Tag: FMMO reform

FMMO’s Next Steps Begin

Posted on by Theresa Sweeney

Its Federal Milk Marketing Order (FMMO) hearing now concluded, USDA is now considering more than 12,000 pages of testimony as it formulates its plan for FMMO modernization. NMPF is still doing what it can to ensure that proposal best reflects the interest of dairy farmers and their cooperatives, two NMPF economists said in a Dairy Defined podcast.

The key to successful modernization is a comprehensive approach that addresses the complexity of federal orders in a way that respects the entire dairy industry while keeping in mind that orders most fundamentally must work for farmers, Dr. Peter Vitaliano, Vice President for Economic Policy and Market Research, and Stephen Cain, Senior Director for Economic Research and Analysis at NMPF. That’s always been the bedrock principle behind NMPF proposals on areas ranging from returning to the “higher-of” Class I mover to updating milk composition factors.

“What separates National Milk’s proposals from processor groups is more of our holistic approach,” Cain said. “You can’t look at the federal order system having not been updated in 20 years and not address all facets of the industry, right? You can’t say in good faith that Class I differentials need to be updated because costs have gone up without also conceding the fact that make allowances need to go up for the same reason. So we took that holistic approach. That is going to help move the industry forward together.”

Cain and Vitaliano also discuss USDA’s decision-making timeline, and why July could be the key moment for FMMO modernization. The full podcast is here. You can also find the podcast on Apple Podcasts, Spotify and Google Podcasts. Broadcast outlets may use the MP3 file below. Please attribute information to NMPF.

NMPF Statement on USDA Federal Order Announcement

Posted on by Theresa Sweeney

From NMPF Board Chairman Randy Mooney, a dairy farmer from Rogersville, MO:

Dairy farmers nationwide are grateful that USDA is moving forward by including the full scope of NMPF’s proposal to guide the dairy industry forward as it modernizes the Federal Milk Marketing Order system.

This recognition of NMPF’s consensus-based leadership allows us to continue the substantial momentum for change that we’ve achieved. Each piece of our proposal, from returning to the “higher-of” Class I mover as soon as possible, to updating both Class I price differentials and manufacturing cost allowances, has been crucial toward building that consensus, and all components of our plan are critical to a successful update to this important program.

There is still a long journey ahead toward a modernized federal order system that works better for farmers, but NMPF is ready, with co-op led efforts well under way to ensure that we are well-prepared for the FMMO hearing that begins next month. We’re excited to lead this industry toward solutions that will offer benefits for everyone, and we are gratified that USDA is showing thoughtful leadership through its responsiveness and support for dairy.

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.

Milk Pricing Proposals Reviewed by NMPF Board at June Meeting

Posted on by Theresa Sweeney

NMPF’s Board of Directors took additional steps toward modernizing the federal milk pricing system at their meeting June 7-8 in Arlington, VA.

The board reviewed and provided feedback on a series of recommended improvements generated by a member task force of Federal Milk Marketing Order experts.

The task force formed four committees earlier this year to assess specific areas in need of modernization, including Milk Composition; Dairy Products and Product Specifications; Make Allowances; and Class I Pricing. The task force unanimously recommended 10 proposals to the Economic Policy Committee in those four areas, which now are being shared more broadly with NMPF membership and other stakeholders for further discussion and refinement. The goal to create a single package of recommendations for final approval by the full Board of Directors later this year.

The Board also welcomed two new directors: Joe Coote from Darigold/Northwest Dairy Association and Dan Rosen from Ellsworth Cooperative Creamery.

Dairy Farmers to Seek Emergency USDA Hearing on Class I Mover Reform

Posted on by Theresa Sweeney

NMPF’s Board of Directors voted April 23 to request an emergency USDA hearing on a Federal Milk Marketing Order proposal to restore fairness for farmers in the Class I fluid milk price mover. The endorsement of the board, which represents dairy farmers and cooperatives nationwide, followed approval April 16 from the organization’s Executive Committee.

The NMPF plan would ensure that farmers recover lost revenue and establish more equitable distribution of risk among dairy farmers and processors. The current mover, adopted in the 2018 farm bill, was intended to be revenue neutral while facilitating increased price risk management by fluid milk bottlers. But the new Class I mover contributed to disorderly marketing conditions last year during the height of the COVID-19 pandemic and cost dairy farmers over $725 million in lost income.

