New rule to include more beverages in Class 1 category


Capital Press

More dairy beverages will fall under the Class I pool pricing formula beginning Jan. 1 under new rules finalized by the USDA last month.

Five years ago the National Milk Producers Federation petitioned the agency to change its Class I definition to include more milk-containing beverages, previously classified as Class II. The agency published a final rule on the issue Aug. 24.

While USDA's final rule will have no immediate impact on producers' milk check, it's an important protection to have in place for the future, said John Kaczor, editor of Milk Producers Council of California's weekly update.

"It will catch some products that have been under the radar of fluid milk, (and) producers are protected from an additional move in that direction," he said.

The previous definition exempted dairy beverages with less than 6.5 percent nonfat milk solids from Class I pricing, even if they contained as much milk protein as regular milk. And whey solids were not counted as dairy solids under the old rule.

USDA's final rule requires that a product be both under 6.5 percent nonfat milk solids and under 2.25 percent milk protein to be exempted. USDA also changed the rule so that whey solids are treated like other milk solids.

"If you're going to use milk in a product competing against fluid milk, you shouldn't get a price break," said Roger Cryan, vice president for milk marketing and economics with National Milk. "It's not a punishment. It's only fair."

USDA's final rule will remedy the issue. However, the agency made the decision to provide kefir, a cultured milk beverage, and yogurt drinks containing at least 20 percent yogurt a blanket exemption from Class I.

Yogurt drink makers successfully argued yogurt drinks are consumed as a snack or meal replacement and do not compete with fluid milk.

"They are not used for the same purpose as fluid milk, nor are they competing for the same consumers with fluid milk. Rather, they compete with other food products, and should be classified as such," the National Yogurt Association stated in testimony to the USDA.

USDA agreed, pointing out that yogurt drinks are not marketed alongside fluid milk and are instead positioned alongside other Class II products, such as cup yogurt.

Cryan said the decision to exempt yogurt drinks is disappointing and puzzling.

"We don't really think that exemption was justified. A yogurt drink is essentially a flavored milk," he said.

And the decision to exempt kefir, which he said has no meaningful definition to distinguish it from other Class I cultured milk drinks, is problematic, he added. That could lead processors to label a product "kefir" to avoid paying into the Class I pool.


National Milk Producers Federation:

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