Washington, July 31 - The U.S. Agriculture Department on Wednesday issued an interim final rule that will increase the price manufacturers get paid to convert raw milk to finished products such as butter by as much as 43 percent.
USDA said during public hearings held in 2007 it became evident that manufacturers were not able to cover their costs to convert raw milk into cheese, butter and other goods.
As a result of the new rule, the change will increase the price processors get paid while farmers will receive less for each hundredweight (cwt=100 lbs) of raw milk. Dairy farmers have approved the change.
A competitively determined farm level price for milk does not exist, so USDA uses the wholesale market price and converts it back to an equivalent at the farm.
USDA determines the cwt price of milk to make the finished product by taking into account how much it costs to make it and how many lbs of finished product are generated per cwt of milk.
The decision amends the manufacturing allowances for cheese, butter, nonfat dry milk and dry whey and goes into effect on Sept 1, 2008. The allowances are:
revised previous
cheese $0.2003 per lb $0.1682 per lb
butter $0.1715 per lb $0.1202 per lb
nonfat dry milk: $0.1678 per lb $0.1570 per lb
dry whey - $0.1991 per lb $0.1956 per lb
This decision also increases the butterfat yield factor of the butterfat price from 1.20 to 1.211.