USDA Proposes New Milk Pricing System

The U.S. Department of Agriculture recommended the first overhaul of the federal milk pricing system since the Depression, consolidating dozens of pricing regions and changing the formulas by which dairy farmers are paid. The changes, which must be approved by milk producers, are expected to benefit consumers only slightly: The government expects the average price of drinking milk to drop by about two cents a gallon. The nation’s milk pricing regions are divided into what are called milk marketing orders, which set the price processors pay dairy farmers. Under the changes, the milk marketing orders would be reduced from 31 to 11. The newly consolidated orders must be approved by either two-thirds of producers in a marketing area or by producers who supply two-thirds of the milk in a marketing area. If these producer referendums are approved, the changes will take effect Oct. 1. In addition, the basic formula price, which establishes the minimum price for milk used in nearly all dairy products, would be replaced with a formula that looks at multiple across-the-board components. Jerry Kozak, chief executive of the National Milk Producers Federation, said his organization was also reviewing the proposal.