Policy: Somewhat Simpler?

04:39AM Apr 06, 2011
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National Milk’s order reform proposal

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FFTF Federal Order Reform Program Overview

How FFTF’s Federal Order Reform Works

FFTF News and Resources

The National Milk Producers Federation’s (NMPF) Federal Milk Marketing Orders reform package, one of the four parts of its Foundation for the Future plan to revise U.S. dairy policy, lays out the first steps for simplifying U.S. milk pricing.

Complexity remains, however, because the proposed system retains the ghosts of the current four classes. But gone are price minimums for Classes II, III and IV. Gone are cheese make allow-
ances. Gone are negative producer price differentials (PPD). And gone is explicit reliance on the Chicago Mercantile Exchange.

Current Class I price differentials remain. As do the "higher of" Class III and IV prices to set the Class I price mover. Class II will have a 30¢ per cwt. differential, down from the current 70¢ per cwt.

Though no Class III minimum payments will be required, USDA will conduct regional surveys of proprietary cheese plants to determine the prices they paid for milk that goes into the cheese vat. (California prices will not be included because they are still set by formula.)

The surveyed prices will be used to determine a cheese price average each month for calculating the Class I mover. Proprietary (non-co-op) plants that process more than 250,000 lb. of milk per day will be surveyed. NMPF estimates the survey will cover more than 70% of daily cheese production.

Class IV prices will be calculated with the current Class IV formula, which uses National Agricultural Statistics Service butter and nonfat powder prices. The higher of the competitive cheese milk price and the Class IV formula price will be used to determine the Class I mover.

Handlers of Class IV milk will still pay into their Federal Order pool if the Class IV formula price exceeds the cheese milk price. They will draw from the pool if the Class IV formula price is below the region’s competitive cheese milk price. But the Class IV handler draw cannot exceed the available pool balance. Thus, the PPD can never be negative.