Summary of Proposals in Federal Milk Marketing Order (FMMO) Hearings

Understanding the proposals for the Federal Milk Marketing Order (FMMO) is critical for informed participation in the hearing process, effective advocacy, and the strategic planning of various stakeholders in the U.S. dairy industry. Testimony is in progress by subject area, in the following order proposals are classified on the basis of:

Milk Composition

Proposal 1: Submitted by the National Milk Producers Federation

This proposal aims to modify the factors attributed to the milk component in the pricing formulas for Class III and Class IV skim milk. The specific objective is to adjust the skim component factors to align with the weighted average values for nonfat solids, true protein, and other solids in milk pooled under Federal orders. The data for this alignment will be drawn from the three years preceding the implementation, subject to a 12-month lag time for execution.

The suggested changes to the component factors are delineated as follows:

• Nonfat solids: An increase from 9.0 to 9.41 per hundredweight is proposed for Class IV skim milk.
• Protein: For Class III skim milk, the component factor is recommended to be raised from 3.1 to 3.39 per hundredweight.
• Other solids: The factor for Class III skim milk is advised to increase from 5.9 to 6.02 per hundredweight.

Moreover, the proposal stipulates that these skim component factors be reevaluated a minimum of every three years. Updates will only be triggered if the weighted average for nonfat solids from the preceding three years shifts by a minimum of 0.07 percentage points. In the event that an update is required, an official announcement will be made in February of the corresponding year, and the changes will be implemented on March 1 of the subsequent year.

Proposal 2: Submitted by National All-Jersey Inc.

This proposal seeks to amend the milk component factors in the Class III 

and Class IV skim milk price formulas. The proposal seeks to update the factors annually using the previous year’s weighted average calculations, with a 12-month implementation lag.

Surveyed Commodity Products

Proposal 3: Submitted by the National Milk Producers Federation

The proposal aims to remove the 500-pound Cheddar cheese barrel price series from the protein price formula.

Proposal 4: Presented by the American Farm Bureau Federation

This proposal aims to include 640-pound Cheddar cheese blocks in the protein price formula.

Proposal 5: Presented by the American Farm Bureau Federation

This proposal aims to incorporate unsalted butter into both the butterfat and protein price formulas.

Proposal 6: Presented by the California Dairy Campaign

This proposal aims to include mozzarella in the protein price formula.

Class III and Class IV Formula Factors

Proposal 7: Submitted by the National Milk Producers Federation

The proposal aims to modify the manufacturing cost allowances specified in the four component price formulas. The suggested adjustments are as follows:

Butterfat: An increase from $0.1715 to $0.2100 per pound of butter,

Nonfat Solids: An increase from $0.1678 to $0.2100 per pound of nonfat dry milk (NFDM),

Protein: An increase from $0.2003 to $0.2400 per pound of Cheddar cheese,

Other Solids: An increase from $0.1991 to $0.2300 per pound of dry whey.

The proposed alterations equate to a rise of $0.0385 per pound for the butter make allowance, $0.0422 per pound for the nonfat dry milk make allowance, $0.0397 per pound for the Cheddar cheese make allowance, and $0.0309 per pound for the dry whey make allowance.
Proposed

Component	Previous Allowance ($/lb)	Proposed Allowance ($/lb)	Change in Allowance ($/lb)
Butterfat	0.1715	0.2100	0.0385
Nonfat Solids	0.1678	0.2100	0.0422
Protein	0.2003	0.2400	0.0397
Other Solids	0.1991	0.2300	0.0309

Proposal 8: Submitted by the Wisconsin Cheese Makers Association

This proposal seeks to update the current make allowances with a 4-year phase-in implementation schedule.

Proposed to Make Allowance Levels

Product	Current	Year1	Year2	Year3	Year4
Cheese	$0.2003	0.2422	0.2561	0.2701	0.285
Whey	0.1991	0.2582	0.2778	0.2976	0.3172
NFDM	0.1678	0.2198	0.237	0.2544	0.2716
Butter	0.1715	0.2251	0.2428	0.2607	0.2785

The proposal additionally stipulates that none of the aforementioned increases will be implemented if, before January 1 of the respective year, the USDA receives both the authority and funding to carry out audited cost studies on dairy products from all manufacturers involved in setting Class III and Class IV prices. This condition is contingent upon the USDA issuing regulations that exercise this authority and adopting make allowances in accordance with those regulations.

