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NMPF Cooperative Leader Urges Class I Pricing Changes at Senate Hearing

October 5, 2021

A leader of an NMPF member cooperative amplified its call to reform the Class I milk pricing formula to ensure dairy farmers are fairly compensated both now and into the future at a Senate Agriculture dairy subcommittee hearing on milk pricing Sept. 15.

The pandemic “has created an even greater urgency to revisit orders,” said Catherine H. de Ronde, vice president for economic and legislative affairs for Agri-Mark, based in Andover, Massachusetts, in her testimony. “Negative PPDs had milk checks looking incredibly bizarre, de-pooling at a level never-before seen became a new phenomenon for many. The change to the underlying Class I mover was a key catalyst of these outcomes,” added de Ronde, a member of NMPF’s Economic Policy Committee.

The hearing, led by Sens. Kirsten Gillibrand (D-NY) and Ranking Member Cindy Hyde-Smith (R-MS), focused on issues related to milk pricing and the Federal Milk Marketing Order (FMMO) system, strained during the COVID-19 pandemic due in large part to flaws in the current Class I mover and its ripple effects through dairy revenues. The 2018 Farm Bill changed the Class I mover, which determines the price of fluid milk under the FMMO system, at the urging of dairy processors who sought greater price predictability.

The change contributed to substantial market volatility last year and has led to an estimated $750 million in losses for farmers compared to the previous Class I formula. Without a fix, dairy farmers will permanently bear unfair and unnecessary price risk compared to processors during times of unusual market volatility.

USDA plans to partially mitigate last year’s losses through its Pandemic Market Volatility Assistance Program, which will reimburse farmers for $350 million of those losses. But that initiative distributes payments unevenly, requiring further remedies to equitably fill the gap for producers of all sizes, as noted at the hearing by Sen. Roger Marshall (R-KS). NMPF is working with Congress to provide full funding to reimburse for these losses and in a manner that does not limit payments to producers based on volume or size.

Sen. Gillibrand chairs the Subcommittee on Livestock, Dairy, Poultry, Local Food Systems, and Food Safety and Security and Sen. Hyde-Smith serves as the subcommittee’s Ranking Member. Sens. Gillibrand and Hyde-Smith called attention to the losses farmers have faced on account of the new Class I mover and discussed a range of possible options for reform.

“The National Milk Producers Federation appreciates the work of Senators Gillibrand and Hyde-Smith for today’s initial examination of crucial milk pricing issues,” said Jim Mulhern, president and CEO of NMPF, in a statement. “Dairy farmers have done their best to navigate this ongoing crisis, aided in part by necessary disaster assistance.

“But without equitable assistance, many family dairy farmers across the nation will needlessly struggle from the effects of the Class I mover change they’ve already felt. And without a change in the mover, we can only expect these struggles will recur.”