With the implementation of the five-year farm bill, agricultural minds have quickly turned their attention toward equally pressing matters including immigration reform, international trade pacts and revisions to USDA's dietary guidelines. With all these crucial issues, some dairy processors still can't help themselves by heaping Federal Milk Marketing Order (FMMO) reform onto an already full plate. In our minds, if that tired "processor versus producer" debate involves dairy farmers bearing all the risk, the FMMO discussion will be dead on arrival.
Milk remains among agriculture's most unique foods . . . it is highly perishable and must be delivered on a daily or every-other-day basis. Unlike other farm commodities, dairy farmers cannot wait for favorable markets to sell our product. These are just some of the same reasons that caused Federal Milk Marketing Orders and state orders like those in California to take root. While we can agree that federal and state orders could use some updating; these rules still play a crucial role in establishing markets and the orderly movement of over 80 percent of the nation's milk.
On top of that, we have yet to meet a nonfarmer-owned proprietary plant that has shown any sincere interest in becoming a balancing plant for raw milk. There is good reason as little monetary margin exists in playing milk traffic cop. Co-ops know that quite well, and it's the farmers who own these co-ops who bear all the risk to find buyers. As a result, when most nonfarmer-owned dairy processors are long on milk, these businesses simply restrict the inbound milk spigot. That leaves dairy farmers and their cooperatives holding the extra milk pails.
While we can all agree the FMMO order rules require a steep learning curve for those who are new to our industry, any economist worth their weight would find it difficult to deny the fact that market pooling and classified pricing brings more value to dairy farmers. Without a suitable replacement for both, it will be hard to convince those of us milking cows that FMMOs need any major reform.
While leadership and vision could ultimately lead to a better system of pricing milk, that model must involve shared risk from processor and producer alike. If processors are serious and can develop an updated proposal that benefits both parties, dairy farmers should listen. If the end game is merely an exercise in eroding rules to secure access to cheap milk, then it's a discussion that will fall on deaf ears. Idaho producers know that full well, as they have never recovered all the milk margins after terminating their federal order a few years back.
This editorial appears on page 252 of the April 10, 2015 issue of Hoard's Dairyman.
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Milk remains among agriculture's most unique foods . . . it is highly perishable and must be delivered on a daily or every-other-day basis. Unlike other farm commodities, dairy farmers cannot wait for favorable markets to sell our product. These are just some of the same reasons that caused Federal Milk Marketing Orders and state orders like those in California to take root. While we can agree that federal and state orders could use some updating; these rules still play a crucial role in establishing markets and the orderly movement of over 80 percent of the nation's milk.
On top of that, we have yet to meet a nonfarmer-owned proprietary plant that has shown any sincere interest in becoming a balancing plant for raw milk. There is good reason as little monetary margin exists in playing milk traffic cop. Co-ops know that quite well, and it's the farmers who own these co-ops who bear all the risk to find buyers. As a result, when most nonfarmer-owned dairy processors are long on milk, these businesses simply restrict the inbound milk spigot. That leaves dairy farmers and their cooperatives holding the extra milk pails.
While we can all agree the FMMO order rules require a steep learning curve for those who are new to our industry, any economist worth their weight would find it difficult to deny the fact that market pooling and classified pricing brings more value to dairy farmers. Without a suitable replacement for both, it will be hard to convince those of us milking cows that FMMOs need any major reform.
While leadership and vision could ultimately lead to a better system of pricing milk, that model must involve shared risk from processor and producer alike. If processors are serious and can develop an updated proposal that benefits both parties, dairy farmers should listen. If the end game is merely an exercise in eroding rules to secure access to cheap milk, then it's a discussion that will fall on deaf ears. Idaho producers know that full well, as they have never recovered all the milk margins after terminating their federal order a few years back.
