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Testimony At House Dairy Hearing Covers Federal Orders, Safety Net

Witnesses who testified at a House Agriculture Committee hearing Wednesday on dairy provisions of the farm bill touched on a number of topics, including, among others, federal milk marketing orders and the dairy farmer safety net.

Mike Durkin, president and CEO of Leprino Foods Company, testified on behalf of the International Dairy Foods Association (IDFA) and Leprino Foods. One of the policy recommendations he put forward was for Congress to authorize USDA to conduct regular cost of processing studies.

Since 2000, USDA’s Agricultural Marketing Service (AMS) has twice commissioned a university to survey US dairy processors to estimate the average cost of manufacturing a pound of the four dairy commodity products — Cheddar cheese, butter, dry whey, and nonfat dry milk — used in federal milk marketing order price formulas, Durkin said.

The first cost study was completed in support of a milk price hearing held in 2006 and 2007, the results of which were implemented in October 2008. The milk price formulas established at that time are the formulas that remain in place today, Durkin pointed out.

“The costs in that formula dramatically understate today’s cost of manufacturing and have resulted in distortions to the dairy manufacturing sector which have constrained capacity to process producer milk,” Durkin said.

The current ad hoc cost study program and price formula updating mechanism does not serve the needs of today’s US dairy industry, Durkin continued. Congress can improve the situation by directing USDA to conduct regular cost of processing studies to enable regular make allowance updates.

In addition, Congress should direct USDA to collect cost information from any dairy processing plant that already provides pricing data under the Dairy Product Mandatory Reporting Program for the four products contained in current pricing formulas, Durkin said. This will ensure the resulting cost information reflects plants of different sizes and in different regions of the US.

The current federal order Class I mover “saddles dairy farmers with asymmetric risk because it includes an upper limit on how much more Class I skim revenue it can generate for producers than the previous mover, but no lower limit on how much less can be generated than the previous mover,” said Lolly Lesher, a Pennsylvania dairy farmer and member-owner of Dairy Farmers of America (DFA), who testified on behalf of the National Milk Producers Federation (NMPF).

The new Class I mover took effect in May 2019, but the COVID-19 pandemic “dramati ,


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