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Butterfat Cheese Value: 1.572 (67 Fed. Reg at 67,927) 

Protein Cheese Value: 1.383 (67 Fed. Reg. at 67,927) 

Other Solids: 1.03 (67 Fed. Reg. at 67,930) (rounded from 1.0305) 

The 2002 Order Reform Final Decision found that farm-to-plant “losses are inherent in 

the handling of milk” and that the applied shrink factors “are intended to reflect actual losses that 

are beyond the processing handler’s ability to control.” 67 Fed. Reg. at 67,917. 

Those findings, to the extent that they were correct in 2002, are no longer appropriate. 

Farm-to-plant losses are neither inherent nor beyond the ability of the producer and handler to 

control. Improvements in technology, changes in the collection and hauling of raw milk, and other 

structural factors now provide the ability to effectively eliminate the loss of milk solids from farmto-plant. Select intends to present such evidence and testimony at a hearing, should its Proposal 

1 be included in a hearing notice. 

Just as other aspects of the pricing formulas need to be re-examined, the assumptions 

regarding farm-to-plant shrink must reflect current technologies and practices.The failure to do 

so under compensates producers. Farm margins are continually thin. Formulas that begin by 

deducting one-third of a percent of a dairy farmer’s income only further erode those margins. 

Select’s Proposal 1 updates the yield factors for butterfat to 1.22, for the protein value in 

cheese to 1.386, and for the butterfat value in cheese to 1.582.The yield factors for nonfat solids 

and other solids remain unchanged due to rounding. The regulatory text would be amended as 

follows: 

7 C.F.R. § 1000.50(l): Butterfat price.The butterfat price per pound, rounded to the 

nearest one-hundredth cent,shall be the U.S.average NASS AA Butter survey price 

reported by the Department for the month, less 17.15 cents, with the result 

multiplied by 1.211 1.22. 

7 C.F.R. § 1000.50(n)(2): (2) Subtract 20.03 cents from the price computed 

pursuant to paragraph (n)(1) of this section and multiply the result by 1.383 1.386; 

7 C.F.R. § 1000.50(n)(3)(i): Subtract 20.03 cents from the price computed pursuant 

to paragraph (n)(1) of this section and multiply the result by 1.572 1.582; and 

b. Proposal 2: Update Butterfat Recovery Factor 

The current formulas assume a butterfat recovery of 90% in the manufacture of cheddar 

cheese.The 2002 Order Reform Final Decision recognizes that butterfat recovery is not a static 

coefficient: 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Suggestions to increase the butterfat recovery factor of 1.582 (to 1.6 or 1.617) 

were made by DFA; Select, Elite, et. al; and National All-Jersey, Inc. These 

commenters relied on hearing testimony that butterfat recovery in cheddar cheese 

generally ranges between 90 and 93 percent, although Kraft testified that their 

butterfat recovery is lower.The commenters favored use of a factor that reflected 

91 or 92 percent fat recovery because that level of recovery is common. In a 

comment filed by Leprino, the cheese manufacturer urged that the 1.582 factor 

not be increased, as any increase would exacerbate the overvaluation of whey fat 

in the current formula and because the 90 percent recovery factor reflects 

results from many cheese vats installed prior to the late 1980’s. 

The recommended decision stated that even though many cheese makers may be 

able to achieve a higher fat retention in cheese, the use of the 1.582 factor 

representing 90 percent fat recovery in cheese continued to be appropriate. The 

recommended decision also stated that as a result of the 90 percent level,butterfat 

in cheese was not overvalued, and those cheese makers who fail to recover more 

than 90 percent of the fat would not suffer a competitive disadvantage. The 

preponderance of the record indicates that most cheese manufacturers should be 

able to obtain a 90 percent butterfat recovery. 

67 Fed Reg. at 67,929 (emphasis added). 

The “classical” or “basic” Van Slyke formula, however, recognizes that the actual butterfat 

recovery in cheddar cheese manufacturing is 93%. See, Frank V. Kosikowski & Vikram V. Mistry, 

Cheese and Fermented Milk Foods, Vol. 1: Origins and Principles, p. 622-24 (3d ed., F.V. Kosikowski, 

L.L.C. 1997). In fact, most cheddar cheese manufacturing plants, and especially those cheddar 

cheese plants that have been constructed since the Department last meaningfully considered the 

butterfat recovery in cheese, achieve at least 93% butterfat recovery.That is to be expected, given 

that the “basic” Van Slyke Formula discussed by Professor Kosikowski was developed in 1894— 

nearly 130 years ago. Select intends to present evidence and testimony to support updating the 

butterfat recovery factors to reflect modern efficiencies and processing realities. 

Select’s Proposal 2 increases the butterfat recovery factor in the Class III formula to 93%, 

which necessities a corresponding increase in the butterfat yield in cheese to 1.624.This change 

to the butterfat yield in cheese does not take into account the correction of farm-to-plant shrink. 

