Milk producers told Congress Wednesday that changes are needed in federal milk marketing order reforms as proposed in a USDA final rule.  Milk processors, however, told the same hearing that Congress should leave the final rule alone, instead “stay the course” with the proposed reforms.

Jerry Kozak, CEO, National Milk Producers Federation, told the livestock subcommittee taht the USDA proposal “assures that dairy producers will receive lower prices, while dairy processors will have higher margins.  We think that’s a serious mistake and drastically changes the foundation of the federal order program.”

However, E. Linwood Tipton, CEO, International Dairy Foods Association, said if Congress overrides the reform of milk pricing regulations by “mandating artificially high milk prices, it will send the dairy industry back to the days of surplus production and declines in consumption.”

NMPF wants Congress to mandate the use of Option 1A to establish Class I (fluid milk) prices.  Although a large majority of
the dairy industry supported Option 1A, USDA selected a slightly modified version of Option 1B, to which NMPF objects.

“You can put lipstick and a dress on a cow and call her Madonna, but she’s still a cow,” said Kozak.  “And despite USDA’s attempts to gloss over the fact that they tried to achieve a compromise on Class I differentials, they’ve given us a dressed-up version of Option 1B.”

The Class I differential is an amount added to the base price for milk used as a beverage.

“They are trying to mandate the addition of this option (1A) on top of other reforms, despite the fact that Agriculture Secretary Dan Glickman scrutinized this option and decided it would not be in line with USDA’s carefully constructed reforms,” said Tipton.  “What’s more, USDA calculates that if the new system with Option 1A would have been in effect in 1998, the average price of beverage milk would have been 11 cents higher per gallon than under existing federal regulations.”

Kozak argued that USDA data show if the dairy industry would had operated under the program in the final rule in place during the last five years, dairy producers would have received nearly $1 billion less in revenue than they received under the current system.