The impact of these changes is a crucial concern for producers, manufacturers, and analysts. The article cites American Farm Bureau Federation Economist Daniel Munch, who explains that the expected gains in producer pay prices have not materialized. Instead, the higher make allowances have lowered class prices by 4% to 5%, with the largest revenue reductions seen in the Upper Midwest, Northeast, and California. This signals a serious problem with the new pricing system that is directly impacting the profitability of farmers.

A core issue, according to Munch’s analysis, is the way make allowances were determined. The article states that they were based on limited, self-reported data from processors, which may not accurately reflect actual manufacturing costs. This incomplete data has the effect of artificially lowering the prices that dairy farmers receive for their product, creating a system that is not fully transparent or equitable, and highlighting a systemic issue in the food supply chain.

The article also points out a “costly missed opportunity”: the delay in updated composition factors. These factors, which would have better aligned pay prices with the actual components farmers are delivering, would have compensated producers by an estimated 100 million in the first six months. This delay, coupled with the problematic make allowance, leaves farmers in a vulnerable position, subject to a pricing system based on incomplete information.