The regulatory text would be amended as follows: 

7 C.F.R. § 1000.50 (n)(3) Add to the amount computed pursuant to paragraph 

(n)(2) of this section an amount computed as follows: 

(i) Subtract 20.03 cents from the price computed pursuant to paragraph (n)(1) of 

this section and multiply the result by 1.572 1.624; and 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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(ii) Subtract 0.9 0.93 times the butterfat price computed pursuant to paragraph (l) 

of this section from the amount computed pursuant to paragraph (n)(3)(i) of this 

section; and 

c. Proposal 3: Update Nonfat SolidsYields 

The current formulas incorporate a yield factor for nonfat solids of 0.99.The 2002 Order 

Reform Final Decision includes a change from the prior Recommended Decision. The Final 

Decision “eliminates the consideration of nonfat solids that end up in buttermilk powder from 

the Class IV nonfat solids pricing formula.” 67 Fed. Reg. at 67,921-67,922. The Department 

concluded then that the elimination of these nonfat solids from the Class IV formulas was 

appropriate because: 

[R]ecognizing a minimum value for buttermilk powder does not materially affect 

the Class IV skim milk price.Record evidence indicates that the price of buttermilk 

powder can be a low of 70 percent of the nonfat dry milk price for the same 

period. In addition, according to the record, the make allowance of buttermilk 

powder is an additional 2 cents per pound higher than the nonfat dry milk make 

allowance.Official notice of weekly Dairy Product Prices published by the National 

Agricultural Statistics Service for January 2000 through May 2002 is hereby taken. 

[dead weblink deleted] 

Using the 2-cent higher make allowance for buttermilk and prices for nonfat dry 

milk and buttermilk powder for the period of January 2000 through May 2002 it 

was determined that the effect of including buttermilk powder in the nonfat solids 

price and the Class IV skim milk price was negligible. Therefore, this decision 

eliminates the consideration of nonfat solids that end up in buttermilk powder 

from the Class IV nonfat solids pricing formula. 

Id. However, the effect of buttermilk powder on the formulas is not “negligible.” Even the 2002 

Order Reform Final Decision acknowledges that the removal of buttermilk powder from the 

formula reduces the nonfat dry milk yield from 1.02 to 0.99. Id. at 67,921. 

Further, current data demonstrate that the spread between the prices of nonfat dry milk 

and buttermilk powder is minimal and not uniformly negative. A comparison of 2021 and 2022 

Western Dry Buttermilk Monthly Average Mostly Prices and Western Nonfat Dry Milk Monthly 

Low/Medium Heat Averages reveals that buttermilk powder prices averaged 98.5% of nonfat dry 

milk prices, ranging from 86.5% to 118.6%. 

Select’s Proposal 3 recognizes that the current yield factor wholly fails to compensate 

producers for the value of these components. It is evident that removing these nonfat solids does 

have a meaningful impact on the nonfat dry milk yield. Specifically, if ninety percent of the nonfat 

solids that end up in buttermilk powder are restored to the formula ((a) acknowledging that the 

relative value of buttermilk powder to nonfat dry milk fluctuates but are largely aligned and (b) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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accepting the Department's earlier finding that the manufacturing costs for buttermilk are 

marginally higher than those for nonfat dry milk powder), the recalculated yield is 1.0319. This 

yield does not recognize the correction of farm-to-plant shrink. Factoring in the farm-to-plant 

shrink correction, the yield increases further to 1.0345. Once rounded, the difference is 

immaterial, and Select proposes a yield of 1.03. 

The regulatory text would be amended as follows: 

7 C.F.R. 1000.50(m): Nonfat solids price. The nonfat solids price per pound, 

rounded to the nearest one-hundredth cent, shall be the U.S. average NASS nonfat 

dry milk survey price reported by the Department for the month, less 16.78 cents 

and multiplying the result by 0.99 1.03. 

d. RegulatoryText of All Select Proposals 

The proposed regulatory text for each proposal is set forth above. If, however, all three 

proposals were adopted, then the aggregate impacts of them would result in modestly different 

changes to the regulations.They are set forth below: 

7 C.F.R. § 1000.50(l): Butterfat price.The butterfat price per pound, rounded to the 

nearest one-hundredth cent,shall be the U.S.average NASS AA Butter survey price 

reported by the Department for the month, less 17.15 cents, with the result 

multiplied by 1.211 1.22. 

7 C.F.R. 1000.50(m): Nonfat solids price. The nonfat solids price per pound, 

rounded to the nearest one-hundredth cent, shall be the U.S. average NASS nonfat 

dry milk survey price reported by the Department for the month, less 16.78 cents 

and multiplying the result by 0.99 1.03. 

7 C.F.R. § 1000.50(n)(2): (2) Subtract 20.03 cents from the price computed 

pursuant to paragraph (n)(1) of this section and multiply the result by 1.383 1.386. 

