Washington D.C. (August 21, 2008) - The Dairy Subcommittee of the National Family Farm Coalition on August 18 submitted a comment to the United States Department of Agriculture (USDA) together with Ohio Farmers Union on the "Tentative Partial Final Decision" issued in June to raise the make allowance fees for cheese, butter, nonfat dry milk, and dry whey and to increase the butterfat yield factor. Starting on September 1, dairy farmers everywhere can expect to lose up to 14 cents per hundredweight (cwt) for all classes of milk under the federal order system as they receive less payment for their milk and processors reap the benefits of accessing cheaper milk.

An increase in make allowances has the immediate effect of lowering the Federal Milk Marketing Order component values which, through price formulas, translate into decreased minimum prices for milk and a reduction in producer revenue. At a time when dairy farmers are facing record high input costs and inadequate farmgate prices, the decision represents a further devastating blow to America's remaining 60,000 dairy farmers. "It is unconscionable for USDA to decide to increase processors' profits while taking it directly out of our milk checks," said NFFC Dairy Subcommittee member and Ohio Farmers Union vice president Bryan Wolfe, an Ohio dairy farmer. "I attended all the hearings on the make allowance decision and farmers basically had no voice in the debate. The processors got the chance to complain about their costs of production, but no one seemed concerned about the farmers' rising cost of production. If the federal government is going to consider processors' cost of production, it must do same thing for dairy farmers, as mandated under the Section 608(c)18 of the 1937 Agriculture Marketing Agreement Act."

John Bunting, a New York dairy farmer, stressed that prices for all classes of milk would be impacted, not just Class III and IV. He called this a windfall for companies such as Dean Foods and the makers of Dannon yogurt. "USDA's own economic analysis shows American dairy farmers stand to lose $156 million a year. Quite probably, USDA's estimates are dreadfully low. This is outrageous!" Bunting also added, "The original concept of the make allowance was designed to support the price of milk through the purchase of manufactured dairy products, but with the current support price for dairy at a ridiculously low $9.90 cwt when costs of production are over $30 cwt for many farmers, this shows why the entire U.S. milk pricing system is broken and needs to be replaced. Current policy is anything but 'free-market' oriented right now."

Pennsylvania dairy farmer Donna Hall noted that many dairy farmers were completely unaware of USDA's decision to increase unjust make allowances and were never allowed a vote. "Thanks to block voting, most dairy farmers who belong to cooperatives such as Dairy Farmers of America or Land O'Lakes were never even informed of the referendum and never had the opportunity to vote on it, as block voting allows the board to make all the decisions. Dairy cooperatives have long ceased to work in the interests of dairy farmers and need to be investigated for corruption, as DFA is currently under fire by the Department of Justice and the Commodity Futures Trading Commission." Hall also added that dairy farmers were held hostage by a broken dairy pricing system since a vote against the referendum would have dissolved the federal orders: "Just because you vote against an amendment to the Constitution doesn't mean we throw out the U.S. Constitution if it fails. It is ridiculous for USDA to hold dairy farmers at the barrel of a gun and give us no good options that would allow us to earn a fair price."

NFFC and OFU's comment to the USDA is attached below.

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DOCKET NO: AMS-DA-07-0026-0005
August 17, 2008

Hearing Clerk
Stop 9200-Room 1031
United States Department of Agriculture
1400 Independence Avenue, SW
Washington, DC 20250-9200

Federal eRulemaking portal: http://www.regulations.gov

To Whom It May Concern:

These comments are in reference to the recent "Tentative Partial Final Decision" concerning the Referendum (July 11, 2008) on the proposal to amend manufacturer "make allowances" by increasing the "make allowance" fees for cheese, butter, NFDM, and dry whey and the proposal to increase the butterfat yield factor in the butterfat price formula.

The proposal to increase make allowances will lower prices dairy farmers receive for all classes of milk. This creates economic hardship for dairy farming families at a time when they are being hammered by escalating production costs on their farms. Make allowances in place are already reducing dairy farmers' blend prices in Federal Order No. 1 by approximately $2.50 per cwt. The impending increased make allowances will increase to nearly $3.00 per cwt.

Current federal milk pricing policy enacted in 2000, under "Federal Order Reform," continues to ignore the mandate in the 1937 Agricultural Marketing Agreement Act (AMAA) 608(c)18 provision that requires the USDA Secretary of Agriculture to factor the dairy farmers' cost of production in the basic federal milk pricing formula. At the same time, dairy farmers are being obligated to cover dairy manufacturers' costs plus a profit by perpetual increases in make allowances while dairy farmers must "go it alone" in a global free market using methods of highest efficiency on their farms. The make allowance for dairy processors executed at the expense of dairy farmers amounts to an entitlement that favors keeping less efficient manufacturing plants in production. At no time do these same plants that benefit from reducing the value of dairy farmers' milk checks with increased make allowances offer any "profit sharing" with the dairy farmers for all the money "invested" in the operation of the plant by the farmers through the make allowances.

Make allowances originated as an incentive for processors to "make product" at a time when high government CCC purchases of dairy products were part of the price support system, not for everyday processor profit. Today's support price is at an abysmal low of $9.90 per hundredweight and is a guarantee that dairy farmers will continue to suffer institutionalized economic injustice under the present federal milk pricing policies. In fact, there is no justification for make allowances at all in today's dairy economy which is now part of the competitive global marketplace. Furthermore, make allowance factors also lower the raw milk price paid by manufacturers of both Class I and Class II dairy products neither of which are purchased by the government at all. This is another example of how the make allowance policy favors dairy processors and directly harms dairy farmers.

The Federal Register (7-31-08) (Vol. 73, No.148) states "More than the required producers approved the issuance of the interim order as amended." This is a bold misrepresentation of the facts, an illusion that maintains the "perception" that dairy farmers have individually studied the facts and somehow assented to lowering the value of their milk checks. The truth is that the majority of dairy farmers were not aware at all that a ballot to raise the make allowances was in the works. Some dairy farmers heard about the referendum to increase the make allowances only because neighbors, as independent producers, had received their own informational "Notice of Referendum to Milk Producers" from their Market Administrator's office. The vast majority of dairy farmers are not being informed about any "Referendum" initiatives in a timely fashion so that they can educate themselves about the issues being considered. Secrecy surrounding the ballot process is institutionalized to maintain control of dairy farmers through block voting.

Dairy farmers, if they are informed about anything, are usually told paternalistically by co-op leadership that the co-op must block vote in favor of an amendment because a vote against an amendment will terminate the entire Federal Order system. This is an outrage against democratic principles and is as preposterous as a policy that would throw out the entire US Constitution if a constitutional amendment is not approved.

The "block voting" abuse being orchestrated against dairy farmers by dairy co-operatives needs to be addressed immediately. Farmers should be informed about the issues under consideration early enough in the process to be able to make their own informed decisions and influence the process. Furthermore, it goes without saying that all dairy farmers should have an individual ballot for any proposal that will remove money from their milk checks.

Another indication of the irrationality of the "Referendum" process is evident in the execution of the ballot and implementation of the "Temporary Partial Final Decision" before any confirmed information is provided to dairy farmers and before the "comment" period itself.

The present policies are irrational and unreasonable to presume that the best interests of dairy farmers are served by anything in this "Referendum" farce.

For these reasons we are vehemently opposed to any increased make allowances that will reduce dairy farmers' income and further insist that the federal milk pricing policies currently in force be examined thoroughly to correct the injustices that are making a travesty of justice as dairy farmers remain powerless, voiceless, disenfranchised, and abused.

Sincerely,

Dairy Subcommittee
National Family Farm Coalition

Ohio Farmers Union

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