Tag: dairy pricing

Co-op Leadership Brings FMMO Modernization Success

Posted on by Theresa Sweeney

Well done, co-ops. Your leadership is shaping a better future for dairy.

On Monday, an effort that took more than three years, more than 200 meetings, 49 days of a record-long Federal Order hearing, and countless hours of analysis and discussion were reflected in a recommended USDA plan for Federal Milk Marketing Order modernization that incorporates much of the comprehensive approach to improvements we advocated throughout.

Yes, not every detail is exactly as we would have had it – we always knew that would be the case. And USDA’s plan isn’t set in stone – we take very seriously the comment period we will soon be in and plan a detailed response to this proposal. Our FMMO task force is meeting to discuss the plan next week; even as we speak, our staff and cooperative experts are putting pen to paper to better understand how various parts of the USDA plan will interact to affect dairy farmers and the cooperatives they own, as well as the broader industry.

That’s all to say our work is far from over. But Monday’s decision was arguably the critical milestone in this process. And this industry – led by the member-owners of the nation’s leading dairy cooperatives – has many reasons to be heartened by the improvements USDA has proposed to the nation’s Federal Milk Marketing Order system.

A few notes on what USDA offered, and how it compares to what we’ve advocated.

  • On the “higher of” Class I mover. Noting that dairy farmers have lost roughly $1.3 billion in revenue since the mover was changed in 2019, we fought for a return to the higher-of in the name of fairness and real-time market signals. Processors proposed a different formula, citing its importance to risk management, especially for extended shelf-life milk. Recognizing the need to restore orderly milk marketing, USDA decided to go back to the higher-of, with an accommodation for extended shelf-life milk, thus granting NMPF’s request for the vast majority of U.S. fluid milk. USDA’s solution is, frankly, as innovative as it is fair – a classic case of two sides not getting all that everyone wanted, but everyone getting what they most needed.
  • On make allowances. USDA’s numbers for an adjustment were higher than what NMPF proposed, though not greatly out of line with our analysis. And USDA denied the processors’ request to automatically increase the numbers over the next three years, which NMPF opposed. Agreement was nearly universal that make allowances, which hadn’t been revised since 2000, needed to change. The next step now will be seeking better plant-cost data through mandatory surveys via legislation, a step that’s been included in every significant congressional farm bill plan that’s been proposed.
  • On increasing the Class price skim milk component factors. Again, USDA’s plan takes a direction similar to NMPF’s, though it doesn’t include the automatic update provision we proposed.
  • On the Class I differentials. In many cases, USDA’s county-level calculations matched our own. In many others, the calculations deviated minimally. And in a few others, the differences were significant. Meanwhile, USDA denied a processor proposal to zero out the base differential, which would have significantly reduced every differential in the country and set the Class I differentials to zero at some locations in the West. We will be examining USDA’s methodology to better understand its calculations, reflecting the best data and our members’ input.
  • On removing barrel cheese from the protein price formula. USDA accepted NMPF’s proposal without modification.

As has always been the case, member leadership is what has made this process work for dairy. The conversation is continuing, and the comprehensive, consensus-driven approach that has been our hallmark will also continue.

Once Monday’s proposal is officially published in the Federal Register, we and other stakeholders will have 60 days to submit comments to USDA. A final producer vote is projected for early 2025. Again, thank you to all the cooperative leadership for what has been accomplished so far, and for the good work for dairy that will continue. And with that, happy Independence Day. We’ll be back next week for the second half of an already successful year.

Gregg Doud

President & CEO, NMPF

 

In The “Eye of The Storm,” Dairy Farmers Stand Strong

Posted on by Theresa Sweeney

Next week, dairy farmers from across the nation are gathering in Orlando, FL, for NMPF’s annual meeting, with no shortage of important items to discuss.

  • America is currently without a farm bill — a circumstance that’s not unheard-of given the usual lapses in legislation, but one that inevitably raises uncertainty and questions of strategy.
  • USDA’s Federal Milk Marketing Order hearing is in a temporary pause before resuming Nov. 27. Thanks to years of painstaking preparation and an unshakable consensus among our members, we at NMPF feel very good about our hearing proposals. But the hearing’s final major issue, the Class I price surface, is still under consideration. And even after the hearing concludes, several steps remain before a successful producer vote will take place, likely late next year, on a USDA plan we hope will be largely modeled on our own.
  • The dairy economy continues to be challenging. Prices and margins are now rising, but only after producers experienced their lowest margins since the current USDA safety-net system began. Meanwhile, dairy producers continue to experience bad-faith attacks from outside activists over their animal care stewardship, environmental and climate leadership, and workforce management. And exports continue to suffer because of unfair trade policies. And so on.

So, while our conversations will be cordial and collegial, in the cooperative spirit that defines our industry, our challenges are real. And, as usual, we will meet those challenges.

