Livestock News

Bipartisan bill addresses volatile milk pricing

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U.S. Senators Gillibrand (D-NY), Leahy (D-VT) and Collins (R-ME) introduced their bipartisan Dairy Pricing Opportunity Act, which would require the U.S. Department of Agriculture to initiate the process of holding Federal Milk Marketing Order (FMMO) hearings within six months allowing producers and industry to consider and review proposals that could change Class I skim milk pricing. This way, the producers who understand these dynamics firsthand will have a voice in formulating any potential changes in calculating the price of Class I milk. The introduction of this bill would pave the way for critical FMMO reform in not just Class I pricing, but potentially other areas of need. 

“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during my subcommittee hearing on dairy pricing and the message was clear — our dairy pricing system is inadequate, out of date, and working against producers.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 Senator Kirsten Gillibrand, chair of the Subcommittee on Livestock, Dairy, Poultry, Local Food Systems, and Food Safety and Security

Experts agree — 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 skim 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.

Prior to the 2018 Farm Bill, Class I milk was calculated using the “higher of” Class III or Class IV 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.

In a recent American Dairy Coalition poll, responses from producers in 10 of the 11 FMMOs showed a large majority across all dairy size categories experienced negative impacts affecting their confidence in risk management, and an even larger majority favored a return to the previous ‘higher of’ method for Class I pricing until a formal hearing process can adequately review proposals.

“Our producers have suffered. They have lost confidence in the functioning of the FMMOs and the performance of their available risk management tools – especially in their responsiveness to unexpected marketing conditions,” American Dairy Coalition CEO Laurie Fisher said. “This bill responds to producer concerns to get national hearings started. ADC looks forward to seeing this bill become law so our farmers can be at the table on milk pricing that affects their livelihoods.”

The Dairy Pricing Opportunity Act has been endorsed by the American Farm Bureau Federation, New York Farm Bureau, American Dairy Coalition (ADC), and Maine Dairy Industry Association.

For the full text of the bill, please click here.

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