NMPF FMMO Modernization Comments Put Farmers First

The National Milk Producers Federation, the largest U.S. dairy-farmer organization and the industry’s premier policy voice in Washington, submitted its final, formal legal “brief” on their behalf for Federal Milk Marketing Order (FMMO) modernization to USDA.

The NMPF brief, which was submitted March 29 and hand-delivered to USDA today, emphasized that those farmers are the reason the system exists — and that, by law, their priorities are pre-eminent in USDA consideration of a final plan.

“Our proposed package of proposals to the Federal Milk Marketing Order align thoroughly with its mission and purpose, which were intended to put farmers first,” said Gregg Doud, president and CEO of NMPF. “We’ve spent nearly three years painstakingly assembling the broad consensus among dairy farmers that modernization needs to succeed. Our approach is careful and comprehensive, and it benefits farmers of all regions and types of operations.”

NMPF’s proposals 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;
  • Updating dairy product manufacturing allowances contained in the USDA milk price formulas; and
  • Updating the Class I differential price system to reflect changes in the cost of delivering bulk milk to fluid processing plants.

In contrast to proposals driven by narrow self-interest, NMPF’s package of proposals reflect its broad-based membership and consensus-driven approach, which resulted in unanimous approval from its Board of Directors last year. With that unity unbroken, Doud said he looked forward to USDA’s consideration of NMPF’s solid hearing record which was built along with its recently submitted brief, as well as the department’s recommended decision expected at the beginning of July.

“NMPF has taken seriously its role as the policy leader for U.S. dairy farmers and the cooperatives they own, and we continue to draw on the strength of our members,” he said. “Today we’ve taken another big step toward modernization. We continue to look forward to its successful conclusion.”

FMMO Hearing Ends with NMPF Unity Strong as Ever

USDA’s longest-ever federal order hearing ended Jan. 30 with NMPF’s comprehensive approach to modernizing milk pricing at the center of industry discussion. With the FMMO update process now moving to its next phase, NMPF leadership remains critical as USDA moves to formulating its own proposal to put before producers.

“NMPF spent more than two years preparing for USDA’s Federal Order hearing, and that preparation paid off,” said NMPF President and CEO Gregg Doud in a statement after the end of testimony and rebuttals. “Our proposals, unanimously supported by our Board of Directors, reflect farmer unity and a good-faith effort to build industry consensus.

“After five months, 12,000 pages of testimony, and almost two dozen separate proposals considered, our plan remains the most comprehensive, coherent, and compelling framework for modernizing a system that’s badly in need of improvement. We look forward to working with USDA and the entire industry in the weeks and months to come, noting that any plan USDA designs will by necessity require complex analysis to result in a proposal that serves diverse farmer needs well.”

Organized discussions of the federal milk-pricing system, which showed strains under the weight of the COVID-19 pandemic and continues to struggle in the face of a changing industry, began with NMPF in 2021. The five-month USDA hearing in Carmel, IN, revolved around NMPF’s suite of proposals for change unanimously adopted by its Board of Directors last year.

The hearing has addressed critical issues for dairy farmers, including the “make allowance” re-imbursing processor costs, component pricing for milk, and the Class I price surface that considers travel expenses. Recent discussions have revolved around the so-called Class I mover, a change to which in 2019 has cost farmers roughly $1.2 billion. Doud called for change to the mover in his statement and in NMPF’s monthly CEO’s Corner column published today.

“We’ll continue to advocate for badly needed changes in areas such as the Class I mover,” he said. “It needs to change back to the previous “higher-of’ formula that served farmers best. The higher-of responds quickly to the marketplace, it helps farmer cash flow, it’s simple to understand, and it would have no real impact on processors who are using the formula to boost their immediate balance sheets, not manage future risk as they claim.”

NMPF and member cooperative staff are currently formulating NMPF’s elaboration and defense of its positions in the hearing to USDA, the first step toward USDA’s own proposal. That’s due in less than two months – and only underscores how much work is left to do in creating a fairer pricing system for farmers, Doud said.

“This final year is the most critical,” he said. “We are excited to continue our leadership, and will, as always, fight for the best approaches to ensure that dairy farms prosper.”

FMMO Hearing Focuses on Price Surface, May End in February

NMPF witnesses advocated for a fairer Class I price surface dominated testimony in USDA’s Federal Milk Marketing Order hearing, which resumed Nov. 27 in Carmel, IN. That’s critical for its contributions to the hearing record the Agriculture Department is building to craft a proposal to submit to farmers next year.

