IDFA Urges Make Allowance Implementation

USDA is under increasing pressure from dairy processors who say the agency’s sudden decision to delay implantation of updates to milk “make allowances” is costing the industry millions of dollars. In a strongly worded letter to Agriculture Secretary Mike Johanns, CEOs from 25 large dairy companies and cooperatives urged immediate implementation of a new make allowance formula. At the urging of dairy manufacturers, USDA held hearings earlier this year to gather data for the make allowance update, which processors expected to be implemented this summer. Instead, USDA announced in July that it would reconvene a national public hearing to amend the Class III and Class IV milk price formulas. Cornell University is currently conducting a cost study on behalf of USDA, and the agency said it would like to factor its findings into the update.

“Given the potentially complex and divisive nature of the amendments that may now be proposed, this timetable will not allow for the implementation of new make allowances until well into calendar year 2007,” the executives said in their letter.

Make allowances establish fixed margins available to manufacturers under Federal Order classified pricing formulas. IDFA estimates that the current formulas, which it says use manufacturing cost data from 1997-99, are causing dairy companies to lose $26 million a month.

U.S. officials are putting the best face possible on the conclusion of the latest WTO talks in Geneva, but the disappointment is hard to conceal. U.S. Trade Representative Susan C. Schwab and U.S. Agriculture Secretary Mike Johanns issued a joint statement, saying they had hoped to break the current deadlock, but will keep trying.

Johanns said the issue of improving market access to agricultural products is on the table, and that an agreement would provide a huge benefit to U.S. producers. The United States participated in several days of WTO negotiations, which included bilateral and small group meetings. Schwab and Johanns remain hopeful, but Rep. Bob Goodlatte (R-VA), Chairman of the House Ag Committee, said there’s not a lot of “wiggle room” left.