WASHINGTON, Nov. 6, 2002 - The United States Department of Agriculture today announced the final decision to amend the pricing formulas for milk marketed for manufacturing use under all federal milk marketing orders. The amended formulas use market prices of dairy products to establish minimum prices for milk used in the production of Class III products (cheese) and Class IV products (butter, dry milk products).

Today's final decision culminates a process that began with the 1996 Farm Bill. Historically, USDA established minimum prices for milk used in manufacturing by surveying the prices paid for manufacturing grade milk by unregulated plants in Minnesota and Wisconsin. However, by the late 1990s, declining supplies of manufacturing grade milk necessitated that a new procedure be developed to determine the value of milk used in manufacturing. As part of a comprehensive effort to consolidate and reform federal milk marketing orders under the 1996 Farm Bill, USDA developed pricing formulas for Class III and Class IV milk based on wholesale prices of manufactured dairy products. These pricing formulas were implemented on Jan. 1, 2000, as required by the 1996 Farm Bill.

Congress mandated that USDA review the pricing formulas following the reform effort. A public hearing was held May 8-12, 2000, to consider proposals to change the formulas. Effective Jan. 1, 2001, USDA issued revised formulas that were enjoined by a U.S. District Court at the end of January. In October 2001, following the court injunction, USDA issued a recommended decision again altering the pricing formulas. Today's final decision makes several minor changes in the recommended decision.

This final decision differs from the recommended decision by modifying the Class III and Class IV formulas to recognize the loss of milk during delivery from farm to plant. As proposed in the recommended decision, the make allowance for dry whey is increased from $0.140 to $0.159 per pound. All other make allowances remain unchanged.

The final decision will be published in the Nov. 7 Federal Register. The final decision would amend all federal milk orders. Each amended federal order must be approved by either two-thirds of producers supplying milk to the federal order or by producers who supply two-thirds of the milk to the federal order. USDA will determine approval or disapproval of each amended order over the next 4-6 weeks.

For additional information about the decision contact David Z. Walker, USDA/AMS/Dairy Programs, P.O. Box 30128, Cleveland, Ohio 44130-0128, Telephone (440) 826-3220; email: