BY KARL BERGER
Special Correspbndent
WASHINGTON, DC Multi
ple component pricing advocates
nationwide could receive a major
boost if U.S. Department of Agri
culture officials okay a joint but
terfat and protein-based pricing
scheme in a Western federal milk
order.
Officials of the department’s
Agricultural Marketing Service,
which oversees the nationwide
federal order system, are preparing
a final decision on the plan,
according to Will Blanchard,
deputy administrator of the Dairy
Division of AMS.
In July, USDA issued a “recom
mended decision” to incorporate
the pricing provisions in a new
order that would result from the
merger of the current Great Basin
and Lake Mead federal drdets that
regulate milk marketing in Utah
and neighboring states. The
department is weighing additional
comments before making a final
decision, which observers expect
to see before the end of the year.
Should the plan gain final
approval it also must be ratified
by affected producers voting in a
referendum it would mark the
first instance in which a compo
nent other than butterfat is used to
price milk in a federal order.
That’s a long sought goal among
advocates of multiple component
pricing.
Erick Metzger, executive leader
of the American Guernsey Associ
ation, said the implementation of
component pricing in one federal
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Multiple Component Price
order would provide a precedent
for establishing similar plans in
other orders. Calvin Covington,
assistant secretary of National' All-
Jersey Inc., agreed, although he
noted the recommended decision
states its pricing plan is not a mod
el for other federal orders.
Nevertheless, the impending
decision has already aroused local
interest. Delegates at last week’s
annual meeting of Atlantic Dairy
Cooperative directed the staff to
work towards implementing a
pricing plan similar to the Great
Basin-Lake Mead one in federal
orders 2 and 4, which govern milk
marketing in the Mid-Atlantic
area. Cooperative officials said
they would ask for a hearing before
federal officials soon.
Covington said National All-
Jersey, which coordinates market
ing efforts for members of the
American Jersey Cattle Club (and
which also receives substantial
financial support from Guernsey
breeders, according to Metzger),
has been intimately involved in the
Great Basin case. Getting the fed
eral order system to adopt multiple
component pricing is one of the
group’s major goals and a logical
outgrowth of successful efforts to
get handlers and cooperatives to
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adopt individual plans, Covington
said.
More than half of the nation’s
milk supply now has access to
some form of such pricing; protein
premiums and cheese-yield pric
ing are the most common, Coving
ton said. In its recommended deci
sion, USDA cited the existence of
several such plans in the Great
Basin and Lake Mead orders.
Other orders in which a number of
such programs already exist, such
as federal orders 1. 2 and 4 in the
Northeast, are good candidates for
an order-wide approach, Coving
ton said.
Jim Fraher, an economist for
Atlantic, said a single pricing plan
is preferrable to a patchwork of
individual programs. “The federal
order approach is better in that it
will be uniform and it will pool the
added value.” Fraher argued that
some of the current protein pre
mium programs don’t pass along
to dairymen the full value of the
protein.
Implementing multiple compo
nent pricing in a federal order also
would make it applicable to all the
producers, not just those who are
supplying certain plants or
cooperatives. According to an
analysis of the Great Basin-Lake
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Mead plan prepared by Fraher,
every dairyman regulated by the
new order there would receive a
blend price determined primarily
by the amount of protein and but
terfat in his milk.
Under the current pricing
scheme in federal orders, only but
terfat content matters; as its level
rises, so does the price per hun
dredweight. The effect of this but
terfat differential remains the same
in the new plan, although it is cal
culated differently. The big change
is that protein content also matters.
In fact, protein levels would have
about the same impact as butterfat
content in adjusting producer
prices.
Under the plan, the various
“Class” prices paid by handlers
would continue to provide the
basis for producer prices. Fluid
handlers would continue to pay the
same Class I price, which is
adjusted only for butterfat content
But handlers who buy milk for
making cheese (Class III) or other
products (Class II) would see some
changes because their prices
would be adjusted for both protein
and butterfat
The plan is designed to be
“revenue neutral”: that is, the over
all amount of money changing
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hands between producers and
handlers in the order would not
vary from the total dictated by the
current system. Individual shares
would change, however.
Among producers, those whose
milk contains a higher than aver
age amounts of protein and butter
fat would benefit while those with
lower than average levels would
suffer. In an example cited by
USDA, a dairyman selling milk
that contains 3.5 percent butterfat
and 3.0 percent protein would
(given the same Class prices)
receive 77 cents less $ll.lB
rather than $11.95 under the
plan. By contrast, a dairyman sell
ing milk with 5.0 percent butterfat
and 4.0 percent protein would get
76 cents more $15.11 rather
than $14.35.
The fact that Class I pices
would not change under the plan is
critical to its acceptance by fluid
handlers, according to William
Tinklepaugh, an economist for the
Milk Industry Foundation. The
foundation, which represents the
interests of milk bottlers and other
handlers, opposes the use of pro
tein or solids-not-fat levels in pric
ing fluid milk because its members
“do not want to pay more for some
(Turn to Pag* A2l)
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