NATIONAL CHEESE EXCHANGE DATA

                                            Release No. 0019.97
                                                               
                               Jim Petterson     (202) 720-4623
                               Connie Crunkleton (202) 720-8998

USDA SEEKS COMMENT ON USE OF NATIONAL CHEESE EXCHANGE DATA IN DETERMINATION  
  OF MILK PRICES

     WASHINGTON, Jan. 29, 1997--Agriculture Secretary Dan Glickman today
announced he is taking steps to address concerns raised by dairy producers
about how milk prices are calculated.  

     Glickman is seeking public comment on whether National Cheese Exchange
(NCE) price data should be used in the determination of the Basic Formula
Price (BFP) used in federal milk marketing orders.  This action is in
addition to the process currently underway in the Department to consolidate
and reform federal milk marketing orders by April 1999, as mandated by the
1996 Farm Bill.

     The BFP is determined by USDA each month based on a formula that uses
the previous month's producer price paid by unregulated manufacturing plants
in Minnesota and Wisconsin, adjusted for changes in dairy product prices
between the previous and current month.  The price of cheese on the NCE is
used in this adjustment. 

     The BFP serves as the price that handlers must pay dairy farmers for
milk used to manufacture Class III products (i.e., butter, nonfat dry milk
powder, cheese) under the federal milk marketing order program.  It also is
used to arrive at the price that processors must pay dairy farmers for milk
consumed as fluid milk and soft products usage of milk (i.e., yogurt, ice
cream).

     "Many dairy producers and producer organizations, as well as Senators
Kohl and Feingold and Congressman Obey, have indicated their concern with
using NCE prices to establish the BFP," Glickman said.  "There are concerns
that NCE prices may not be reflective of market conditions for cheese
nationally, because only a very small share of total U.S. cheese is traded
on the NCE, and NCE prices have been subject to abnormally high volatility."

     "We must address these concerns now so that dairy producers have
confidence that the prices they receive reflect market conditions," Glickman
said.  "We cannot wait until April 1999 to address this issue.  Based on the
comments we receive, we will determine whether we should proceed with a
national hearing on replacing NCE prices in establishing the BFP." 

     In response to concerns about the accuracy of reported prices, this
month, USDA's National Agricultural Statistics Service (NASS) will begin
conducting a national survey of cheddar cheese prices.  "We must have broad
participation in the survey if it is to be useful to the dairy industry and
to be considered as a possible substitute for NCE prices," Glickman said.    

                            
     The Department will continue to review the BFP as part of Congress'
mandate in the 1996 Farm Bill to reform and consolidate federal milk
marketing orders.  During the next several weeks, in preparation for meeting
the April 1999 deadline, USDA will release several studies addressing
options for milk order reform, including the role of the BFP and other
longer-term pricing issues.    

     Interested parties wishing to comment on the use of NCE prices in the
determination of the BFP may send their comments to: Dairy Division, AMS,
USDA; ATTN: BFP Evaluation; Room 2968-S; PO Box 96456; Washington, DC 20090-6456.  Comments should be postmarked not later than March 31, 1997.
                                 
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