07/25/07 Milk Hearings

Milk Hearings. I'm Greg Martin with today's Line On Agriculture. More than a year ago - co-ops and processors - mainly in the cheese industry - asked USDA to look at make allowances for turning milk into cheese, butter and powder. They wanted USDA to determine if those allowances were adequate. After a couple of hearings - USDA raised the make allowance for processors. Since then - USDA has held hearings to review proposed amendments that deal with these Class III and IV milk price formula manufacturing allowances. But according to Chris Galen - Vice President of Communications for the National Milk Producers Federation - the make allowance is a complex issue because increased allowances result in lower prices paid to farmers. GALEN: No one was really making a lot of money last year when Class III prices were below average and yet there were high costs of production at the farm as well as at the cheese plant level. But I think that longer term the argument is you have to strike a balance between what farmers are paid for their milk going into cheese and that make allowance or the manufacturing allowance that goes to the handler  the cheese plant to cover their cost of turning the milk into cheese. There has to be a win-win solution. That's why Galen says NMPF would like USDA to tie make allowances to an energy price index. GALEN: Obviously turning milk into things like cheese and butter and powder is very energy intensive, particularly when you have to dry what is a fluid product and energy costs lately have been quite high and so therefore we think the make allowance should be tied to an index. If the cost of energy goes up, then the make allowances might be higher; if the cost of energy drops then the make allowances ought to be lower returning more money to producers. USDA recently held the final Class III and Class IV formula hearings. And according to Galen - there's good and bad news. GALEN: The good news is that this multi-year process of looking at make allowance formulas is at an end; the bad news is that we don't know that it's going to result in any changes right away. According to Galen - USDA has a number of proposals to consider - and it's unknown how long it will take before changes - if any - are made to the make allowances. That's today's Line On Agriculture. I'm Greg Martin on the Northwest Ag Information Network.