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Call for FMMO reform pushes on

Progressive Dairy Editor Dave Natzke Published on 31 March 2021

A deadline for dairy producers to sign on to a letter seeking Federal Milk Marketing Order (FMMO) reforms has been extended until April 5.

The letter campaign, directed at Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF), and Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA), seeks to ensure that dairy producers are at the table when the major producer and processor organizations address dairy policy issues.

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Read: Grassroots call for FMMO reform grows louder.

With coordination assistance from the American Dairy Coalition (ADC), the letter campaign is an outgrowth of grassroots conference calls and emails involving dairy producers from more than 20 states, said Laurie Fischer, ADC chief executive officer. Producers can add their name to the letter digitally here.

Primary dairy producer concerns involve FMMO depooling, milk check disparity due to negative producer price differentials (PPDs) and the inability to utilize risk management tools to shield themselves from significant financial losses due to PPDs and other milk check deductions.

Separately, ADC issued a call for federal lawmakers to re-examine modifications made to the FMMO Class I milk pricing formula in the 2018 Farm Bill. The change from a formula utilizing the “higher of” to one using an “average plus 74 cents” Class III-Class IV milk price has resulted in a “a cascading failure through producer price differentials for American dairy farmers.” ADC estimates more than $3.7 billion was unevenly distributed to dairy producers for milk due to depooling and negative PPDs over the past 15 months.

Current 2021 Class III-Class IV milk and milk futures prices indicate the price relationship will yield negative PPDs through the end of the year.

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Read: Pandemic impact shows up in milk ‘mailbox’ price.

March FMMO uniform prices and PPDs will be announced in most orders between April 9-13.

“Clearly, this current milk pricing formula has failed, and a better plan is needed in order to stop the financial devastation that approximately 70 percent of America's dairy farmers are currently facing,” according to a detailed release from ADC.

Along with decreased net pay prices, dairy farmers were unable to utilize risk management tools that do not account for milk check deductions resulting from negative PPDs.

Remedies sought

ADC has called on the “average of” Class I pricing formula to be replaced by one using the “Class III price plus 50 cents” per hundredweight (cwt).

Following a unanimous vote of the NMPF executive committee on Jan. 8, Mulhern said NMPF would seek potential changes to the so-called “Class I fluid milk price mover” in an effort to “remedy economic damage to dairy farmers who have disproportionately suffered as a result of this pandemic.”

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The ADC said a NMPF proposal being discussed is to change the Class I pricing formula to an average of the Class III-Class IV price plus $1.63 per cwt. (NMPF did not confirm the proposal but said conversations with IDFA were ongoing.)

ADC said that proposal does not “fix this unacceptable procedural problem” because it allows a readjustment to the milk pricing formula every two years through legislative action alone.

The letter to the heads of NMPF and IDFA calls for the process to be conducted through expedited FMMO hearings, rather than through congressional action.

“Farmers deserve transparency on their milk checks,” according to ADC. “The trust between farmers and processors has been significantly tarnished through depooling, and this needs to be improved. Farmers should be able to review their milk checks and determine exactly how the price they are paid for their milk reflects the value of the commodity dairy products that are made with that milk.”  end mark

Dave Natzke
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