methods born outside of the geography of federal milk marketing orders.
In short, the lack of initiative to keep government-set milk price formulas up to date has forced change upon milk pricing in the United States – necessity being the mother of invention.
In our petition to USDA, WCMA pointed to an excellent tool for discovering the up to date make allowance values that these regulators want. It’s the “Cost of Dairy Processing” survey tool currently available to dairy manufacturers. The deadline to complete this survey is May 12, 2023. Dr. Mark Stephenson, the newly retired and busier-than-ever Director of Dairy Policy at the University of Wisconsin, initiated this survey in February, asking manufacturers of cheddar, dry whey, nonfat dry milk and butter to complete this detailed look at dairy product production costs.
Interestingly, in its 49-page petition filed May 1, NMPF listed some exact ideas for new make allowance for cheddar, butter, nonfat dry milk and dry whey. But the document doesn’t detail where those values came from. In fact, the petition states: “NMPF does not contend that these increases fully correct for the increases in butter, NFDM, cheddar cheese and dry whey manufacturing costs experienced by manufacturers since 2008, when the current make allowances were implemented.”
Instead, NMPF states, these new make allowances “represent a fair balance between the producer impact of higher make allowances and the processor impact of make allowances more closely reflecting the current cost of manufacturing commodity style butter, nonfat dry milk, cheddar cheese and dry whey.”
Make allowances are data-driven cost compilations used in a mathematical formula, not “fair balance” political footballs.
Which brings us back to the “Cost of Dairy Processing” survey tool that dairy manufacturers can fill out by May 12. This national plant survey has a logical flow from seeking the specific products made by a manufacturer to noting each volume of production. Then the dairy inputs (such as raw milk, cream, liquid whey) are quantified, as well as ingredients such as cheese starter, rennet and salt.
The survey captures the cost of various forms of energy and annual labor costs allocated to the various products produced. Packaging costs such as the costs of cheese boxes, bulk bags, stretch wrap, pallets and liners are gathered for a complete look at the cost of manufacture. Finally, the survey takes in the market value and depreciation of assets.
In addition to agreeing to update make allowances, NMPF, WCMA and IDFA agree that USDA needs the long-term authority to conduct mandatory, auditable, plant processing cost studies to fuel further make allowance adjustments in the future.
WCMA looks forward to providing USDA with the specific make allowance data they have requested to consider our petition for a hearing to update make allowances.