In the simplest terms, a make allowance is an estimate of what it costs to transform milk into a finished dairy product like butter or cheese. These estimates are important because the values are used by USDA in setting the monthly minimum prices that regulated plants must pay for the components in milk checks.

Dairy farmers, on average, lose $6.72 per hundredweight of milk produced, according to USDA data. The loss for dairy farms with less than 50 cows was even greater at $21.58 per hundredweight. Two dairy processor associations requested a federal milk marketing order hearing to increase make allowances. While AFBF is not opposed to updating make allowances, the proposals to USDA do not address the wider need for changes to milk pricing regulations, according to AFBF President Zippy Duvall.

In a letter to Vilsack, Duvall says, “The petitions we oppose here threaten to undercut trust between farmers who produce the milk and the processors who turn it into the dairy products we all know and love.”

There are no simple changes to the milk pricing system. However, the entire industry must be healthy for all segments to thrive. Right now, lower premiums and depooling are suggestive that dairy manufacturers are having problems under regulation, suggesting it’s time for the industry to have that discussion on make allowances.