Auto-SummaryThe post discusses a proposal for milk marketing in the Northeast region, specifically focusing on balancing services to manage fluctuations in supply and demand for fluid milk and manufacturing purposes. The proposal suggests that during periods of abundant milk supply, reserve milk is used for Class IV manufacturing, such as nonfat dry milk (NFDM). The balancing study, conducted under different scenarios with 10% and 20% operating reserves, shows that changes in Class I (fluid) demand affect the amount of unused butter-powder plant capacity and associated costs. The proposal is supported by a Dairylea witness who argues that the Northeast marketing area, a "milk megamarket," requires marketwide service payments for balancing due to its high population and milk production density. The witness also notes that without compensation, some milk production may not clear the market. Another ADCNE witness representing Agrimark supports the proposal, stating that payments for balancing services can be made from the total sums payable by all handlers for milk, ensuring equitable cost distribution.
Weird..
He references the section proposing rules for milk marketing under the dept. of agriculture. (If you have ritalin, now is the time to pop em).
Im not sure about pay cuts but it will tell you all about which milk is reserved for class IV manufacturing.
Federal Register: March 25, 2004 (Volume 69, Number 58) (ed. heh, 69)
[[Page 15576]]
daily operating fluctuations among distributing plants (operating
reserves) and seasonal fluctuations (seasonal reserves). According to
the witness, during periods of abundant milk supply in the Northeast
marketing area, such reserve milk is used for Class IV manufacturing
purposes, specifically for the manufacture of nonfat dry milk (NFDM).
According to the RCBS witness, the study suggests that seasonal
variations in the demand for fluid milk cause variations in the supply
of milk that would otherwise be used in manufacturing. As a result,
milk available for the manufacturing of NFDM fluctuates inversely with
the milk supplies needed to meet fluid milk demand, the witness noted.
The witness said that as demand for milk for fluid use increases,
supplies of milk for manufacturing tend to decline. According to the
witness, changes in Class I (fluid) demand change the amount of unused
butter-powder plant capacity and that such unused capacity has
associated costs.
The RCBS witness explained that the balancing study was conducted
using two different scenarios. The witness said the first scenario
assumes an operating reserve of milk needed to balance the regions'
needs at 10 percent of total fluid demand. The second scenario assumes,
according to the witness, an operating reserve of 20 percent. The
witness testified that operating costs were compared under these two
differing scenarios while other factors were held constant. The witness
noted that while the study focuses on estimating costs and changes in
estimated costs, the study did not address methods by which to recover
or offset costs typically associated with balancing services and
operations. The witness indicated that cost recovery methods might
include some form of marketwide service payments formalized under the
term of a milk marketing order, ``give-up'' charges (a charge by a
supplier for making milk available, for example, to a distributing
plant), balancing or diversion fees (a charge for accepting milk at a
balancing facility when not needed by a Class I bottler), ``over-
order'' premiums (a price charged for milk above those minimum prices
set under the terms of a milk marketing order), or by pricing formulae
included in the classified prices established under a milk marketing
order.
A witness for Dairylea, a farmer-owned agricultural marketing and
service organization, testified in support of Proposal 7. The witness
described the Northeast marketing area as a milk ``megamarket''
characterized by high population and milk production density that
requires marketwide service payments for balancing the market's fluid
needs. The witness asserted that the Class I needs of the Northeast
market are so large and unique among Federal milk orders that without
compensation for the costs incurred for balancing, such activities
might not otherwise be provided. The witness asserted that there is no
other viable market mechanism through which excess milk supplies can be
adequately disposed of other than through the butter-powder balancing
facilities of the region's six largest cooperative handlers. The
witness did note, however, that all manufacturing handlers operating in
the Northeast marketing area also perform balancing functions by simply
procuring milk from the area's producers.
The Dairylea witness characterized the Northeast as a unique milk-
producing region because nearly 25 percent of farmers supplying the
market are independent producers and not members of cooperatives. The
witness characterized the Northeast's independent producers as largely
serving the needs of Class I handlers and as generally not involved in
providing balancing facilities and services for the market.
Additionally, the witness testified that the marketing area contains
nearly 40 percent of all dairy farmer cooperatives in the United
States. In comparing outlets for milk, the witness testified that the
Northeast marketing area is represented by 32 proprietary handlers and
259 milk plants.
The witness for Dairylea was of the opinion that the unique
characteristics and size of the marketing area together with the sheer
volume of milk required to supply the fluid needs of the marketing area
make it imperative that marketwide service payments be provided to
compensate the largest cooperative handlers for the costs that they
incur for balancing the market. According to the witness, without
cooperatives performing this service, some milk production in the
marketing area would not clear the market. The witness did note that
some milk produced within the boundaries of the Northeast marketing
area is not pooled on the order because it is delivered south to other
marketing areas where it receives a higher blend price. The witness
similarly acknowledged that milk produced west of the marketing area is
delivered to the Northeast marketing area butter-powder plants because
being pooled on the Northeast order often commands a higher blend
price.
The Dairylea witness also acknowledged that other plants located
within the Northeast marketing area (some 184 nonpool plants, many of
which are proprietary) also perform significant balancing functions.
While the witness was of the opinion that no single nonpool plant could
individually provide significant market balancing services, taken as a
whole, these plants do provide and perform balancing functions.
The Dairylea witness testified that the members of ADCNE had
advanced a conceptually similar marketwide service payment proposal for
balancing during the Federal milk order reform effort. The witness
testified that Federal order reform provided public debate and analysis
on the need for a marketwide service payment for balancing. The witness
explained that USDA rejected that marketwide service payment proposal
in the reform's recommended decision of 1998 and in its final decision
in 1999 because the proposed balancing credit level sought had not been
adequately explained.
A second ADCNE witness, representing Agrimark, testified that the
Food Security Act of 1985 (commonly referred to as the 1985 Farm Bill)
provided authority for Federal milk marketing orders to allow handlers
to collect for services rendered that are of benefit to all the
market's participants. The witness asserted that the disposal of
surplus milk (milk not needed for fluid use) and the procurement of
supplemental milk supplies for fluid handlers are specifically
identified in the provisions of the 1985 Farm Bill as being of
marketwide benefit. The Agrimark witness also asserted that payments
for reimbursing handlers who provide services of marketwide benefit may
be made from the total sums payable by all handlers for milk--the costs
are paid from the total value of milk pooled before the computation of
the blend price.
In the opinion of the Agrimark witness, such payments would be made
on a uniform basis by all pool participants and thereby all would
equitably share in the cost associated with balancing. According to the
witness, because independent producers do not operate balancing
facilities or perform balancing functions, they have avoided the burden
of incurring balancing costs while receiving the benefit of the blend
price.
Testimony of the Agrimark witness reinforced the opinion of the
Dairylea witness that cooperatives perform the bulk of market balancing
functions in the Northeast marketing area throughout the year. As an
example, the witness... (end of page)
Edited by Catalysis (09/07/05 09:30 PM)
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