WCMA Notes: A Broad Milk Price Hearing Approaches the Starting Line
The value of cheddar blocks and dry whey has sunk amidst strong supplies as spring turns to summer. A declining Class 3 milk price and the continuing threat of an economic recession provide a bearish backdrop to efforts to reform national milk pricing.
On the bright side, the U.S. Department of Agriculture team leading federal milk marketing orders (FMMOs) has acted nimbly, issuing an Action Plan on June 1 that starts a crisply defined process to consider changes “to the current pricing provisions applicable to all FMMOs,” to quote their June 1 memo.
USDA accepted five proposed changes from National Milk Producers Federation (NMPF), as well as a proposal – to update make allowances in milk pricing formulas – from Wisconsin Cheese Makers Association (WCMA) and the aligned proposal from International Dairy Foods Association (IDFA).
USDA also opened a window to accept any and all other proposals to change milk pricing in federal orders. An industry concern earlier this year that WCMA and IDFA wanted “make-allowance-only” rulemaking has been proven unfounded, just as this column predicted back in April: “An action plan can include USDA soliciting additional proposals from the dairy industry for topics to address at a national hearing. WCMA is certainly open to additional ideas to update federal milk marketing orders,” WCMA wrote on April 14.
NMPF has placed on the table their proposals to: 1) address divergent cheddar block and barrel prices in the protein price calculation; 2) set new milk component factors used in price calculations; 3) change the current base value (mover) for Class 1 milk prices; and 4) update Class 1 differentials across the U.S.
And in line with WCMA, NMPF is strongly recommending updates to make allowances for production of cheddar cheese, dry whey, butter and nonfat dry milk. All the organizations listed in USDA’s Action Plan – WCMA, IDFA and NMPF – agree: a national hearing should determine updated values for make allowances, currently based on 16-year-old data.
The values proposed for new make allowances are listed in the chart below, with the caveat that proposals from WCMA and IDFA would slowly raise make allowances across four years to reach the values noted below.
|
Amending Make Allowances |
|||
|
Product |
Current Values |
NMPF Proposal |
WCMA/IDFA Proposals |
|
BUTTER |
$0.1715 |
$0.2100 |
$0.2770 |
|
NFDM |
$0.1678 |
$0.2100 |
$0.2701 |
|
CHEESE |
$0.2003 |
$0.2400 |
$0.2825 |
|
DRY WHEY |
$0.1991 |
$0.2300 |
$0.3157 |
With the USDA Action Plan announced on June 1, here’s what the timeline looks like for this hearing and rulemaking process:
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June 1, 2023 – USDA issues Action Plan on proposals to amend FMMOs
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June 14, 2023 – Call for Additional Proposals closes
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June 16, 2023 – Pre-Hearing Information Session with USDA
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July TBD – Official Notice of National Hearing on FMMO proposals
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August 23, 2023 – USDA estimate of Hearing start date
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September 29, 2023 – Hearing end date (by USDA’s 120-day guideline)
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November 28, 2023 – Post-Hearing Briefs due (by USDA’s 60-day guideline)
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February 26, 2024 – Tentative Final Decision due (by USDA’s 90-day guideline)
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April 26, 2024 – Industry comments on decision due (by USDA’s 60-day guideline)
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June 25, 2024 – Final Decision due (by USDA’s 60-day guideline)
Following the final decision, USDA will conduct a national referendum of dairy farmers who vote to approve the federal orders as amended by the final decision, or vote to reject the proposed changes, effectively terminating federal orders. If approved, the new rules are published in the Federal Register with an effective date. A possible effective date, given this timetable, could be January 1, 2025.
The updated make allowance values that WCMA and IDFA offered to USDA are in part informed by a new, national cost of production survey completed in May 2023 by Dr. Mark Stephenson. The survey, sent to makers of cheddar, butter, nonfat dry milk and whey dry, captured a robust share of dairy production. Preliminary estimates find that 56 percent of national cheddar production, 80 percent of butter production, 91 percent of nonfat dry milk production and 51 percent of dry whey pounds were captured in the survey data.
The other building block used to produce updated make allowance values from WCMA and IDFA is a 2022 cost study by Dr. Bill Schiek, which projected 2022 costs of production based upon California Department of Food and Agriculture audited costs surveys performed in 2016 and the changes in relevant cost factors since that time.
USDA’s clear, informative start to the laborious process of renovating FMMOs is great to see. Kudos to the agency team for their focus on a successful process.