The information below has been supplied by dairy marketers and other industry organizations. It has not been edited, verified or endorsed by Hoard's Dairyman.
Farm Bill discussions are underway, including the future of federal milk pricing. In fact, there is some unfinished business from the previous Farm Bill with consensus among dairy producers and organizations to return the Class I pricing formula to its previous ‘higher of’ method that was changed legislatively to an ‘averaging’ method in the last Farm Bill. That change did not go through a hearing process or a producer referendum.
For the grassroots American Dairy Coalition (ADC), it’s been the topic of meetings, conference calls, producer surveys and other outreach for several years. Since early 2021, ADC has been calling for a change back to the ‘higher of’ for the Class I mover formula.
Separately, ADC has included in its 2023 priorities the push for a more comprehensive Farm Bill hearing on the future sustainability of Federal Milk Marketing Orders (FMMO) as Class I pool revenues continue to decline and more manufacturers opt out of FMMO participation. Only Class I processors are required to participate in FMMOs, which are the only structure for dairy pricing reports and transparency, payment oversight, weights and measures and other functions.
“We believe the Farm Bill should be used as the vehicle to expeditiously return the Class I mover to the ‘higher of’ method. We are also looking ahead more comprehensively at the FMMOs. The change to the averaging method for Class I was passed by Congress with language that a hearing could be held to consider alternatives after two years. It has now been almost four years, and dairy farmers are still waiting, while having lost almost $1 billion, net, in Class I value over the past 45 months,” said Laurie Fischer, ADC CEO.
“It appears that USDA may receive a petition from processors for an FMMO hearing limited to raising their ‘make allowances’, which could take another $1.00 per hundredweight out of farmer milk checks. We see National Milk Producers Federation is still working on coordinating a set of modifications for an FMMO hearing petition, but their timetable has been delayed. ADC does not support make allowance increases for processors without fixing the change made to Class I and without a comprehensive national hearing with a report to Congress that looks at solutions for a sustainable pricing structure,” she explained.
“We are pleased that Senator Kirsten Gillibrand recently re-introduced her Dairy Pricing Opportunity Act, which would require USDA to hold an administrative hearing on the Class I mover, including the 'higher of' option. However, farmers deserve to have a more immediate re-do of the Class I method, which would allow a future hearing to look at more comprehensive long-term solutions. Class I needs immediate attention because the change to it in the last Farm Bill puts all the risk on farmers with a cap on the benefit and no floor on the losses it can create in farm milk checks. It undermines the way their risk management tools function and leaves them vulnerable to increasingly volatile market shifts amid geopolitical uncertainty,” said Fischer.
“Furthermore, the Farm Bill is the vehicle needed to help shape a direction for longer-term federal milk pricing solutions that address the long-term sustainability of FMMOs that are based on Class I fluid milk utilization. But first, we need to expedite putting the Class I formula back the way it was. Remember, there was no hearing for the 2018 change and no dairy farmer input. To be candid, most Remember, dairy farmers didn't even know the change was made until the unintended consequences hit their milk checks,” said Fischer.