USDA Grants NMPF Request For Dec. 11 Hearing To Establish New Pricing Formulas for Class I, II Products; Agency Also Raises Make Allowances For Classes III, IV

The U.S. Department of Agriculture, at the request of NMPF, will hold a hearing next week to consider new pricing formulas for Class I and II milk, the department has announced.

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 will hold a hearing 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 last month, 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.

The potential price impact of these altered allowances on producer prices will be 25 cents less per hundredweight on Class III, and 17 cents/cwt. less on Class IV.

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USDA to Consider Opening of Canadian Border to Dairy Replacements

The USDA has sent a new proposed rule to the Office of Management and Budget (OMB) that would reopen the Canadian border to cattle over 30 months of age - which may also include dairy heifers. Currently, only cattle less than 30 months may enter the U.S. for slaughter.

USDA attempted this past summer to open the border for entry of animals over 30 months. But that proposal was withdrawn following the discovery this past July of a 50 month-old Alberta dairy cow with BSE - the 7th Canadian mad cow case in the past three years, which has called into question the effectiveness of the feed ban that prevents the spread of BSE.

NMPF's concern is that USDA will propose that the border be opened for all classes of animals, not just cattle over 30 months destined for slaughter. This could mean that breeding age dairy heifers might also be permitted entry under the proposed rule.

USDA closed the border and banned all beef and cattle in May of 2003, following Canada's identification of their first domestic case of BSE. The border remained closed to live cattle and most beef until July 2005, when it was reopened for cattle less than 30 months going directly to slaughter.

If the new proposed rule clears review by OMB and is published within the next 90 days, there will likely be a 60 day public comment period, and several months of further government review before the rule is put into place, most likely by end of summer 2007.

Government Won't Make Animal ID Mandatory

The Bush administration is abandoning plans to make farmers and ranchers register their cows, pigs and chickens in a nationwide database intended to help limit disease outbreaks.

Faced with widespread opposition, the USDA said recently that any national animal tracking program should remain voluntary.

"Really embracing this as a voluntary program ... will help the trust issues that some farmers and ranchers have raised about the national animal identification system," said Bruce Knight, undersecretary for marketing and regulation.

So far, about 23 percent of the nation's ranches, feed lots, livestock barns and other facilities have registered their premises with the Agriculture Department.

The department's goal is to have all premises registered by January 2008 and to have full participation in the system by January 2009.

Last year, Agriculture Secretary Mike Johanns announced that participation would be mandatory by 2009. Later, Johanns said it would be required someday.

NMPF has been working with other dairy industry organizations through IDairy in order to spur producers to register their premises, tag their animals, and ultimately identify that tag information in the National FAIR database.

New Associate Member, Blimling and Associates, Joins NMPF

NMPF's newest associate member is Blimling and Associates, which was founded in 1992 to provide support to firms and individuals seeking to successfully navigate the milk and dairy product markets. They provide price forecasting and market outlook, and also offer assistance with dairy procurement and price risk management. Their risk management services range from conducting futures market training, to developing sophisticated methods for cash/futures integration, to compiling detailed research.

Their company representative will be Roger Blimling, President, who can be reached at 608-839-5565. You can learn more by going to www.blimling.com.

Associate Member Focus: M.E. Franks

Founded in 1948, M.E. Franks Inc. is a leading global supplier of dairy ingredients. They work closely with their customers to meet their supply chain and quality assurance requirements by sourcing ingredients through their international network of dairy suppliers. They also support their customers and suppliers by providing them market analysis and direction.

M.E. Franks Inc. was a pioneer in the Dairy Export Incentive Program during the 1980 and 90's. In recent years, their partners have benefited from participation in U.S. Food Aid programs and the development of functional dairy blends.

For more information contact Donald Street at 610-989-9688 or visit their website: www.mefranks.com