The future of uniform milk pricing formulas under all 11 of the Federal Milk Marketing Orders (FMMOs) is now in the hands of dairy farmers and cooperatives across the nation.
Producers have through the end of the year to weigh in on the proposed amendments to FMMOs published in November by the U.S. Department of Agriculture (USDA). USDA proposed changes to the FMMOs at the request of, and with input from, the dairy industry.
The proposed changes include updating the differential values for class 1 to reflect the increased cost of serving the class 1 market. It would also include a county-specific class 1 differential.
The proposal includes changing the milk composition factors to 3.3% true protein, 6% other solids and 9.3% non-fat solids.
“The composition of milk has been changing,” Stephen Cain, senior director of economic research and analysis for the National Milk Producers Federation, said. “The federal order system, how it’s designed today, has sent some signals to dairy farmers to increase components within the milk. That goes to cow comfort, genetics, feeding rations and goes into a lot of different things in the operation. As a result of that effort, milk composition has increased.”
The formula used in the FMMOs has not changed and is based on the components of milk 20 years ago. “That’s drastically changed today. We’re looking to update those numbers to be reflective of what the true composition of milk is today,” Cain said.
In its final proposal, USDA made a change from its original proposal to reduce the proposed delay in increasing milk composition in the baseline milk price formulas from 12 months to six months.
Dairy farmers can weigh in on whether USDA should stop using the prices for 500-pound barrel cheese for the Dairy Products Mandatory Reporting Program survey. Instead, USDA would rely solely on the price of 40-pound block cheddar cheese to determine the monthly average cheese price.
USDA also proposes changes to the class 3 and 4 formula factors. The final proposed rule increases the butter make allowances by five cents per pound to 22.7 cents per pound, the cheese allowance by five cents per pound to 25.1 cents per pound and the non-fat dry milk make allowance by six cents per pound to 23.9 cents per pound.
The whey make allowance would be increased 7 cents per pound to 26.6 cents per pound. The amendments would update the formula for the base class 1 skim milk price to be the higher of the advance class 3 or 4 skim milk price for the month.
USDA also proposed adopting a rolling monthly class 1 extended shelf life adjustment they say would provide for a better price equity for extended shelf life products whose marketing characteristics are distinct from other class 1 products.
If the proposed changes are implemented as proposed, Cain said dairy farmers should receive a slightly higher milk check.
Eligible dairy farmers and co-ops will receive ballots in the mail for the referendum. Those who receive ballots are encouraged to have them post-marked by Dec. 31 to be considered.
Source: Farm Bureau
