The Class I Mover Needs to Move

By Paul Bleiberg, Executive Vice President, Government Relations, NMPF

Even as an election looms on the horizon, USDA will soon develop its Federal Milk Marketing Order (FMMO) modernization recommendations after months of proceedings. Meanwhile, Congress is preparing to advance a farm bill. U.S. dairy farmers and their cooperatives have a stake in both. But regardless of the policy landscape of the moment, one pressing priority that unites producers from coast to coast in every way, shape, and form is the need to restore the “higher of” Class I mover.

Since it was implemented five years ago, the current “average of” Class I mover has cost dairy farmers nationwide more than $1 billion in Class I skim revenue, with losses continuing to pile up monthly. This, of course, was not intended — but neither were the repeated price inversions that upended decades of data and showed the new mover is poorly adapted to dairy’s present and future in a variety of economic climates.

Congress changed the mover during the last farm bill to respond to fluid processor requests for risk management, but that was with the expectation that it would be revenue neutral for the dairy producer. Unfortunately, the new mover has been anything but revenue neutral, and it’s been so in a way that has overwhelmingly favored processors, who are not the epicenter of the FMMO system. The new mover has underperformed repeatedly, to the detriment of dairy farmers, in 2020, 2022, 2023, and again, month by month, in 2024. The current formulation has harmed farmers so consistently that it would have been nowhere close to revenue neutral even setting aside the calamity of 2020.

In an attempt to remedy an intolerable situation (everyone, even processors, agrees on that point, at least), several concepts have been put forth that are bandages to the problem but aren’t true solutions. Modifying the current formula, for example, to retroactively recoup producer losses would still fail to send timely price signals to farmers. The argument that this modified version would have paid more to farmers at some point just yet again exposes the problem with the “average of,” which is that it causes farmers to suffer losses when they should have been paid based on market signals and instead distorts the true market by paying them back later. That approach also provides little help to the many family dairy producers who don’t have years to be made whole, a fact underscored forcefully by continued trends toward farm consolidation.

The solution to this problem comes down to priorities. The current mover may have been a fair experiment to test, but with its performance now having been assessed, continuing the “average of” formulation can be to nothing except the detriment of dairy farmers who have lost more than $1 billion dollars of ongoing disorderly marketing of milk.

The right solution is the previous “higher of” mover. That tried-and-true approach, one that served farmers well for decades, responds quickly to and accurately reflects the marketplace, encouraging the orderly marketing of milk that provides the rationale for the FMMO system, and it helps dairy farmer cash flow when it counts. The “higher of” Class I mover must be reinstated.


This column originally appeared in Hoard’s Dairyman Intel on March 4, 2024.

NMPF’s Galen Urges DMC Signup

NMPF Senior Vice President Chris Galen detailed improvements to the Dairy Margin Coverage program in an interview with the National Association of Farm Broadcasters. “We encourage people to look at the dairy margin coverage program if they’re not already covered or to make adjustments in their coverage levels, because you don’t know what’s going to happen with either milk prices or feed costs,” he said.

NMPF’s Vitaliano Offers 2024 Dairy Economic Outlook

 

NMPF’s Vice President of Economic Policy Peter Vitaliano provides Dairy Radio Now listeners a look ahead at what farm-level milk prices will do in 2024. Farmers should benefit from lower feed costs, and with milk production expected to remain stagnant again this year, prices should gradually improve.

December DMC Margin Reverses Trend, Drops to $8.44/cwt

The December margin under the Dairy Margin Coverage (DMC) program bucked the trend that began in August of improving milk prices and margins, sliding $1.14/cwt to $8.44/cwt and matching the margin last seen in September. The renewed weakness was due almost entirely to a $1.10/cwt fall in the December all-milk price from November. The December DMC feed cost rose by 4 cents a hundredweight to $12.16/cwt of milk, with higher corn and premium alfalfa hay prices almost offset by a lower soybean meal price.

The average margin for all months of 2023 was $6.70/cwt, effectively tying last year with 2021 for the lowest average calendar-year margin under both the DMC and its predecessor, the Margin Protection Program (MPP). End-of-January futures-based forecasts indicated DMC margins averaging between $10.20/cwt and $11.00/cwt in 2024.

NMPF’S Cain sums up USDA milk pricing hearing

 

NMPF’s Stephen Cain provides Dairy Radio Now listeners a summary of what USDA will do now that its five-month-long national milk pricing hearing concluded at the end of January. NMPF and other parties will soon submit post-hearing briefs, and the USDA is expected to then weigh the evidence presented by witnesses and issue a draft proposal by mid-summer.

