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Bill Calls for FMMO Hearings to Address Class I Milk Pricing
Illinois Ag Connection - 12/02/2021

U.S. Senators Patrick Leahy (D-Vt.), Kirsten Gillibrand (D-N.Y.) and Susan Collins (R-Maine) Wednesday introduced the bipartisan Dairy Pricing Opportunity Act, which would direct the U.S. Department of Agriculture (USDA) to initiate the process of holding Federal Milk Marketing Order (FMMO) hearings within six months. The hearings would provide an opportunity for producers, who understand the dynamics of milk pricing first hand, to have a voice in formulating any potential changes in how the price of Class I milk is calculated.

The introduction of this bill builds on a Senate Agriculture Subcommittee hearing in September on modernizing milk pricing and the Federal Milk Marketing Order system (FMMO) and would pave the way for critical FMMO reform in not just Class I pricing, but potentially other areas of need.

"Even before the coronavirus pandemic upended the dairy economy, producers in Vermont and throughout the Northeast were already struggling through years of price volatility, market consolidation, and rising costs. Small- and mid-sized farms, the very same farms that have underpinned Vermont's rural communities for generations, have long borne the brunt of these market forces. As Congress and USDA help farmers recover from the pandemic's immediate impacts, it's a critical time to reexamine the federal milk pricing system and ensure it works equitably for all farmers," said Leahy, chairman of the Senate Appropriations Committee.

"When the dairy pricing system isn't working for farmers, the economic ramifications are felt across the country. I heard from producers across the industry firsthand during my subcommittee hearing on dairy pricing and the message was clear-- our dairy pricing system is inadequate, out of date, and working against producers. That's why I introduced the Dairy Pricing Opportunity Act, a bill that would put the power back in farmers' hands and bring the industry together to build a system that works for the 21st century dairy farmer. This bill is a great first step and I look forward to continuing efforts on broader FMMO modernization," said Gillibrand, chair of the Subcommittee on Livestock, Dairy, Poultry, Local Food Systems, and Food Safety and Security.

"Maine dairy farmers are resilient, and for years they have been weathering the storms of market instability and industry consolidation. The Dairy Pricing Opportunity Act would help restore some stability to this sector by ensuring that USDA holds public hearings to receive farmers' input on ways to correct the unintended consequences of a pre-pandemic pricing policy. Our dairy farmers have always worked tirelessly to provide high-quality, nutritious products for Maine people, and we must address the obstacles that threaten to prevent them from carrying on that tradition," added Collins.

Experts agree that the current milk pricing system is one of the most complicated economic systems in the country and leaves too many farmers without adequate pay, especially as costs rise and competition intensifies. Even before the pandemic, dairy farmers across the nation were facing the challenges of volatile milk prices, as well as increased competition from non-dairy "milk" products. This has led to a substantial loss of licensed dairy herds, with the United States losing almost 40,000 dairy herds since 2003. The Dairy Pricing Opportunity Act would allow dairy producers and industry to consider and review proposals that could change Class I milk pricing, while also creating the opportunity for hearings to be held on other areas of the Federal Order system that are in need of reform.

The Dairy Pricing Opportunity Act has drawn support from across the dairy industry, including from the American Farm Bureau Federation, New York Farm Bureau, American Dairy Coalition, Maine Dairy Industry Association, and Agri-Mark which provided testimony in favor of the bill.

Class I, or fluid milk, is milk that is sold directly to consumers for drinking and is the milk for which farmers have traditionally been most highly paid.

Prior to the 2018 Farm Bill, the Class I milk price was calculated using the "higher of" Class III (milk used to make cheese) or Class IV (milk used to make butter or milk powder) price plus the applicable Class I differential. This was changed in the most recent Farm Bill to an averaging method of Class III and Class IV plus $0.74. This change, compounded by government intervention in cheese markets as a result of the pandemic, has resulted in hundreds of millions of dollars in lost income for dairy farmers from May 2019 through April 2021. This combination of factors demonstrates that when there is a wide discrepancy between the Class III and Class IV price, the current mover will cause significant loss of Class I skim milk revenue relative to the previous Class I mover and what was intended by Congress in the 2018 Farm Bill change. This has led to increased calls from producers and industry for USDA to hold Federal Milk Marketing Order national hearings to resolve this issue with the Class I mover.

National Milk Producers Federation President and CEO Jim Mulhern said, "Sen. Gillibrand's legislation, cosponsored by Sens. Leahy and Collins, adds bipartisan momentum to a range of critical milk pricing discussions that dairy farmers are having through NMPF's Economic Policy Committee. NMPF is continuing to work with USDA and Congress on how best to remedy deficiencies in the Class I mover formula and fully recoup $750 million in unintended losses felt by farmers of all sizes. NMPF also is leading discussions on a broad range of Federal Milk Marketing Order reform issues important to producers in all regions of the country. We look forward to pursuing policy improvements that will serve all dairy producers more equitably and effectively."


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