My view

Make allowances help middlemen by hurting farmers

By ARDEN TEWKSBURY
Posted 3/9/22

Should an increase in the make allowance be awarded to milk handlers, which could then be used to lower milk prices paid to dairy farmers? Of course not!

The make allowance was once part of the …

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My view

Make allowances help middlemen by hurting farmers

Posted

Should an increase in the make allowance be awarded to milk handlers, which could then be used to lower milk prices paid to dairy farmers? Of course not!

The make allowance was once part of the former milk-support price program set by the USDA and Congress. Under the program, the USDA established a value for butter, powdered milk and cheese. These prices were not sufficient to cover the total costs of the milk handlers. Consequently, the USDA had hearings and developed what is called the Make Allowances. This was geared to have the manufacturers made whole. In addition, the milk support program was also intended to shore up prices paid to dairy farmers.

When the milk support price program was eliminated by Congress in the early 1990s, nothing was offered in its place. So the manufacturers of dairy products convinced the USDA and Congress to build the make allowance into the federal milk orders pricing system that determines what dairy farmers are paid. This means that dairy farmers pay for the costs of manufacturing rather than have the manufacturers recoup their costs through pricing the product to the customer.

Wait a minute? Who pays for the make allowances in the federal milk order? You guessed it! In the pricing formula used to determine the dairy farmers’ prices, the value of the make allowance collected could lower milk prices paid to dairy farmers.

Guess what is happening now?  Manufacturers and some farm organizations are making efforts to raise the amount of the make allowance, which will again come from the price dairy farmers should be receiving.

Why do the USDA and U.S. Congress and many farm organizations support more make allowances for milk processors? It seems that no one will stand up and support efforts to have dairy farmers receive a pricing formula based on their cost of production.

It can be done, but it won’t be done until dairy farmers get on the ball and support a new pricing formula based on the cost of production.

In summary, it appears that the USDA and Congress both are willing to have the processors have their make allowance subsidized in the pricing formula, and don’t want to listen to people who believe the dairy farmers’ price should be established by using the national average cost of producing milk.

Arden Tewksbury is the manager of Pro-Ag in Meshoppen, PA.

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