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Pricing formula has caused all these problems

Arfen Tewksbury

Dairy farmers all across the USA shook their heads when they looked at their recent milk check stubs. This is the same formula that John Hathaway and I drove to testify against this proposal at a hearing in Alexandria, Virginia before Order Reform took place. It’s the same formula that Gerald Carlin, Donna Hall, Linda Broyan and Brenda Cochran joined me to testify (for 2½ hours) against the continuation of the provisions of the new Federal Orders.

When we left Virginia, I said we will never obtain a fair price for our dairy farmers through the hearing process. We must have a new dairy bill passed by Congress or we will see the demise of our family dairy farms. Consequently, that’s why the Specter-Casey bill (The Federal Milk Marketing Improvement Act) was conceived.

We also labeled the new pricing formula a dairy farmers’ nightmare and a processor’s dream. The PPD (Producer Price Differential) that raised its ugly head on your milk check stub did not directly affect your price. It did not lower your price, nor did it raise your price. The PPD simply states the difference between Class I, II, and IV prices from the Class III price.

Actually, I don’t even believe the PPD should appear on the dairy farmer’s milk check stub. It is completely misleading and misunderstood. If you want to blame someone for this formula, then I feel you should blame some of the dairy co-ops and IDFA, as they were the ones that supported that proposal. 

Remember, the total value of all four classes of milk determines how much money will be available to pay the dairy farmers.

Yes, what happened to the value of all milk in June was the result of the worst topsy-turvy milk event that you will probably ever see. When you have a Class I price of only $14.67, a Class II price at $12.99, and a Class IV price at $12.90, and then a Class III price of $21.04, you can only expect the dam to break somewhere along the way.

Adding to this miserable situation was the fact that different dairy cooperatives de-pooled a large amount of milk across the country. Whoever thought that the upper Midwest farmers would receive the highest pay price of any Federal Order for their milk in June at $17.23 per cwt. (hundred pounds) and only with a Class I utilization between 8 to 10%, and at the same time, see the price paid to dairy farmers in the Florida market of $16.83 at a Class I utilization between 82-84%.

The reason the price in the upper Midwest was higher than the rest of the country is because of so much cheese being produced in that area. Actually, I’m glad that their price was $17.23, but $17.23 is still not a satisfactory price. Please remember that in Order #1, the Class I price for July’s milk will be $19.81 per cwt. and if the Class III price stays somewhere near June’s level, then the dairy farmers pay price for July’s milk could go to nearly $17 per cwt. However, as I have said many times, the only ones that don’t make mistakes in predicting milk prices are the ones who don’t estimate milk prices.  Please watch for Pro-Ag’s news release regarding the Specter-Casey bill. 

Arden Tewksbury

Tewksbury is the manager of Pro-Ag