FEDERAL MILK MARKETING ORDERS
It’s cold outside, but discussions regarding the Federal Milk Marketing Order (FMMO) system are heating up. With a growing call for change, Dana Coale, deputy administrator of the USDA’s Agricultural Marketing Service Dairy Program, participated in a cross-country trip to communicate with producers on federal programs for which she has administrative oversight. During a stop at the annual DairyStrong Conference in Wisconsin, Coale provided an overview of the FMMO hearing process.
As a veteran of the USDA’s dairy programs, Coale prefers to define any potential changes to the FMMO system as “modifications” and not necessarily reaching the level of wholesale reforms implemented two decades ago. While there are issues impacting dairy producers and processors across all FMMOs, there are also regional issues that may impact individual or multiple FMMOs based on geography and market characteristics.
Whether modifying or reforming FMMOs, heat does not necessarily generate speed. Once dairy organizations petition for a hearing, the process will take upwards of 12-18 months, with public notices, invitations for input, formal hearings, analysis of input and initial recommendations, comment periods, issuance of a proposed rule and referendums within each FMMO.
Citing comments by U.S. Secretary Tom Vilsack, Coale said modifications to the FMMO system will require a consensus within the dairy industry. She noted that it was up to dairy producer organizations to initiate the FMMO hearing process.
With both a potential FMMO hearing and the upcoming 2023 Farm Bill, “Right now we’re at a prime point in time for (producers) to get engaged; you can get involved,” Coale said.
PANDEMIC MARKET VOLATILITY ASSISTANCE PROGRAM (PMVAP)
Last August, the USDA announced details of the Pandemic Market Volatility Assistance Program (PMVAP). That program was designed to reimburse dairy producers with up to $350 million for unanticipated financial losses created during the COVID-19 pandemic, when the change to the Class I mover price formula and federal food box purchases weighted heavily toward cheese combined to create significant losses for some producers.
Progressive Dairy has covered the basics of the PMVAP in the past. Under the original timeline, payments were scheduled to be distributed in December.
Coale noted that the process was slowed by complexities of the program, as well as producer payment eligibility due to milk production caps and federal farm program payment limitations.
The good news for affected producers, distribution of some PMVAP payments to cooperatives and other handlers was underway as of Jan. 20. Those co-ops and other handlers must distribute checks to producers within 30 days, and Coale anticipated most if not all funds could be distributed by the end of February.
The amount of money due to milk cooperatives and/or other handlers is determined by the volume of milk regulated by the FMMO during July to December 2020. Payments were capped on 5 million pounds of milk marketed, or 833,000 pounds per month during the period. Producers in FMMOs with highest Class I utilization should see the largest payments.
NORTHEAST ORGANIC CONTRACTS
As noted in this column previously, as many as 135 organic dairy producers in the Northeast faced termination of milk contracts from Danone North America, owner of Horizon Organic and Maple Hill Creamery.
Organic dairy organizations continue to seek or provide markets for some of those producers through participation in the Northeast Dairy Task Force.
In early January, the Northeast Organic Family Farm Partnership was formed to build support for regional organic dairy producers. Launched by Gary Hirshberg, co-founder and former long-time CEO of Stonyfield Organic, the partnership asked consumers to sign a pledge to purchase one-fourth of their weekly dairy purchases from 35 brands which have committed to increase their purchases of milk from Northeast farmers.
The partnership also invited grocers, restaurants, cafeterias and any outlets that sell dairy products to become licensed partners, signing affidavits to grow their organic purchases, making them eligible to display the partnership logo in point-of-sale and online marketing.
Later in January, farmer-owned cooperative Organic Valley announced it added five small organic family farms formerly supplying milk to Maple Hill and would take additional steps in a yearlong campaign to support organic dairy farms in the Northeast. To join the cooperative, organic farms are required to meet animal care and quality standards and pasture expectations of the cooperative.
CLASS I MOVER
After a seven-month reprieve, the debate over the “higher of” versus “average of plus 74 cents” formula resurfaces in February.
The “good” news: The FMMO advanced Class I base price moves to a 86-month high for February.
The “bad” news: The February difference between the advanced Class III skim milk pricing factor and the advanced Class IV skim milk pricing factor is $2.54 per hundredweight (cwt). Adding the advanced butterfat pricing factor means producers will see a negative impact using the “average of plus 74 cents” Class I formula.
The situation is likely to resurrect the debate over the two formulas. The situation should be short-lived. Current Class III-IV futures prices indicate a small negative impact on the Class I mover in March but then a net benefit to using the “average of plus 74 cents” formula through the rest of the year. Markets change.
Based on Progressive Dairy calculations, the Class I mover calculated under the “average of plus 74 cents” formula is 51 cents less than the “higher of” formula. That full difference will be diminished in producer milk checks, however, depending on Class I utilization in each FMMO and its impact on “blend” or uniform milk prices.
- Progressive Dairy
- Email Dave Natzke
Future of Federal Dairy Milk Pricing Forum scheduled
In an effort to find dairy producer consensus on FMMO issues, the American Dairy Coalition (ADC) is hosting a virtual “Future of Federal Dairy Milk Pricing Forum,” Feb. 15, 11 a.m.-12:30 p.m. (Central time).
The forum is designed to take input from individual producers, heads of state and national producer associations. Presenters will include:
- Calvin Covington, retired co-op CEO with FMMO hearing experience who will discuss what FMMOs do, don’t do, can and can’t do, and how the hearing process works.
- Frank Doll, a dairy producer serving on the American Farm Bureau Federation’s dairy policy committee.
- Mike McCully, a dairy industry consultant will give a perspective on how changes to the Class I fluid milk pricing impacts farm mailbox milk prices.
The panel will be moderated by Progressive Dairy editor Dave Natzke.
For more information and to register for the free forum, visit American Dairy Coalition.