Fairness to Farmers Makes Dairy Work

Happy National Dairy Month!

It’s hard to have National Dairy Month without dairy, and it’s hard to have dairy without dairy farmers – and that’s why it’s important to treat them well.

But what hasn’t worked out well for milk producers since 2019 is the current formula for the Class I mover – the formula that helps set the price of fluid milk under Federal Milk Marketing Orders — was changed in the 2018 Farm Bill. Under current rules, which were adjusted so that milk processors could better manage pricing risk, dairy producers have lost an estimated $1.2 billion compared to the previous formula.

The losses are occurring because farmers now bear a disproportionate part of the burden when prices turn volatile. That wasn’t foreseen when the change to the formula went into effect. It wasn’t the intention of what was meant to be a revenue-neutral adjustment, and it isn’t fair. And fairness to farmers is what makes dairy work.

Fortunately, momentum for relief is building. NMPF’s proposal before the USDA’s Federal Milk Marketing Order hearing restores the old formula, and the farm bill that passed the House Agriculture Committee also brings it back. That’s more than just relief for farmers – it’s the right thing to do. And it would be a great thing to raise a glass to this Dairy Month.

NMPF’s Bjerga on New Pandemic Aid

NMPF Senior Vice President of Communications Alan Bjerga said $100 million on new assistance to dairy farmers under the Pandemic Market Volatility Assistance Program will better aid midsize and larger dairies that received inadequate support in an earlier round of aid. Bjerga also discusses mental health stresses among farmers, and a recent Dairy Defined Podcast that discusses ways they can get help. Bjerga was interviewed on RFD-TV.

NMPF’s Mulhern on FMMO Modernization and the State of Dairy


NMPF President and CEO Jim Mulhern recaps progress made at NMPF’s annual meeting in Denver last week, including unanimous support for a Federal Milk Modernization Order modernization framework. Mulhern also talks about next steps on FMMO modernization and highlights the current popularity of dairy products and their nutritional benefits, noting the highest U.S. per capita consumption since 1959. Mulhern speaks on the “Agriculture of America” podcast.

NMPF’s Bjerga on the Dairy Economy, FMMO Modernization and Fake Milk


NMPF Senior Vice President for Communications, Alan Bjerga, discusses dairy issues ranging from pricing to fake milk with KASM radio of Albany, MN, at the National Association of Farm Broadcasters Issues Forum in Washington, DC. Record milk prices are coming with higher costs as well; meanwhile, NMPF is positioned to lead on Federal Milk Marketing Order modernization, a farmer-led process.

NMPF’s Bjerga on Holiday Dairy Demand, Milk Pricing


NMPF Senior Vice President of Communications Alan Bjerga discusses how dairy demand may fare over the holiday season as COVID worries clash with consumer cravings for eggnog. Meanwhile, U.S. senators are looking at milk pricing, a discussion NMPF is leading thanks to its nationwide scope and diverse membership. Bjerga spoke in an interview on RFD-TV.

NMPF Leads Dairy in FMMO Discussion



NMPF President and CEO Jim Mulhern called for dairy farmers from all regions to work together for improvements to the Federal Milk Marketing Order system in his remarks at NMPF’s annual meeting in Las Vegas as shown on RFD-TV. Positive changes for dairy producers is possible through NMPF leadership because of the nature of the organization as an industry leader, said NMPF Senior Vice President of Communications, Alan Bjerga.

NMPF’s Mulhern Speaks at Annual Meeting


NMPF President and CEO Jim Mulhern speaks at the organization’s annual meeting in Las Vegas, NV on Nov. 16.

NMPF Cooperative Leader Urges Class I Pricing Changes at Senate Hearing

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.”

New USDA Program Addresses Class I Shortfall, But Work Remains

NMPF’s reaction was mixed toward USDA’s new Pandemic Market Volatility Assistance Program, announced Aug. 19. While the initiative, which will distribute $350 million in assistance payments to dairy farmer, arose from NMPF and member-cooperative advocacy, significant issues remain with how payments are distributed, making improvements necessary.

Under the program, USDA will reimburse producers for unanticipated losses created during the COVID-19 pandemic prompted by a change to the Class I fluid milk price mover formula that put price risks disproportionately on the backs of farmers, burdens which were increased by the government’s pandemic dairy purchases last year. Still, caps on the production amount covered by the program will limit assistance in ways that create inequitable outcomes among dairy producers.

The plan “is an initial step in this effort that will help many producers, but it unfortunately falls significantly short of meeting the needs of dairy farmers nationwide,” said NMPF President and CEO Jim Mulhern in a statement the day of the announcement.

Congress’s change to the previous Class I mover in the 2018 Farm Bill was never intended to hurt producers, and in fact was envisioned to be revenue neutral. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions. Those disruptions thus far have cost dairy farmers nationwide more than $750 million when compared to what they would have been paid under the previous system.

