The American Farm Bureau Fedration believes Congress should put on hold until 2002 any consideration of modifying milk market order reforms.  Reform "still has several problems" that must be worked out, says AFBF.  USDA has issued its final rule on milk order reform.

Paul Rovey, Arizona dairyman and chairman of the AFBF's Dairy Advisory Committee, says the final rule "includes a number of useful changes to the federal milk order system, but it still has several problems."

USDA earlier this year chose what was said to be a compromise between Options 1A and 1B.  The overall Class I milk price differentials in the rule were close to that of Option 1A, which AFBF supports, says Rovey, but some characteristics of 1B also were included.  For that reason and because there is limited data to examine, he says it is "difficult to accurately assess the likely impact on producer income."

"The Class I differentials are a concern," says Rovey.  "They are intended to facilitate movement of milk from areas of reserve production to deficit markets.  The differentials in the proposed rule appear to work contrary to this and will lower producer prices in most areas."

AFBF also is concerned about the rule's provisions for make allowances -- the term used for a dairy processor's manufacturing costs.  According to AFBF, the make allowance level in the final rule is too large and will financially hurt dairy producers' income levels.

The higher make allowances "tend to assure profits for most manufacturing plants but give much lower price movers for producers," says Rovey.

Sen. Russell Feingold (D-WI), in a letter to the House Agriculture Subcommittee on Livestock and Horticulture, called for "more substantial reform" than USDA has proposed.  Reforms should include "flat" Class I differentials that discard the single-point pricing system, a "fair formula" for the basic formula milk price that will provide less volatile prices and less opportunity for price manipulation, and, "most importantly," the rule "must focus on the needs and success of the producers in every region."