Since the genesis of Federal Milk Marketing Order (FMMO) pricing, the balance between pricing in the various milk classes has caused discussion and at times even distress among dairy farmers.
During the May 5 Hoard’s Dairyman DairyLivestream, DFA’s Ed Gallagher perfectly summarized recent strife regarding federal order pricing and class differences.
“I know there’s a lot of tension in the producer community because of the difference between Class III and Class IV. Certainly, things that happened during the pandemic exasperated that spread,” he acknowledged. “We need to take a breath and take a step back.”
Specifically, Gallagher suggested investment in dairy processing has gone in waves and has contributed to the rise and fall of Class III and Class IV prices.
“We went through a period of investing in powder plants in the United States,” he shared. “It seems like there is a follow the leader approach when they’re deciding what they’re going to invest in when it comes to plants, and it goes in waves. The industry just completed a wave of a lot of investment in Class IV manufacturing plants, and now it’s flipped. It’s flipping to Class III.”
He noted the construction of the recently completed cheese plant in Michigan that is expected to process 4 billion additional pounds of cheese in 2021 and a number of additional cheese processing facilities coming online this year.
“As that happens, I think the price difference between Class IV and Class III narrows quite a bit,” he predicted. “As we think about what we want going forward, I think we have to think in the future and not think about how it was in the past.”
An ongoing series of events
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