Economist Peter Vitaliano continued to anchor NMPF’s testimony, joined by multiple co-op experts explaining the effects of a modernized formula taking account of differing cost structures for milk production in various regions of the country. With NMPF’s Proposal #19 taking the bulk of the hearing time over a scheduled two-week period, the team effort highlighted the unanimous co-op unity that’s allowed NMPF to lead the discussion, aided by organizations such as the American Farm Bureau Federation and the Milk Producers Council that are aligned with NMPF positions and show broader farmer and industry support for the proposal.

The hearing itself, however, is becoming significantly delayed, with an original timeline of wrapping up in mid-October now being pushed as late as early February due to venue availability and delays for holidays. That potentially may cost millions of dollars to farmers who would not benefit from the improved component pricing, modernized Class I price surfacing and the return to the “higher of” Class I mover. NMPF continues its thorough preparation for all scenarios.

NMPF’s Galen Discusses Federal Order Hearing, WOTUS Updates

Chris Galen, NMPF’s senior vice president of membership services and strategic initiatives, discusses the second week of USDA’s national hearing on Federal Order modernization, which focused on updating the milk composition formula. NMPF witnesses this week included member cooperative staff experts and dairy farmers, who effectively discussed the need to have the FMMO pricing formula reflect the rise in milkfat and solids over the past two decades. Galen also discussed EPA and the Army Corps of Engineers’ revised definition of the “waters of the U.S.”, which conforms to a recent Supreme Court ruling.


 

Economics: Advancing FMMO Modernization Through Analysis, Discussion

Highlights

  • Provided backbone of FMMO economics analysis as NMPF guides industry to modernized pricing system
  • Focused industry communications to build consensus as FMMO modernization moves forward

Federal Milk Marketing Order modernization is a critical goal for NMPF members in 2022, with NMPF asserting leadership through its discussions with members and stakeholders on how to best craft solutions for farmers and the industry.

Economic analysis and guidance is the backbone of successful FMMO changes. The focus of FMMO modernization is the dairy product pricing formulas, which determine the federal order component and Class prices and thus constitute the foundation of the entire order system. The formulas need to provide accurate reflections of the real-world conditions under which the components of dairy farmers’ milk are actually transformed into such products, via such factors as producer milk composition, manufacturing costs, and product yields. These formula factors mostly have not been updated since 2000, while the dairy industry has evolved significantly.

About 20 federal order and milk marketing specialists from the staffs of NMPF member cooperatives, led by including Chief Economist Peter Vitaliano and Jim Sleper, a consultant and FMMO expert, are actively participating in this extensive effort, which so far has involved over 60 virtual and in-person meetings, with a goal of having a complete package of all pertinent recommendations for consideration and approval by the NMPF Economic Policy Committee and the Board of Directors at the annual meeting this fall. After that, NMPF will offer a comprehensive proposal to USDA to amend the orders, potentially leading to a national hearing on these issues in 2023.

In tandem with the policy analysis meeting, NMPF experts have worked with its member services staff on a series of hour-long Zoom webinars for membership to reviewed FMMO issues, giving participants the opportunity to pose questions, offer input and understand how task force recommendations may affect their respective cooperatives. NMPF staff also provided customized webinars to three cooperative members.

In addition to those virtual sessions, NMPF created a structured dialogue among state dairy organizations about major policy issues, including milk pricing, by organizing a state dairy association summit meeting on July 11-12 that gathered 45 farmers and executives from 22 state organizations in Chicago. Participants gained a deeper understanding of pressing public policy challenges affecting other regions and learned more about how national issues are being handled at the local level, in milk pricing and in areas both within and outside economics.

While FMMO work continues, the economics team continues to oversee the administration of the Cooperatives Working Together (CWT) program, a voluntary, marketing-focused export program, helping member cooperatives gain and maintain market share in the international market. The team’s work in administering the program includes recommending assistance levels, providing market insight and managing the dispersal of funds.

Finally, the team, which in July merged with USDEC economics staff to provide comprehensive analysis across the dairy spectrum, offered its economic and market insight through engaging with farmers, cooperatives, processors and the broader industry, through August delivering nearly 40 speaking engagements and 42 market publications in addition to many telephone conversations, Zoom meetings and in-person conversations throughout the year.