Thursday, May 29, 1997

Removing Cheese Exchange from price formula seen as good step

By J.T. SMITH / Abilene Reporter-News

The removal of the National Cheese Exchange from the "basic formula price" is seen as a positive first step, but it still fails to address the dairy crisis, says a Sweetwater dairyman.

"The new cheese price series to be used in calculating the basic formula price paid to producers for their milk may more accurately reflect cheese demand - but it does not address the crisis American dairymen are facing today," Sims said.

Sims is president of Texas Farmers Union.

USDA Secretary of Agriculture Dan Glickman announced this month that the cheese price series, gathered from a weekly survey of cheese manufacturing plants throughout the entire country, will replace the cheese price data of the National Cheese Exchange (NCE) in Wisconsin, previously used in calculating the basic formula price.

"Producers across the country objected to pricing the milk off the thinly-traded NCE and have been equally skeptical to the newly established cash market on the Chicago Mercantile Exchange," Sims said. "Interim use of the cheese price series while USDA completes its reform of milk marketing orders is a step in the right direction."

Sims said TFU continues to call for a basic formula price based on three factors: production cost, wholesale price, and retail price.

"The need for price reform is urgent," Sims said. "Dairy farmers from throughout the country are challenged with (last) fall's precipitous drops in milk prices, followed by further declines in recent weeks. This scenario is hurting every dairy farmer - regardless of herd size."

TFU will continue to work with USDA to reform milk marketing orders and to encourage a pricing system that will provide dairy farmers a reasonable return on their investment and labor, Sims said.

Farmers' milk prices dropped more than 25 percent between September and December of 1996, forcing many producers to go out of business for good.

In the meantime, retail prices for milk and cheese remain virtually unchanged.