Time to Move on Milk Marketing System Reform

My earliest memories of farming were in my family’s dairy barn. Those were some of my happiest memories—rising before the sun to milk the cows, helping care for our animals and doing my part to provide a nutritious product for our community. Dairying also brought some of my earliest heartache in farming. It’s a hard business on the best days, but the most frustrating part of the job came from the mysterious ups and downs of milk prices under the Federal Milk Marketing Order (FMMO) system. Dairy farmers deserve a fair and transparent paycheck for the work they do, 365 days a year, and it's long past time we set about modernizing this system.

My frustration with the unfairness and uncertainty of the market as a young farmer was one of the issues that led me to get involved in Farm Bureau. After yet another day of my complaining at the breakfast table, my dad told me that if I really wanted to see change, I needed to get outside my fencerows. Back then the FMMO’s needed improvements, and that was more than 40 years ago. Change has been slow in coming to say the least, but it might never have come if we hadn’t finally brought everyone—farmers, commodity groups and processors—to the table to find common ground.

That’s just what Secretary Vilsack asked the dairy business to do a couple years back. So, last year, Farm Bureau held a forum to discuss what changes are needed in the FMMO system. Nothing was off the table in those discussions, which covered everything from updating Class pricing formulas to reducing de-pooling incentives to milk check transparency and strengthening the farmer’s voice in the referendums that are required to approve or reject changes to FMMO’s. Overall, everyone was able to agree on the need to modernize the FMMO system in a way that reflects the current market and is fair to everyone involved.

Now Farm Bureau, along with the National Milk Producers Federation, is calling on USDA to take the next step and hold a public hearing on FMMO reform. In NMPF’s petition to USDA they called for reforms to the FMMO that, in principle, are right in line with Farm Bureau policy:

• Discontinue the use of barrel cheese in the protein component price formula;
• Return to the “higher-of” Class I mover;
• Update the milk component factors for protein, other solids, and nonfat solids in the Class III and Class IV skim milk price formulas; and
• Update the Class I differential pricing surface throughout the U.S.

All these changes would reflect where the dairy industry is today and how the market has changed over the decades. What’s more, these changes would help ensure farmers receive a fair price for their farm products.

NMPF is also asking for increases in the allowance that processors receive in the milk price formulas for their cost of turning milk into cheese and whey and butter and powder. Farm Bureau, however, believes these allowances for processors will only be fair if they are based on accurate data. USDA can only ensure fairness in dairy pricing by accurately capturing those costs through mandatory surveys of processor costs and yields.

I recently sent a letter to USDA outlining these solutions on behalf of our members. We believe USDA has the legal authority to conduct mandatory, audited cost and yield surveys of dairy processors, which can be used for determining make allowances as they are factored into dairy pricing. Voluntary surveys simply won’t work, and the numbers prove it. Two-thirds of the dairy processors that participate in USDA’s weekly mandatory price survey did not provide cost data in the voluntary survey that USDA released in 2021. And since there’s no audit of the voluntary data that is provided, there’s no way to ensure the little data available is accurate. The only way to restore trust between farmers and dairy processors is to get full participation—just once every two years—of all the plants that are already working with USDA on the weekly price survey.

When USDA announces a hearing of this sort, they normally ask for additional proposals. We look forward to the opportunity to propose additional AFBF policies that NMPF hasn’t addressed in their petition. These include milk check transparency standards and additional price formula changes that could further reduce or eliminate de-pooling incentives and make milk pricing more predictable.

Just as everyone can agree that the FMMO system is long overdue for reform, we also can agree it’s a complex issue that needs to be addressed thoughtfully. We are hopeful the Secretary’s leadership will bring about a fair solution on these issues, and we are eager for USDA to take the next steps toward holding the hearings that can put these solutions in place.

America’s dairy farmers have made tremendous strides in improving sustainability and increasing the nutritional value of the dairy products we all enjoy. FMMOs should reflect the modern dairy industry and restore fairness for our hardworking dairy farm families.