August Update: FMMO Hearing Underway; Margins Below $4
September 6, 2023
NMPF capped an unusually busy August – traditionally a slower month in policy circles due to the congressional recess – with the beginning of the USDA Federal Milk Marketing Order hearing in Carmel, IN. The first comprehensive hearing on the FMMO system since 2000 is the result of more than two years of NMPF study, discussion and leadership, featuring more than 200 meetings and exhaustive, member-led examination of all issues as dairy farmers achieved overwhelming consensus behind its proposal.
That said, work is far from over. The first weeks of questioning and cross-examination have featured challenging questions regarding methodology, analysis and whether NMPF’s plan is best for the industry. Still, led by staff economists, cooperative efforts and dairy farmers, NMPF is entering September in a commanding position in a hearing that may last well into October.
“Thanks to the tireless efforts of dairy farmers and their cooperatives, this industry is poised for progress as Federal Milk Marketing Order modernization is now in sight,” NMPF President and CEO Jim Mulhern said in a statement on Aug. 23, the hearing’s first day. “NMPF’s comprehensive proposal for improvements to the system forms the basis of this hearing, and through our members’ depth of expertise and unmatched team of dairy farmers and cooperative analysts, we are prepared to advance our industry’s need for these updates.”
The FMMO hearing is occurring against a backdrop of the lowest producer margins since margin-protection insurance was introduced in the 2014 Farm Bill. The USDA announced that the July Dairy Margin Coverage margin dropped $0.13/cwt from June to $3.52/cwt. That will generate payments of $0.48/cwt payments for the free $4/cwt coverage level, and payments of $5.98/cwt for coverage the maximum $9.50/cwt Tier 1 coverage. The July all-milk price was $17.40/cwt, $0.50/cwt lower than in June, while the DMC July feed cost was $0.37/cwt of milk lower than June’s.
Available forecasts indicate the margin will increase rapidly during the following three months and stabilize around $9.50/cwt for the fourth quarter of this year.
In addition to FMMO activity, NMPF and the U.S. Dairy Export Council organized an Aug. 3 meeting for APEC agricultural officials as part of the larger APEC Food Security Ministerial session in Seattle as part of the federation’s ongoing engagement with the Asia-Pacific Economic Cooperation (APEC), an organization that includes 15 of the top 20 U.S. dairy export markets. Mulhern spoke to the value of an incentive-based, voluntary approach toward improving the sustainability of U.S. agriculture and highlighted the dairy sector’s leadership in implementing climate-smart solutions.
NMPF tangibly expanded U.S. dairy exports in August through the Cooperatives Working Together program. CWT member cooperatives secured 67 contracts, adding 6.3 million pounds of American-type cheeses, 2,000 pounds of anhydrous milkfat, 337,000 pounds of cream cheese and 137,000 pounds of whole milk powder to CWT-assisted sales in 2023. In milk equivalent, this is equal to 61.5 million pounds of milk on a milkfat basis. Sales for the year so far through August are the total milk equivalent of 610.5 million pounds on a milkfat basis.
NMPF’s regulatory team, meanwhile, noted progress in the Waters of the U.S. issue, with a new Biden Administration rule offered in line with a Supreme Court decision last spring that limited the reach of EPA’s regulatory authority. While the rule will almost certainly be subject to litigation, the approach is an improvement of the most recent changes to WOTUS, which created regulatory uncertainty for farmers and represented government overreach, a point regulatory staff have made in numerous meetings with and comments to EPA over more than a decade.
Finally, the final day of August saw USDA announce the fiscal year 2023 notice of funding for CIG On-Farm Conservation Innovation Trials, bringing to fruition an important win NMPF secured last year.
On-Farm Conservation Innovation Trials support widespread adoption of innovative approaches, practices, and systems on working lands. The Inflation Reduction Act, which Congress passed last year, doubled annual funding for this program from $25 million to $50 million for four fiscal years. NMPF won language in the law to target this new funding toward initiatives that use feed and diet management to reduce enteric methane emissions, which can comprise roughly one-third of a dairy farm’s greenhouse gas footprint and represent a major opportunity for dairy to lead the agriculture sector in making sustainability gains.