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Senators vie to eliminate end-product milk pricing formula 
 
In dairy politics, DPW reports that; “If and when Senate and House leaders negotiate the final terms of a 2012 farm bill, U.S. Sens. Kirsten Gillibrand (D-N.Y.) Olympia Snowe (R-Maine) want to make sure their amendment addressing federal order reforms remains intact. In a letter to Senate Ag Committee chair Sen. Debbie Stabenow (D-Mich.) and ranking member Sen. Pat Roberts (R-Kan.), they and seven other senators joined in requesting amendment Senate Bill1481 be in the final bill.

Ultimately, the goal of the legislation is the elimination of end-product pricing formulas. The amendment requires USDA to collect information on various pricing systems, and to assess the impact of a change to end product pricing on price volatility, producer payments and overall fairness and efficiency in pricing. USDA is also required to report analysis to the Agriculture Committee. At present, this language is only included in the Senate farm bill proposal, and not in the House Ag Committee proposal. 

The Snowe-Gillibrand amendment would allow industry groups to present milk pricing reforms to USDA for consideration in a public hearing setting, and order the Secretary of Agriculture to release the USDA’s final proposal to Congress. 

Changing nonfat dry milk (NDM) production trends along with the regulated dairy product price reporting system are helping to lift Class II and IV milk prices, according to the December 7 Daily Dairy Report (DDR). Editor Mary Ledman talked about it in the Dec. 7 Daily Dairy Discussion on the DDR website.

Prior to 2011, California, Washington, Idaho, and Arizona accounted for 78 percent of U.S. NDM production, she said. From 2005 to 2010, the Central region’s NDM production declined, while the Atlantic region was able to maintain production levels. 
Ledman said this is significant because the location of plants ultimately influences Class II and Class IV milk prices which are calculated from the average National Dairy Products Sales Report (NDPSR) NDM and butter prices. NDPSR rules stipulate that sales are reported free-on-board (FOB) the plant, which means transportation costs are excluded from the reporting. In addition, only the first sale of product is included in the report. 

For example, if a manufacturer sells NDM to a broker and then the broker sells that product to an end-user, only the sale from the manufacturer to the broker is included in the NDPSR price. As a result, the NDPSR price tends not to include very high or very low spot prices. 

Based on historical DMN reports, both the Central and East NDM prices tend to hold a premium to the West NDM price, Ledman said. Historically, significant NDM production from the West, particularly California, has heavily influenced the NDPSR NDM price and subsequently the Federal Order Class II and IV prices. 

As of late, California’s influence on the NDM market is lessening, she said, and while California is still the largest NDM producer in the country, for the first ten months of 2012, it accounted for 48 percent of total U.S. NDM production, down from 56 percent in 2010 and 51 percent in 2011. 

Shifting production from NDM to skim milk powder (SMP) has accounted for some of the declines in NDM production, she explained, and SMP prices are not included in the NDPSR NDM price. It appears that the addition of two NDM plants, one in Colorado and the other in Michigan, in late 2011 has altered NDM production trends in the United States, she concluded.

FDA Registrar letters
Dairy producers in several states are being warned to be alert for letters from a Virginia company identified as FDA Registrar Corporation offering to complete a Food and Drug Administration (FDA) food facility registration, for a fee of $195. 

DPW’s Dave Natzke reported in last Friday’s DairyLine that, according to the FDA, dairy farms are not required to register as a food facility under a law that was implemented shortly after the terrorism attacks of 9-11. The law requires owners and operators of all domestic and foreign facilities that manufacture, process, pack, or hold food that will be consumed in the U.S. to register. However, dairy farmers are exempt. If they receive similar letters, dairy producer organization leaders are urging their members to destroy them and take no action.

He also reported that a number of lawsuits around the country are targeting labels on Greek yogurt, alleging some yogurt makers are misleading consumers. This week, a Minnesota federal district court judge dismissed one of those suits against General Mills and Yoplait. The lawsuits allege some yogurt makers are using milk protein concentrates to thicken their product, instead of going through an extensive and expensive straining process required to make Greek yogurt.

The FDA proposed a rule in 2009 regarding standards of identity for yogurt, which would identify allowable ingredients. However, the agency has never held a public hearing on the proposal, according to court documents, according to DPW.
12/19/2012