USDA Updates Milk Pricing Orders, Aiming for Fairer Compensation for Dairy Farmers
Source: The DairyNews
The U.S. Department of Agriculture (USDA) has announced significant updates to the Federal Milk Marketing Orders, a move that aligns closely with the National Milk Producers Federation's (NMPF) long-standing goal to more accurately reflect the value of dairy products like cheese in the milk payments to dairy farmers.
Peter Vitaliano, NMPF’s Vice President of Economic Policy and Market Research, expressed a positive outlook on the adjustments during the “Dairy Defined” podcast. "The USDA has made substantial progress towards our proposals, improving how milk values are calculated and ultimately benefiting dairy farmers," he noted.
A key component of the update was the adjustment to the Class I mover formula, which determines the base price of Class I milk used primarily for fluid consumption. In response to fluctuations caused by government cheese purchases during the COVID-19 pandemic, the USDA recommended returning to the previous "higher of" pricing formula for Class III (milk for cheese and dry whey) and Class IV (milk for butter and powder) rather than the average of the two, which had reduced farmers' earnings.
This change comes after dairy farmers reportedly lost around $1.3 billion in revenue due to the previous formula instituted by the 2018 Farm Bill. The new recommendation also introduces a separate "average of" formula for extended shelf-life products to cater specifically to processor needs without broadly impacting all Class I milk.
Further, the USDA addressed "make allowances," which are the manufacturing costs deducted from farmers' milk checks. Stephen Cain, NMPF Senior Director of Economic Research and Analysis, stated that while the recommended allowances are higher than what NMPF proposed, they remain significantly lower than processor groups’ requests. "It’s a balance that still needs fine-tuning, particularly in regions with lower Class I utilization, but it’s a step in the right direction," Cain explained.
The updates also propose future adjustments to composition factors like protein content for Class III and IV milk and plan to refine the Class I differential, which reflects the costs associated with servicing fluid milk markets.
As part of these comprehensive changes, all stakeholders at the hearing agreed on the necessity of legislative support in the next farm bill. This would grant the USDA the authority and resources to conduct mandatory, audited surveys on manufacturing costs, replacing the current system of voluntary surveys.
A key component of the update was the adjustment to the Class I mover formula, which determines the base price of Class I milk used primarily for fluid consumption. In response to fluctuations caused by government cheese purchases during the COVID-19 pandemic, the USDA recommended returning to the previous "higher of" pricing formula for Class III (milk for cheese and dry whey) and Class IV (milk for butter and powder) rather than the average of the two, which had reduced farmers' earnings.
This change comes after dairy farmers reportedly lost around $1.3 billion in revenue due to the previous formula instituted by the 2018 Farm Bill. The new recommendation also introduces a separate "average of" formula for extended shelf-life products to cater specifically to processor needs without broadly impacting all Class I milk.
Further, the USDA addressed "make allowances," which are the manufacturing costs deducted from farmers' milk checks. Stephen Cain, NMPF Senior Director of Economic Research and Analysis, stated that while the recommended allowances are higher than what NMPF proposed, they remain significantly lower than processor groups’ requests. "It’s a balance that still needs fine-tuning, particularly in regions with lower Class I utilization, but it’s a step in the right direction," Cain explained.
The updates also propose future adjustments to composition factors like protein content for Class III and IV milk and plan to refine the Class I differential, which reflects the costs associated with servicing fluid milk markets.
As part of these comprehensive changes, all stakeholders at the hearing agreed on the necessity of legislative support in the next farm bill. This would grant the USDA the authority and resources to conduct mandatory, audited surveys on manufacturing costs, replacing the current system of voluntary surveys.