The new USDA program will reimburse qualified dairy farmers for 80 percent of the revenue difference per month on up to 5 million pounds of milk marketed and on fluid milk sales from July through December 2020. The payment rate will vary by region based on the actual losses on pooled milk in each order.

NMPF has been working on approaches to right this unintended wrong to dairy farmers by recouping as much of the loss as possible.

“The arbitrary low limits on covered milk production volume mean many family dairy farmers will only receive a portion of the losses they incurred on their production last year,” NMPF President and CEO Mulhern. “These losses were felt deeply by producers of all sizes, in all regions of the country, embodying a disaster in the truest sense of the word. Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses.”

Additional work lies ahead to remedy this shortfall more fully for all dairy producers. “We very much appreciate USDA’s persistence and efforts to find a way to cover some of these losses using existing authorities, but NMPF represents producers from all regions and of all sizes and believes that losses incurred by producers must be addressed equitably,” Mulhern said. NMPF will work with Congress to seek supplemental funding to close this gap.

NMPF also is continuing discussions about the current Class I mover to prevent a repeat of this problem.

NMPF Pursuing Needed Fixes on Disaster Assistance and Class I Mover

Dairy farmers welcomed assistance from USDA in August via the new Dairy Donation Program, which NMPF championed through the legislative process; adjustments to the Dairy Margin Coverage program; and the new Pandemic Market Volatility Assistance Program, which will partially reimburse farmers for losses that arose from how the department approached dairy purchases for food-insecure families in 2020. These initiatives will help farmers during difficult times, and they happened because NMPF worked closely with USDA and Congress to help dairy farmers better manage their risks and serve their communities.

That doesn’t mean our work is over – especially on the pandemic market program. The $350 million in reimbursements is a partial balm that begins to redress policies that created unintended harm. But it isn’t a fair deal for all dairy farmers. NMPF is committed to lead efforts for fairness on behalf of our members.

Some background: USDA’s new program attempts to rectify two policy actions that left many in dairy on the wrong end of unplanned consequences. The immediate trigger was government food-box program purchases that were heavily weighted toward cheese. That over-emphasis sent Class III cheese prices to all-time highs and caused unusual and uneven impacts on milk checks, most commonly noticed via the record negative Producer Price Differentials (PPDs) seen during the pandemic.

The other culprit was an attempted good-faith policy change that inadvertently became a ticking time bomb, exploded by those same milk-price gyrations. A change to the Class I mover formula, which sets the price of Class I fluid milk, in the 2018 farm bill was originally proposed as a revenue-neutral adjustment designed to encourage increased fluid milk sales without hurting farmers. It turned out to be anything but that. Last year’s unprecedented discrepancies between Class III and Class IV prices, which are used to calculate the mover, pushed Class I skim milk prices dramatically lower than they would have been under the previous formula, leaving dairy farmers with roughly $750 million in losses.

At NMPF, we repeatedly urged the government to make more balanced purchases last year because we feared that unbalanced dairy-buying would wreak havoc on markets, as it did. Subsequently, when the effects of the new Class I mover formula became clear, we voiced support for an emergency Federal Milk Marketing Order hearing focused specifically on addressing the problem. We have held back on a formal hearing request, choosing instead to work with USDA toward creative solutions to more quickly assist producers, such as the new pandemic program. With USDA’s announcement – a milestone in the government’s response to the pandemic’s toll on dairy — it’s time to look at where we are, and where we need to go.

We are grateful that the department found a way to provide some relief, and that many members of Congress worked with us to advocate vocally for dairy farmers.

And while the program will help many producers, its lack of fairness is a major concern for NMPF and many of its members. The payment is calculated based on only 5 million pounds of milk per farm during the period of July-December 2020. That level is well below the production of thousands of dairy farms, meaning many family dairy farmers will only receive a portion of the losses they incurred. Losses were felt by producers of all sizes and in all regions: It was a disaster in the truest sense of the word. And like most other disaster programs, this one shouldn’t be subject to such arbitrary low limits on assistance. We are already working with allies in Congress to further supplement USDA’s already announced funding.

Meanwhile, we still need to address the risk imbalance in the current Class I mover formula that was exposed by the pandemic. The proposed adjustment to the mover NMPF developed last spring was designed to account for past losses and to restore needed balance for farmers going forward. The COVID-19 pandemic is (we hope) a once-in-a-lifetime occurrence. But as we can now see, a large spread between Class III and IV milk prices is not, making a Class I mover fix essential. Along with more fully recouping last year’s losses, we look forward to advancing positive solutions to this and other federal-order issues.

NMPF applauds USDA’s and Congress’s many crucial efforts for dairy. But fair is fair. As the advocate for U.S. dairy farmers, we’re leading the fight for fairness. Our efforts, along with those from our member-allies across the dairy farmer community, have already yielded a lot. And they’re far from over.