Proposal 9: Submitted by the International Dairy Foods Association

The proposal aims to revise the existing make allowances according to a four-year phased implementation plan.

Product	Current	Year 1	Year 2	Year 3	Year 4
Cheese	$0.20	$0.24	$0.26	$0.27	$0.28
Whey	$0.20	$0.26	$0.28	$0.30	$0.32
NFDM	$0.17	$0.22	$0.24	$0.25	$0.27
Butter	$0.17	$0.23	$0.24	$0.26	$0.28

The proposal further stipulates that the outlined increases will not be adopted if, before the first of January of the corresponding year, the USDA obtains both the authority and requisite funding to execute audited cost studies for all dairy products manufactured for Class III and Class IV pricing. This is conditional upon the USDA having issued regulations to operationalize this authority and having set make allowances in accordance with such regulations.

Proposal 10: Submitted by Select Milk Producers, Inc.

This proposal seeks to increase the butterfat recovery factor in the Class III price formula to 93 percent, which would necessitate a corresponding increase in the butterfat yield in cheese to 1.624.

Proposal 11: Submitted by Select Milk Producers, Inc.

This proposal seeks to update the specified yield factors to reflect actual farm-to-plant shrink. The yield factors for nonfat solids and other solids would remain unchanged. The proposed yield factors are:

Factor	Proposed Yield Value
Butterfat	1.22
Protein Value in Cheese	1.386
Butterfat Value in Cheese	1.582

Proposal 12: Submitted by Select Milk Producers, Inc.

This proposal seeks to update the nonfat solids factor from 0.99 to 1.03.

Base Class I Skim Milk Price

Proposal 13: Submitted by the National Milk Producers Federation

This proposal seeks to amend the base Class I skim milk price in all Federal orders. Specifically, the proposal seeks to replace the simple average of the Class III and Class IV Advanced Skim Milk pricing factors with the “higher of” the two factors and remove the additional $0.74 per hundredweight.

Proposal 14: Submitted by the International Dairy Foods Association

This proposal seeks to amend the base Class I skim milk price to equal the simple average of the Advanced Class III and Class IV prices, plus the “higher of”  either $0.74 or an adjust or equal to the 24-month (August–July) rolling simple average difference between the Advanced Class III and Class IV skim milk prices.

Component	Description
Base Class I Skim Milk Price	To be determined by new formula
Advanced Class III Price	Current market price
Advanced Class IV Price	Current market price
Simple Average of Advanced Class III and Class IV	(Advanced Class III Price + Advanced Class IV Price) / 2
24-month Rolling Simple Average (August–July)	Average difference between Advanced Class III and Class IV skim milk prices over the last 24 months
“Higher of” $0.74 or 24-month Rolling Simple Average	The greater value between $0.74 and the 24-month rolling simple average
New Formula for Base Class I Skim Milk Price	Simple Average of Advanced Class III and Class IV + “Higher of” $0.74 or 24-month Rolling Simple Average

Proposal 15: Submitted by the Milk Innovation Group

The proposal aims to preserve the existing “average of” formula for the base Class I skim milk price and suggests a monthly update of the adjuster using a 24-month retrospective period with a 12-month delay, specifically covering the 13-to-36-month period prior to the current month. The rolling adjuster would be calculated as the differential between the “higher of” the advanced Class III or IV skim milk prices and the “average of” those advanced prices, based on the aforementioned 13-to-36-month period, added to the current month’s “average of” Class III and IV advanced skim milk prices.

Component	Description
Base Price Formula	Preservation of existing “average of” formula for base Class I skim milk price.
Update Frequency	Monthly
Retrospective Period	24-month period with a 12-month delay. Specifically, the 13-to-36-month period prior to the current month will be considered.
Rolling Adjuster	Calculated as the differential between the “higher of” the advanced Class III or IV skim milk prices and the “average of” those advanced prices.
Period for Rolling Adjuster	Based on the 13-to-36-month period prior to the current month.
Final Adjusted Price	Rolling adjuster added to the current month’s “average of” Class III and IV advanced skim milk prices.

Proposal 16: Presented by Edge Dairy Farmer Cooperative

This proposal aims to alter the base Class I skim milk price to the announced Class III skim milk price, augmented by an adjuster. It suggests recalculating Class I prices using announced rather than advanced prices. The proposed adjuster would be based on a 36-month average (from August to July) of the monthly differences between the “higher of” the advanced Class III or Class IV skim milk prices and the Class III skim milk price.

