The National Milk Producers has taken a look at USDA's final rule and found the department adopted "most" of NMPF's recommendations on changing the proposed rule issued by USDA in January 1998.

"Considerable change" has been incorporated into the final rule, says NMPF, "not only from the current milk marketing system but also from what USDA first proposed.  The NMPF board meets April 13 to further assess the impact of the final rule and determine what, if anything, should be "done in response," says NMPF.

Eight comparisons were provided by NMPF between what the federation proposed and what USDA adopted.

1. NMPF supported four utilization classes with the products included in each class as proposed by USDA.  USDA changed its initial proposal as NMPF recommended.

2. NMPF supported replacing the basic formula price by applying product formulas to wholesale product prices determined by a USDA price survey to calculate Class III and Class IV milk prices.  As NMPF requested, the new system will replace the BFP with a multiple component pricing system.  Weekly surveys will be conducted to determine the price of the milk components.

3. NMPF recommended maintaining existing competitive relationships between federal order prices and California prices primarily by using data from a USDA plant manufacturing cost survey in the formula used to determine federal order Class III and Class IV milk prices.

4. NMPF proposed adjusting the proposed yield factor for nonfat dry milk.

5. NMPF proposed adjusting the factor for milkfat recovery in cheese.

USDA's response to 3, 4, and 5 in the final rule was to make some upward adjustments in the manufacturing allowances provided to plants processing Class III and IV products, as NMPF requested.  NMPF still is evaluating USDA's data to determine exactly how these changes in the final rule will affected the final value of Class III and IV products (cheese and butter-powder).

6. NMPF supported using the Class IV price plus 70 cents to determine the Class II price; however the Class II price should be announced in advance for both skim milk and butterfat, NMPF said.  USDA adopted that recommendation.

7. NMPF supported USDA's proposal to establish a Class I price mover as the weighted six-month moving average of the higher of either the Class III or IV price in each month, starting with the second preceding months weighted by six and reducing the weight by one for each preceding month.  USDA altered its initial proposal by deciding not to use a six-month moving average.  Instead it will use a weighted average of price for manufactured products as published by USDA for the most recent two weeks preceding the 23rd of each month.  The price mover then will be announced monthly on the 23rd.

8. NMPF supported using Option 1A in the USDA proposal to establish federal order Class I differentials.  However, NMPF recommended that the differentials should include a supply-demand adjuster to account for changes in the market.  USDA adopted a modified Option 1B price level which reduces Class I differentials in 18 markets while increasing differentials in 13.  USDA estimates that the weighted Class I differential for all federal order markets will decline 29 cents per hundredweight.