NMPF’s proposal would help recoup the lost revenue and ensure that neither farmers nor processors are disproportionately impacted by future significant price disruptions.

“As the COVID-19 experience has shown, market stresses can shift the mover in ways that affect dairy farmers much more than processors. This was not the intent of the Class I mover formula negotiated within the industry,” said Randy Mooney, the dairy farmer chairman of NMPF’s Board of Directors. “The current mover was explicitly developed to be a revenue-neutral solution to the concerns of fluid milk processors about hedging their price risk, with equity among market participants a stated goal.

“Dairy farmers were pleased with the previous method of determining Class I prices and had no need to change it, but we tried to accommodate the concerns of fluid processors for better risk management. Unfortunately, the severe imbalances we’ve seen in the past year plainly show that a modified approach is necessary. We will urge USDA to adopt our plan to restore equity and create more orderly marketing conditions,” Mooney said.

While the current Class I mover was designed to improve the ability of fluid milk handlers to hedge milk prices using the futures market, it was also expected to be revenue-neutral compared to the formula it replaced. But that has not been the case. The significant gaps between Class III and IV prices that developed during the pandemic exposed dairy farmers to losses that were not experienced by processors, showing the need for a formula that better accounts for disorderly market conditions.

NMPF’s proposal would modify the current Class I mover, which adds $0.74/cwt to the monthly average of Classes III and IV, by adjusting this amount every two years based on conditions over the prior 24 months, with the current mover remaining the floor. NMPF’s request will be to limit the hearing specifically to proposed changes to the mover, after which USDA would have 30 days to issue an action plan that would determine whether USDA would act on an emergency basis​. NMPF plans to formally submit its proposal to USDA this month.

Dairy Farmers to Seek Emergency USDA Hearing on Class I Mover Reform

Posted on by Theresa Sweeney

The National Milk Producers Federation’s Board of Directors voted today to request an emergency USDA hearing on a Federal Milk Marketing Order proposal to restore fairness for farmers in the Class I fluid milk price mover. The endorsement of the board, which represents dairy farmers and cooperatives nationwide, follows approval from the organization’s Executive Committee last week.

The NMPF plan would ensure that farmers recover lost revenue and establish more equitable distribution of risk among dairy farmers and processors. The current mover was adopted in the 2018 farm bill and intended to be revenue neutral while facilitating increased price risk management by fluid milk bottlers. But the new Class I mover contributed to disorderly marketing conditions last year during the height of the pandemic and cost dairy farmers over $725 million in lost income. NMPF’s proposal would help recoup the lost revenue and ensure that neither farmers nor processors are disproportionately harmed by future significant price disruptions.

“As the COVID-19 experience has shown, market stresses can shift the mover in ways that affect dairy farmers much more than processors. This was not the intent of the Class I mover formula negotiated within the industry,” said Randy Mooney, the dairy farmer chairman of NMPF’s Board of Directors. “The current mover was explicitly developed to be a revenue-neutral solution to the concerns of fluid milk processors about hedging their price risk, with equity among market participants a stated goal.

“Dairy farmers were pleased with the previous method of determining Class I prices and had no need to change it, but we tried to accommodate the concerns of fluid processors for better risk management. Unfortunately, the severe imbalances we’ve seen in the past year plainly show that a modified approach is necessary. We will urge USDA to adopt our plan to restore equity and create more orderly marketing conditions,” Mooney said.

While the current Class I mover was designed to improve the ability of fluid milk handlers to hedge milk prices using the futures market, it was also expected to be revenue-neutral compared to the formula it replaced. But that has not been the case. The significant gaps between Class III and IV prices that developed during the pandemic exposed dairy farmers to losses that were not experienced by processors, showing the need for a formula that better accounts for disorderly market conditions.

NMPF’s proposal would modify the current Class I mover, which adds $0.74/cwt to the monthly average of Classes III and IV, by adjusting this amount every two years based on conditions over the prior 24 months, with the current mover remaining the floor. NMPF’s request will be to limit the hearing specifically to proposed changes to the mover, after which USDA would have 30 days to issue an action plan that would determine whether USDA would act on an emergency basis​.