Ag Policy Blog

The Agriculture Department's Agricultural Milk Marketing Service has released its recommendation on changes to the Federal Milk Marketing Order system, which will be published in the Federal Register soon.

The Federal Register draft is 332 pages long. The FMMO affects 321 dairy processing plants around the country at least one month out of the year. The draft recommendations summarize months of hearings that stretched from Aug. 23, 2023, to Jan. 30, 2024, in Carmel, Ind. USDA received evidence on 21 different proposals from the dairy industry for changing the Federal Milk Marketing Order, or FMMO.

In a notice to stakeholders, USDA state some of the proposed changes in its recommendations:

1) Milk Composition Factors: Update the factors to 3.3% true protein, 6.0 percent other solids, and 9.3 percent nonfat solids.

2) Surveyed Commodity Products: Remove 500-pound barrel cheddar cheese prices from the Dairy Product Mandatory Reporting Program survey and rely solely on the 40-pound block cheddar cheese price to determine the monthly average cheese price used in the formulas.

3) Class III and Class IV Formula Factors: Update the manufacturing allowances to: Cheese: $0.2504; Butter: $0.2257; NFDM: $0.2268; and Dry Whey: $0.2653. The Recommended Decision also proposes updating the butterfat recovery factor to 91 percent.

4) Base Class I Skim Milk Price: Update the formula as follows: the base Class I skim milk price would be the higher-of the advanced Class III or Class IV skim milk prices for the month. In addition, adopt a rolling monthly Class I extended shelf life (ESL) adjustment that would provide for better price equity for ESL products whose marketing characteristics are distinct from other Class I products.

5) Class I differentials: Update the Class I differential values to reflect the increased cost of servicing the Class I market. The county-specific Class I differentials are specified in the decision.

At least a few of these proposed changes also have been incorporated into the House version of the farm bill, which includes chancing the base formulate for Class I skim milk to the "higher of" price instead of the average price.

The proposed rule will be available for comment for 60 days once it is published.

National Milk Producers Federation President and CEO Gregg Doud said in a news release Monday, "Based on our initial reading, NMPF is heartened that much of what we proposed after more than two years of policy development, and another year of testimony and explanation, is reflected in USDA's recommended Federal Milk Marketing Order modernization plan."

"Crafting an effective milk-pricing system for farmers is complex and requires a careful balance," Doud said.

"USDA's plan acknowledges that complexity and, while not matching our proposal in every detail, looks largely in keeping with the comprehensive approach painstakingly determined by the work of dairy farmers and their cooperatives over the past three years. We look forward to examining this proposal topic-by-topic, gathering input regarding the various needs of our members nationwide, and adding their insights as this process moves toward a vote of producers."

International Dairy Foods Association Chief Economist Mike Brown said, "We are still reviewing USDA's recommended decision, but our first impression is that there are aspects of the proposal that are responsive to the facts and data presented at the hearing by IDFA and our members which offer a path toward balanced growth across the dairy supply chain."

"We were disappointed that the recommended decision would revert the Class I mover to the 'higher of' which will make it nearly impossible for non-ESL (extended shelf life) fluid milk processors and their customers to continue to use risk management tools in their business relationships," Brown said.

NMPF represents dairy farmers and co-ops while IDFA represents dairy processors.

-USDA Agricultural Marketing Service -- Milk in the Northeast and Other Marketing Areas; Proposed Amendments to Marketing Agreements and Orders (draft): Proposed rule

https://www.ams.usda.gov/…

-USDA Issues Recommended Decision Proposing Amendments to all Eleven Federal Milk Marketing Orders https://www.ams.usda.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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