Component	Specification
Objective	To alter the base Class I skim milk price
Reference for New Price	Announced Class III skim milk price
Proposed Calculation Method	Use announced rather than advanced prices for Class I
Adjuster	Included
Basis for Adjuster	36-month average
Time Frame for Adjuster	August to July
Adjuster Calculation Details	Monthly differences between the “higher of” advanced Class III or Class IV skim milk prices and the Class III skim milk price

Proposal 17: Presented by Edge Dairy Farmer Cooperative

This proposal aims to employ the “higher of” the Class III or Class IV skim milk prices for calculating the base Class I skim milk price. It also seeks to adjust the calculation of Class I prices to rely on announced rather than advanced prices.

Proposal 18: Presented by the American Farm Bureau Federation

This proposal aims to discontinue the advanced pricing for Class I milk and its components, as well as for Class II skim milk and its components. As per the proposal, the Class II skim milk price would be set as the Announced Class IV skim milk price plus the Class II differential; similarly, the Class II nonfat solids price would be the Announced Class IV nonfat solids price plus one-hundredth of the Class II differential. The proposal also stipulates that the Class I skim milk price should be the “higher of” the Announced Class III or Class IV skim milk prices, augmented by the Class I differential; the Class I butterfat price would be determined as the butterfat price plus one-hundredth of the Class I differential.

Aspect	Current Pricing Mechanism	Proposed Pricing Mechanism
Class I Skim Milk Price	Advanced Pricing	“Higher of” Announced Class III or IV skim milk price + Class I differential
Class I Butterfat Price	Advanced Pricing	Butterfat price + 0.01 * Class I differential
Class II Skim Milk Price	Advanced Pricing	Announced Class IV skim milk price + Class II differential
Class II Nonfat Solids Price	Advanced Pricing	Announced Class IV nonfat solids price + 0.01 * Class II differential

Class I and Class II Differentials

Proposal 19: Submitted by the National Milk Producers Federation

The proposal aims to revise the Adjusted Class I differentials as cited in all Federal orders applicable to the 3,108 designated counties, parishes, and independent cities within the contiguous 48 United States. The suggested update encompasses an increase in Class I differentials at all specified locations, with the amounts of increase varying by location.

Element	Description
Objective	Revision of Adjusted Class I Differentials
Scope	All Federal orders applicable to designated regions
Number of Affected Regions	3,108 counties, parishes, and independent cities
Geographical Coverage	Contiguous 48 United States
Nature of Revision	Increase in Class I Differentials
Variability	Amounts of increase vary by location

Proposal 20: Submitted by the Milk Innovation Group

This proposal seeks to lower the current base Class I differential from $1.60 to $0.00.

Element	Description
Objective	Lowering the current base Class I differential
Initial Differential	$1.60
Proposed Differential	$0.00

Proposal 21: Submitted by the American Farm Bureau Federation

The proposal aims to revise the Class II differential to $1.56. It specifically suggests that the Class II differential be calculated using the existing nonfat dry milk make allowance, the current yield factor for nonfat solids, and updated butterfat and nonfat solids tests for milk in the Federal Milk Marketing Orders (FMMOs).

Element	Description
Objective	Revision of the Class II Differential
Proposed Differential	$1.56
Calculation Components	– Nonfat dry milk make allowance<br>- Current yield factor for nonfat solids
Additional Considerations	Updated butterfat and nonfat solids tests
Applicable Framework	Federal Milk Marketing Orders (FMMOs)

Proposal 22: Submitted by Dairy Program, Agricultural Marketing Service:

Implement the requisite modifications to align the respective marketing orders with any amendments that may emerge from this hearing.

Additionally, It is noteworthy that From the issuance of a hearing notice until the release of a final decision in the proceeding, employees of the USDA involved in decision-making are restricted from engaging in ex parte discussions about the merits of the hearing issues with any interested parties. This restriction applies to personnel in the following organizational units:

• Office of the Secretary of Agriculture
• Office of the Administrator, Agricultural Marketing Service
• Office of the General Counsel
• Dairy Program, Agricultural Marketing Service (both the Washington, DC Office and the Offices of all Market Administrators)

The above prohibition does not extend to procedural matters, which may be discussed at any time.