The National Milk Producers Federation is asking the U.S. Department of Agriculture to hold an emergency hearing on a proposal to adjust the Federal Milk Marketing Order pricing formulas for Classes I and II.

At issue is a proposal, sent Monday to the USDA that 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 Class 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.

NMPF’s action comes at a time when the USDA is considering updating the pricing formulas for Class III and IV products.   The USDA is expected to increase the manufacturing allowances for those formulas, which could result in lower farm-level milk prices in all four milk pricing classes. 

“Because the USDA has not accepted our argument that it should hold Class I and II prices harmless until they review all aspects of the make allowance pricing issue, we are now asking for a separate hearing to address our concerns,” said Jerry Kozak, President and CEO of NMPF.   “America’s dairy producers will face substantial economic hardship if, as anticipated, USDA’s decision to increase Class III and IV make allowances results in reduced in Class I and Class II prices.” 

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 a 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.

NMPF tried to propose independent consideration of the Class I and II milk prices in a hearing process that began last January, but was overruled. NMPF’s new proposal accounts for those additional competitive factors, increasing the Class I price by an estimated 73¢ per hundredweight.

“Under our proposal, month to month, Class I and II prices would move up and down with the Class III and IV prices, just as they do today,” Kozak said.  “However, because the Class I and II formulas would stand on their own, future adjustments to the Class III and IV formulas would be made either without impacts on Class I and II, or only after full consideration of the Class I and II formulas.”

NMPF sent the proposal to the USDA for consideration as part of that agency’s ongoing hearing into Class III and IV price formulas, and also sent it as a separate request for an emergency hearing to Agriculture Secretary Mike Johanns. 

NMPF press release