NMPF’s Bjerga on the Urgency of Changing the Class I Mover

NMPF Executive Vice President for Communications & Industry Relations Alan Bjerga speaks with RFD-TV about the need to change the Class I mover in a way that ends losses to dairy farmers that have totaled $1.2 billion since 2019. The mover is in the spotlight with the conclusion of USDA’s Federal Milk Marketing Order hearing in Carmel, IN.

 

Whole and Lactose-Free Milk Shine Bright

By Alan Bjerga, Executive Vice President, Communications & Industry Relations, NMPF

This is shaping up to be an exciting year for both whole and lactose-free milk, two growing segments of fluid milk consumption that are poised for further gains in grocery aisles as well as Washington, D.C. policy circles.

First, the facts: Even as fluid milk continues its decades-long challenge of eroded consumption as beverage markets diversify and consumer preference shifts to other forms of dairy, both whole milk and lactose-free varieties are bucking that trend. According to data from Circana Inc., which tracks retail sales, whole milk sales rose slightly (up 8 million gallons, or 0.6%) in 2023 over 2022. Because overall fluid sales declined, whole milk now makes up 45.4% of total fluid volume sold and is easily the most popular variety.

Lactose-free milk, meanwhile, reached a milestone. By climbing 6.7% to 239.2 million gallons last year, it surpassed the sales volume of almond beverages, by far the most popular plant-based milk alternative beverage. Almond’s annual decline of 9.8% is a big part of an overall consumer move away from plant-based alternatives, which have now seen two straight years of sales volume drops. Buyers are emphatically rejecting years of misleading claims that these beverages are a worthy substitute to dairy.

What’s next?

The National Milk Producers Federation is pushing for full congressional passage of the Whole Milk for Healthy Kids Act, which overwhelmingly passed the House in December and stands good prospects of passage in the Senate — if the right legislative vehicle can be found in a jam-packed election year. Bringing whole and 2% milk back to school meal menus is a great way to improve the nutrition of the next generation of milk drinkers. We have a call to action on our website urging senators to take up the bill.

Lactose-free milk is becoming the industry’s spearhead in ensuring equitable access to milk across diverse populations in federal nutrition programs. It is simply asinine federal policy to do what some vegan activists are proposing — increase access in federal programs to plant-based beverages that are both nutritionally inferior and now falling out of favor with consumers — when a beverage exists that circumvents lactose intolerance and offers all of milk’s benefits because it is, after all, milk. You will be hearing more about this in upcoming months as we strive to make 2024 a year when people become more broadly aware of just how critical lactose-free milk can be for effective and fair nutritional choices.

In what’s been a challenging time for the industry, what can the success of whole and lactose-free milk tell us? It shows that, for all the proliferation of alternatives, consumers like milk that’s most like milk, in taste and composition. They also like milk that’s accessible for everyone who wants its benefits. Quality and diversity are promising building blocks for a prosperous future. That’s plentiful in dairy, and this year, what consumers are choosing also can inform better federal policy.


This column originally appeared in Hoard’s Dairyman Intel on Jan. 18, 2024.

November DMC Margin Barely Tops $9.50 for the First Time in 2023

The November margin under the Dairy Margin Coverage (DMC) program inched up $0.14/cwt from a month earlier to $9.58/cwt, marking its first time in 2023 above the maximum $9.50/cwt Tier 1 coverage level.

The monthly change was a product of modest price movements. The all-milk price rose $0.10/cwt to $21.70/cwt, while the DMC feed cost formula dropped $0.04/cwt to $12.12/cwt of milk. There was a bit more drama inside the DMC feed cost formula, with a $0.35/cwt increase in the soybean meal price factor slightly more than offset by a combined drop in the prices of corn and premium alfalfa hay. During the first ten months of this year, the average monthly change, plus or minus, in the margin was $1.22/cwt, the average monthly change in the all-milk price was $1.15/cwt and the average monthly change in the DMC feed cost was $0.37/cwt.

With one more month in to be reported for last year, the 2023 average margin is on track to average about $6.80/cwt, which would be the second-lowest margin for the DMC and its predecessor Margin Protection Program (MPP), just above 2021’s average DMC margin of $6.70/cwt. The end-of year futures prices indicated the margins would average about $8.60/cwt during January-September this year but improve during the fourth quarter to average about $9.10/cwt for the year.

NMPF’s Galen Outlines Latest Developments on FMMO Hearing, School Milk Legislation

NMPF’s Chris Galen provides the latest developments for the listeners of Dairy Radio Now on two key priorities for farmers:  updating the milk pricing system, and expanding milk options in schools.  The USDA’s national hearing on Federal Order modernization continued its review of Class I differentials this week in Indiana, while back in Washington, NMPF is building support for an anticipated vote next week in the House of Representatives on a bill that would expand students’ milk options in schools.