Dairy Make Allowances Reform a Must

American Farm Bureau Federation economist Danny Munch presented testimony today on behalf of AFBF and its membership at the ongoing Federal Milk Marketing Order Pricing Formula hearing. This is the third time an AFBF representative has testified at the hearing. AFBF Chief Economist Roger Cryan previously testified on cheese and butter pricing and milk composition.

The testimony focuses on adjusting make allowances, or the estimated costs that dairy processors incur to convert milk to consumable dairy products, like cheese and butter. This price directly impacts the price paid to farmers for their milk.

AFBF is advocating for make allowances to be adjusted based on a mandatory, audited USDA survey, which USDA says it does not have the authority to conduct. AFBF is pursuing legislation, with the support and assistance of the National Milk Producers Federation and International Dairy Foods Association, that would direct USDA to conduct such a survey. AFBF opposes increasing make allowances based on potentially biased voluntary survey data that could reduce farmers’ prices unfairly.

Below are excerpts from the testimony, which can be read in full here.

A fundamental focus of AFBF’s proposals is the reduction or elimination of negative producer price differentials and the de-pooling they cause. We believe that an orderly pool is the key to orderly marketing and ensuring Federal Milk Marketing Orders continue to benefit farmers, cooperatives, processors, and consumers. The key to an orderly pool, in turn, is, above all, the proper alignment of the four Class prices.

This statement covers Category 3, Class III and Class IV formula factors, and includes AFBF’s response to Proposal 7, made by the National Milk Producers Federation (NMPF); Proposal 8, made by the Wisconsin Cheese Makers Association; and Proposal 9, made by the International Dairy Foods Association.

The last time we knew the time was in California in 2016 – as the last mandatory audited surveys of U.S. dairy processing costs were those of all manufacturing plants in the state of California in 2016. … Since the 2016 California survey was mandatory, a representative sample of commodity dairy processors was captured, providing an important check to voluntary surveys. …

AFBF’s proposals are based on years of work by dairy farmer members, policy established through AFBF’s grassroots policy development process, and recommendations developed during the FMMO Forum, which brought together representatives from all sectors of the dairy industry last October.