Almost a year after USDA’s Ag Marketing Service (AMS) first began considering more than 12,000 pages of testimony and evaluating 21 different accepted proposals during a 49-day national hearing held in Carmel, Ind., the organization has finally issued its Recommended Decision proposing to amend the uniform pricing formulas applicable in all 11 Federal milk marketing orders (FMMOs).
According to USDA, the Recommended Decision puts forth a package of amendments to update formulas and factors based on the evidentiary record of the proceeding. More specifically, this decision recommends the following:
1) Milk Composition Factors: Update the factors to 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids.
2) Surveyed Commodity Products: Remove 500-pound barrel cheddar cheese prices from the Dairy Product Mandatory Reporting Program survey and rely solely on the 40-pound block cheddar cheese price to determine the monthly average cheese price used in the formulas.
3) Class III and Class IV Formula Factors: Update the manufacturing allowances to: Cheese: $0.2504; Butter: $0.2257; NFDM: $0.2268; and Dry Whey: $0.2653. The Recommended Decision also proposes updating the butterfat recovery factor to 91%.
4) Base Class I Skim Milk Price: Update the formula as follows: the base Class I skim milk price would be the higher-of the advanced Class III or Class IV skim milk prices for the month. In addition, adopt a rolling monthly Class I extended shelf life (ESL) adjustment that would provide for better price equity for ESL products whose marketing characteristics are distinct from other Class I products.
5) Class I differentials: Update the Class I differential values to reflect the increased cost of servicing the Class I market. The county-specific Class I differentials are specified in the decision.
National Milk Producers Federation president and CEO Gregg Doud issued a statement following the news of the Recommended Decision.
“Based on our initial reading, NMPF is heartened that much of what we proposed after more than two years of policy development, and another year of testimony and explanation, is reflected in USDA’s recommended Federal Milk Marketing Order modernization plan.
“Crafting an effective milk-pricing system for farmers is complex and requires a careful balance. USDA’s plan acknowledges that complexity and, while not matching our proposal in every detail, looks largely in keeping with the comprehensive approach painstakingly determined by the work of dairy farmers and their cooperatives over the past three years. We look forward to examining this proposal topic-by-topic, gathering input regarding the various needs of our members nationwide, and adding their insights as this process moves toward a vote of producers,” Doud concluded.
Edge Dairy Farmer Cooperative CEO, Tim Trotter, also issued a statement, noting that the 332 page document will take some time to review.
“We will need a few days to analyze today’s report thoroughly, but what we can say is we appreciate the thorough and dedicated work the AMS team did in curating all the testimony, written responses and market analysis done to get us where we are today,” Trotter said.
With the USDA having released its recommendations, the next phase involves gathering feedback from stakeholders. Publication of the Recommended Decision in the Federal Register is anticipated in early July 2024 and will invite public comments on the recommended proposals. Once it is published, comments may be submitted followed by a farmer vote to decide whether to accept the proposal.
“Today’s announcement provides us a preview of the official recommendation, which will be published in the Federal Register sometime in the next few weeks,” said Lucas Sjostrom, Edge Managing Director. “Once the recommendation is published, the clock starts. From the day of publication, there will be a 30-day window to provide feedback to the AMS; 60 days after public comments close the AMS will release their final recommendation. We anticipate there will be a period of education between the final recommendation and when farmers will need to vote. We anticipate a vote to take place sometime close to early 2025.”
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