By Joshua Baethge and Krissa Welshans

The next phase of amending the Federal Milk Marketing Order (FMMO) has commenced after months of hearings recently concluded. The U.S. Department of Agriculture now begins reviewing the hearing record and the 21 different proposals from multiple dairy interest groups. Hearing participants will have 60 days to elaborate and defend their positions.

USDA has the final say in crafting a proposal, but National Milk Producers Federation (NMPF) President and Chief Executive Officer Gregg Doud said this week that the organization is confident its plan will remain the basis of progress.

Doud said NMPF looks forward to adding information and reinforcing its arguments in the weeks to come.

“It's critical to keep in mind that any plan designed to have national support needs to address diverse interests. That’s why our comprehensive plan covers areas ranging from the Class I price surface and make allowances to component pricing formulas and forward contracting,” Doud noted.

NMPF, which represents dairy producers and cooperatives, said it advocates improvements that increase clarity and understanding of mil prices while ensuring an orderly market and fair prices. It supports a return of the “higher of” Class I mover, discounting the use of barrel cheese in the protein component price formula, and updating milk component factors in the Class III and Class IV skim milk price formula. NMPF also supports new processes to ensure make-allowances are reviewed more frequently and updating the Class I differential price system to reflect cost changes for delivering bulk milk to fluid processing plants.

“The current formula has cost farmers $1.2 billion in losses since its implementation after the 2018 farm bill, with additional losses expected in the coming months,” Doud 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.”

After nearly three years of discussion within the organization, Doud said this final year, which should result in a producer vote roughly one year from now, is the most critical.

“These decisions are likely to shape the future of dairy for the next generation. We are excited to continue our leadership in this critical area, and will, as always, fight for the best approaches to ensure that dairy farms prosper,” he said.

The International Dairy Foods Association represents dairy manufacturing and marketing interests. It is pushing for a make allowance proposal that better reflects the cost of processing milk into dairy products. The IDFA has proposed the Class I skim milk mover for any given years should equal to the simple average of the Class III and Clai IV Advance Skim Milk price, plus either a 24-month average of the Advance “higher of” skim milk price or 74 cents/cwt. of skim milk.

“Today’s pricing policies are out of step with the modern marketplace,” IDFA Chief Economist Mike Brown said. “As our industry continues to evolve and become more efficient, we must have policies in place that position U.S. dairy for the future without being hamstrung by outdated regulations.”