Multiple component pricing (MCP) could be coming to the Appalachian and Southeast Federal Milk Marketing Orders. That’s after 14 cooperatives and four state and national trade organizations, which represent 70 percent of the region’s milk, jointly filed the hearing request with USDA.
Pricing milk by its components first came on the scene 29 years ago. Since that time, the MCP pricing has expanded to cover 86 percent of all Federal Milk Marketing Order (FMMO) milk. In addition, California’s state order also employs the pricing mechanism, and if the Golden State enacts a FMMO, it too would use MCP.
Should USDA agree with the petitioners, the Appalachian and Southeast orders would join these groups. If that comes to fruition, only the Florida and Arizona orders would retain skim-butterfat pricing. Under skim-butterfat pricing, producer milk with higher components is undervalued, and milk with lower components is overvalued. The principle reason has been that these orders have high Class I milk markets. For the most part, so do the Appalachian and Southeast orders.
In its April 2018 National All Jersey Equity Newsletter, the authors outlined six reasons to support the MCP proposal in the Appalachian and Southeast orders:
1. Increase hauling efficiencies
2. Eliminate transaction losses
3. Increase regulatory uniformity for manufacturing milk
4. Provide better price signals to producers
5. The SCC (somatic cell count) adjustment will incent improved milk quality
6. Increase the value of pooled milk
To read more, download the April 2018 National All Jersey Equity Newsletter.