| These are frequently asked questions on the proposal and the Milk
Power answers. This proposal is not requesting funding from the
Minnesota taxpayer.
What it does:
1. Organizes a Minnesota milk control board.
- (What specific functions?)
Licence, inspect, price raw milk, regulate margins and caps on
dairy products sold in state, survey, audit processor sales
information, levy fines, penalize and in extreme cases turn repeat
violators over to the criminal justice system. Basically,
enforces the MN statute concerning the dairy industry.
2. Establishes a Minnesota "producer committee" to
deal primarily with producer issues.
- (What issues?)
Quota transfers, hardship, fairness issues, and New Producer Pool
3. Balances the inequities of dairy product pricing from the farm
gate to retail shelves.
- (Explain and itemize inequities.)
The pricing of dairy products should follow the price paid to
producers with acceptable margins built in for processors,
distributors, jobbers, and retailers. Currently, there is no
regulatory agency in place to deal with these issues. The farmer is
paid "rock bottom" prices and consumer costs for dairy
products are ever rising. The formula has got to be changed to
make it fair for all parties concerned and this plan does just that.
4. Reduces actual dairy product costs to the Minnesota
consumers by $105,720,000 a year.
5. Floors Class I at $15.50/cwt and uses the FMMO Class I price as
the "price mover" when it exceeds $15.50/cwt.
6. If cheese falls below $1.10 per/lb. it will raise the
Minnesota Class I price a dollar for each $.10 lost of the cheese market
effectively targeting a blended floor price of $11.54/cwt.
-(Any Commerce issues here - could retailers buy out of state?)
No, acceptable within the limits of the U.S. Constitution. This
is truly a "states rights" issue. The state of Minnesota has
every legal right under the U.S. Constitution to protect the health,
safety, and welfare of its citizens, in this case dairy producers, their
families, and the Minnesota consumers.
Yes, but they must pay the MN prices and they would still be subject
to the rule of Minnesota law and the authority of the MN Control Board.
7. Effectively regulates distribution and retailing pricing
maximums.
 | Distribution maximum 1.5 x the raw price |
| Retail maximum 2.2 x the raw price |
- (What about milk sold to out of state buyers?)
No problem, "They simply have to pay the MN prices." 8. Removes some of the inequities of the federal order
system making it more flexible and favorable to the Minnesota dairy
producers.
- (Comments pending from FMMO 30.)
The FMMO system is discriminatory. To mandate pricing schedules
with great variance between regions is none other that
discrimination. "We do exactly the same job as others, we
should be paid the same." Also, failure of the USDA after
order reform to guarantee the minimum price paid to producers, and their
total disregard of 1937 Act that states "cost of production"
should be factored into minimum pricing formulas. We no longer
need this relic of depression era economics when it ceases to do what it
was designed to do. We can do far more for the producers and
consumers of Minnesota with a Minnesota State Order.
9. Provides growth for our MN dairy industry that has been
constantly shrinking.
-(Will $12.00 cause growth?)
$12.00 to
sustain - $14.50 to grow (pay price)
10. Provides for new producers entering dairy farming.
-(Explain
how?)
New producers - gift Base for 5 years of 500,000 lbs. per
entity, natural allotment. Class V "bonus allotment"
when market demands increased production.
11. Upholds the current USDA and FDA standards in all of the
Classes of milk with an emphasis on cheese manufacturing.
12. Allows for any type of Market Loss or Loan Deficiency
Payment from the federal government to be distributed fairly amongst the
Minnesota dairy producers.
| In the event a producer exceeds their FSA base, a system
deduct will be in place. |
| Example: A 5% production increase over the FSA base would
result in a decrease in LDP or market loss of 3x that of the increase or
15% in this example. |
-(How will the producer check off dollars pay for the MN State
Control Board?)
A 3 cent per cwt. deduct from producer milk checks equals an
estimated 2.8 million dollars a year in operating revenue for the
Control Board. This would be sufficient for the MN State Control
board, but a merger of the Dairy and Foods Inspections Division would
require either additional producer check off dollars or an increased
processor assessment to be completely free of MN general funds.
Example: A producer who does not exceed their quota, a
Class I floor price of $15.50 per cwt., Class III price of $1.10 per lb.
of cheese, and a Class IV of $1.35 per lb. of butter.
|
Ratio |
Price per cwt. |
Utilization |
|
Class I |
$15.50 |
.155 x 20 |
|
Class II .916 |
$15.11 |
.151 x 4 |
|
Class III * |
$11.00* |
.11 x 75 |
|
Class IV * |
$13.50* |
.135 x 1 |
| Excess Milk |
Class V .45 |
0 |
0 |
|
I |
3.10 |
|
II |
.57 |
| Blend < |
III |
8.25 |
|
IV |
.14 |
|
V |
0 |
|
|
12.06 |
Notice: The MN State Control Board will mandate and audit
Class III & IV prices based on actual sales information provided by
in state processors from the preceding month, determining the Class III
& IV prices to be paid per cwt. to the producers for the current
month.
|
$12.06 Blend Price |
|
$1.00 Processor variable |
|
$13.06 Total |
|
Class I |
| Distributor margin |
$1.50 x $15.50/cwt = $23.25/cwt or $2.00/gal. |
| Retail margin |
$2.20 x $15.50/cwt = $34.10/cwt or $2.94/gal. of milk |
|
Class III |
| Distributor margin |
$1.50 x $1.10/lb = $1.65/lb |
| Retail margin |
$2.20 x $1.10/lb = $2.42 /lb of cheese |
|
|
Results in a savings on a per capita basis for the Minnesota
consumer of $26.43 a year, or a grand total on a state basis of
$105,720,000.
The Class III & IV prices are an educated guess as to what the
in state processors receive for cheese and butter for December 2000 in
this example.
|