7 C.F.R. § 1000.50 (n)(3) Add to the amount computed pursuant to paragraph 

(n)(2) of this section an amount computed as follows: 

(i) Subtract 20.03 cents from the price computed pursuant to paragraph 

(n)(1) of this section and multiply the result by 1.572 1.635; and 

(ii) Subtract 0.9 0.93 times the butterfat price computed pursuant to 

paragraph (l) of this section from the amount computed pursuant to 

paragraph (n)(3)(i) of this section; and 

2. Purpose of the Proposals 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Select’s proposals are submitted in the same vein as those of the National Milk Producers 

Federation (“NMPF”). Their intent is to update and modernize aspects of the minimum price 

formulas that have not been comprehensively updated since the reform of the federal milk 

marketing orders following the 1996 FAIR Act.The NMPF hearing proposal submitted on May 1, 

2023 properly outlines many of the market realities and structural changes that have occurred 

since federal order reform.While Select intends to address those structural changes and others 

through its hearing testimony, should the Department elect to proceed to a hearing, we intend to 

focus our attention on the overarching need for the minimum price formulas to (a) reflect the 

realities of the current landscape for the production,transportation,and marketing of milk,as well 

as the manufacturing of commodity dairy products, (b) strive to discover the actual value of milk 

utilized to manufacture the majority of the commodities used to set end-product price formulas, 

(c) compensate producers for the full value of the on-farm production, and (d) recognize and 

encourage efficiency in the marketing of raw milk. 

3. Current Federal Order Requirements and Industry Practices Relative to the 

Proposal 

The current minimum price formulas in general, and the provisions addressed by Select’s 

proposals specifically, are premised on assumptions and data dating back to the last century—in 

some cases utilizing data and practices commonplace in the 1970s and 1980s. If the federal order 

system is to retain its critically important role in establishing the de facto base prices for all classes 

of raw milk (to say nothing of its role in providing critical market data and terms of trade), then 

it must remain current.The NMPF proposals play a critical role in updating many aspects of the 

pricing formulas but fail to address these other important factors. 

If the Department agrees to consider updating the basic assumptions and data regarding 

the costs to manufacture commodity dairy products, then it is incumbent on the Department to 

likewise consider the assumptions and data underpinning the remainder of the price formulas. 

Select’s proposals address several of these elements. We urge the Department to notice these 

proposals for hearing and to take testimony and evidence on them. 

4. Expected Impact on the Industry, Including Producers, Handlers, and Consumers 

a. Impacts on Classified Prices 

Utilizing a five-year average and ten-year average of commodity prices through April 2023, 

Select has calculated the impacts of each proposal on the component and Class III and Class IV 

prices.A summary of this analysis is presented below. If the Department agrees to proceed to a 

hearing on Select’s proposals, additional analysis and supporting data will be offered through 

testimony and exhibits. 
 

 

 

 

 

 

 

 

 

 

 

 

 

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b. Impacts on Consumers 

With respect to consumers, the impacts on the cost of raw milk resulting from Select’s 

proposals, less than 1% of recent minimum prices, could result in incrementally higher product 

prices for purchasers of dairy products. 

Select notes, however, that its proposals and the economic impacts resulting from them 

should be analyzed in the context of any other formula proposals that are considered by the 

Department. For example, increases in the manufacturing allowances, as proposed by both NMPF 

and the International Dairy Foods Association, will result in lower minimum prices and, therefore, 

potentially lower consumer prices. Full econometric modeling of the various proposals notice for 

hearing will be an important aspect of any hearing record and a critical tool for hearing 

participants to evaluate the impacts of proposals both in isolation and in concert. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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5. Expected Effects on Small Businesses 

Most dairy farms pooled on federal milk marketing orders are classified as small businesses. 

To the extent that Select’s proposals increase the regulated prices that handlers pay for pooled 

milk,those farms that are small businesses would be expected to benefit economically.Conversely, 

any handlers that are required to pay the regulated minimum prices, including those that are small 

businesses, will see milk costs increase. 

However, federal order regulations and the minimum prices that they establish are not 

size-dependent.To that extent, Select does not expect that small businesses, whether producers, 

handlers, or retailers, will be impacted differently from businesses that are not classified as small 

businesses. Furthermore, Select does not anticipate that any business not currently subject to 

federal milk marketing order regulation will become regulated by the adoption of any of Select’s 

proposals. Accordingly, no small businesses should be expected to have an increased regulatory 

burden because of Select’s proposals. 

6. Impacts on Costs to Producers, Handlers, Others in the Marketing Chain, 

Consumers, Market Administrators, and the Secretary 

Apart from the impacts on the regulated minimum class prices paid by handlers and the 

uniform prices received by producers,Select does not anticipate any additional costs on producers 

or handlers. Similarly, other than the costs associated with the implementation of new marketing 

order language, Select does not anticipate any impact on the costs to the market administrators 

or to the Secretary. Other than as stated above, Select anticipates no impact on consumers. 

7. Usefulness of a Pre-Hearing Information Session. 

Select believes that these particular proposals are of sufficient simplicity that a pre-hearing 

information session is not necessary. However, Select would be happy to discuss the proposals 

and to answer any questions or provide any additional information to the Department as part of 

the Pre-Hearing Information Session scheduled for June 16, 2023. 

We appreciate the Department’s consideration of our proposals. 

Very truly yours, 

Ryan K. Miltner 

Counsel for Select Milk Producers, Inc. 

cc: Bruce Summers,AMS Administrator 

Erin Taylor, Director of Order Formulation and Enforcement 

Federal Milk Market Administrators