Dairy pricing reform was recently presented to USDA Secretary Tom Vilsack by the American Farm Bureau Federation.

In a letter to Vilsack, AFBF said requests to increase “make allowances” — which are used, in part, to calculate how much a processor pays for milk — fall short of fairly supporting dairy farmers.

According to 2021 USDA milk cost of production estimates, dairy farmers on average lose $6.72 per cwt of milk produced.

The loss for dairy farms with less than 50 cows was even greater, at $21.58 per cwt.

“The reform being sought is a direct result of Michigan Farm Bureau members setting policy asking AFBF to put a national dairy working group in place and requesting a national dairy forum where the reforms were developed,” says Ernie Birchmeier, MFB’s senior industry relations specialist.

“Those who are impacted by challenges will generally come up with the best solutions, and this is the outcome of diverse and broad section of the dairy industry coming together to develop solutions to address the dairy pricing issue.”

In January, farmer delegates at AFBF’s 104th convention approved proposed dairy policy generated through a national Federal Milk Marketing Order forum last October. That policy was the culmination of a two-year effort calling for the first-of-its-kind, industry-wide FMMO forum, leading up to policy calling for the FMMO overhaul.

Milk pricing regulations

Two dairy processor associations requested a FMMO hearing to increase make allowances. While AFBF is not opposed to updating make allowances, it said proposals to USDA do “not address the wider need for changes to milk pricing regulations.”

For example, the requests call for the continued use of voluntary data to set make allowances. In the letter to Vilsack, AFBF President Zippy Duvall argued for mandatory reporting.

“Large, efficient processors may decline to participate [if data is voluntarily collected], which would skew the cost survey results upward,” Duvall wrote.

“This would increase the deduction to cover processors’ cost in the milk price formula, which would skew dairy farmers’ milk checks downward. Farm Bureau believes it is critical that any changes in the make allowance be based on mandatory audited cost and yield surveying, which would provide farmers the assurance that any make allowance change reflects true costs borne by processors.”

To fully address farmers’ needs, AFBF said USDA should consider a wider range of improvements to milk markets, including adjustments to the Class I and II skim milk price formulas, updates to the Class I and II differentials, and a return of the Class I base price formula to the “higher of” the Class III or IV formula.

“Dairy farmers continue to face market challenges as part of the high-cost, high-risk age we live in,” Duvall added. “Trust is critical to maintaining an efficient and resilient federal order system that promotes orderly marketing of milk to consumers across the country. The petitions we oppose here threaten to undercut trust between farmers who produce the milk and the processors who turn it into the dairy products we all know and love.”

Source: MFB