  • On the farm bill, we have crafted board-approved positions that will both preserve the safety net successfully established in the now expired 2018 law while improving meaningful risk management for farms of all sizes, in all regions, while positioning our industry to utilize financial incentives that support our Net Zero Initiative. Dairy farmers are speaking with one voice on these issues, which is always when we are most effective. And the relationships we’ve built on both sides of the aisle allow us to move ahead with confidence.
  • On FMMO, I can’t speak enough about how our comprehensive, farmer co-op-led approach to modernization has impressed the logic and necessity of our plan upon USDA. Through weeks of testimony and dozens of dairy farmer and cooperative expert witnesses, the intellectual rigor and on-farm passion has made a compelling case for our plan – which should carry significant influence with USDA in developing a final proposal. There isn’t enough space in this column to thank everyone who deserves our gratitude, and the honor roll will only grow as we continue to move this process forward.
  • On other issues, some shorter-term and others longer, we have our own record of resilience on which to fall back. When the economy stalls, we innovate, adjust, survive, and thrive. When our naysayers proclaim the “Death of Dairy,” we’re the ones who show life, fighting those messages with the most compelling counter we have – the truth. And we continue to show the world just how compelling and critical our products are, building global market share and our reputation for global leadership, as we did at last month’s successful International Dairy Federation World Dairy Summit in Chicago.

From one perspective, given the moment during which we’re meeting, it could be said that we’re gathering during the eye of a storm – not a bad metaphor for a meeting in Florida. But really, I think of it more like the moment before a dawn, when the new day is about to reveal itself and you’re ready to take it on. We never lack for challenges in dairy, and we never lack for solutions. In Orlando, we’re ready to convene. And nationwide, as always, we’re ready to lead.

Jim Mulhern

President & CEO, NMPF

 

Farm Bill Expires, Government Funding Doesn’t, and FMMO Hearing Soldiers On

Posted on by Theresa Sweeney

Uncertainty defined dairy in September, as the threat of a government shutdown and the impending expiration of the 2018 farm bill, occurring in the context of a slow-moving USDA hearing on the Federal Milk Marketing Order system, reminded dairy farmers of how much of the policy landscape operates outside their control, even as genuine progress continued in the areas that they could.

Five weeks into USDA’s FMMO hearing in Carmel, IN, a federal shutdown approached on Oct. 1, with government spending authority scheduled to lapse and NMPF experts and analysts readying for an indefinite hiatus in the hearing. Instead, an unexpected extension of funding for 45 days presents allow the hearing to continue USDA’s thorough examination of milk pricing, in which NMPF’s proposals have formed the foundation of discussion and remain the most compelling, comprehensive plan for milk pricing modernization.

“We had unanimous support from our board on our proposals” forged after two years of discussion, NMPF Senior Director of Economic Research & Analysis Stephen Cain said in a Dairy Defined podcast Sept. 18. “We have a well-rounded package that’s supported by the entire industry. So that’s the big piece here, again, is just making sure that we get everything we need to into the record to make sure the USDA has the right information they need to make the best decisions to make sure their orders are operating as effectively as they can.”

As October began, USDA had already heard testimony surrounding most major NMPF-identified topic areas, including the make allowance, milk composition and the Class I mover, and was moving into the Class I price surface, the last major topic of dispute among industry players. Through the hearing, NMPF’s years of preparation has paid off, with well-reasoned, factually grounded positions that work in tandem to help farmers in the entire industry. Opposing NMPF has been a motley crew of processor and niche-farmer interests touting proposals that largely benefit themselves.

For more information on the FMMO modernization effort, visit NMPF’s page on the FMMO hearing here.

As FMMO discussions progressed in Indiana, farm bill action in Washington remains elusive as legislation reauthorizing USDA programs expired Sept. 30. Farm bill expirations have ample historical precedent, with authorization often expiring before a new bill is approved. Agriculture committee lawmakers and NMPF continued to express optimism that a law can be passed before year’s end; if not, historical experience suggests that Congress may seek an extension of current law in late 2023 or early 2024, keeping farm-bill programs such as the Dairy Margin Coverage program in operation. NMPF staff continue to be heavily involved in discussions about both the shape and timing of the farm bill.

NMPF Board Unanimously Backs Milk Pricing Package

Posted on by Theresa Sweeney

NMPF’s Board of Directors unanimously endorsed a proposal to modernize the Federal Milk Marketing Order system Oct. 25 at its annual meeting in Denver, following months of extensive deliberation on the future of federal milk pricing..

The Board reviewed a package of changes that were initially developed and proposed by a task force of NMPF cooperative experts and later approved by the organization’s Economic Policy Committee. The key recommendations are the result of more than 100 meetings of member and industry experts during 2022. The changes include:

  • Returning to the “higher of” Class I mover;
  • Discontinuing the use of barrel cheese in the protein component price formula;
  • Extending the current 30-day reporting limit to 45 days on forward priced sales on nonfat dry milk and dry whey to capture more exports sales in the USDA product price reporting;
  • Updating milk component factors for protein, other solids and nonfat solids in the Class III and Class IV skim milk price formulas;
  • Developing a process to ensure make-allowances are reviewed more frequently through legislation directing USDA to conduct mandatory plant-cost studies every two years; and
  • Updating dairy product manufacturing allowances contained in the USDA milk price formulas.

The NMPF task force working on these issues still has to finalize certain pricing data involving an examination of Class I price differentials at the county level, work that’s expected to be completed later this year. A final proposal will be reviewed again by the organization before being submitted to USDA as the basis for a federal order hearing.