Talk of revising, improving, and modernizing the federal milk marketing orders began nearly four years ago, yet with countless hearings, testimonials, and industry input due to the compromise of consensus, the final rule was less than exciting. While changes to individual commodity prices, make allowances, and other nuances in the calculation were made, true, impactful change was missing.
During the hearings and testimony, we hoped to spark ideas to bring the orders into more modern marketing, such as calculating make allowances on plant efficiencies, balancing the increase in butterfat percentage with an increase in protein percentage, and more incentive for all processors to pool their milk.
While we had wished for more innovation in the final rule, and we believe there is still work to be done, we are still advocates of the federal milk marketing orders and encourage a “yes” vote by dairy farmers.
Throughout this process, Edge Dairy Farmer Cooperative provided options, but the industry could use more data. There was a clear consensus from industry stakeholders that more data is required to make accurate decisions on how to better align dairy farmers, processors, and consumers with accurate pricing. Despite multiple stakeholders calling for more data to aid with program improvement, the decision was made to proceed with a hearing. We believe the data will come, and we will continue to advocate for more data and transparency.
USDA has over two dozen federal orders, and their purpose is to set ground rules for the highly perishable products that farmers produce, including all types of fresh fruits, nuts, and vegetables, in addition to fluid milk.
However, unlike our friends in the fruit and vegetable industries and, more recently, the meat industry, dairy has relied on generally accepted business practices rather than a transparency law or regulatory agency to police the rules as they’re written. The 2023-2024 federal milk marketing order hearing focused on wide-ranging topics to reset some standards for fresh fluid milk. These changes, including allowing fluid milk price formulas to go back to the previous higher-of program, were seen as a win for some dairy farmers around the country.
However, in more competitive milk-producing areas like Federal Milk Marketing Order 30 (FMMO 30) – most of Wisconsin and Minnesota and some outlier counties, almost none of our issues were fixed. In fact, while Edge is advocating a strong “yes” vote for the final USDA recommendation, the amount of “deploying” in FMMO 30 highlights that processors no longer value the benefits they receive within the order.
The recent changes did almost nothing to minimize negative deductions on farmer checks when the pool runs out of money. This is due to the lack of incentive for fluid milk sales production versus other production in the region. From a farmer’s perspective, this was the concern that led to a federal order hearing, and ultimately, the lack of addressing this issue is surprising.
These potentially big negative numbers – called producer price differentials ,or PPDs – can cause a surprise double-negative on a farmer’s cash flow. Farmers are unable to manage the risk, not knowing whether their processor will be pooling their milk within the FMMO or not. New processors in the marketplace or changing conditions could also result in pressure to test industry norms and extend payment terms where dairy farmers were no longer paid twice each month as they have for the last 95 years.
The hearing also failed to provide an avenue for dairy farmers to constantly improve component values – cows made milk with around 3.5% butterfat for years, but now it is closer to 4.2% butterfat. We will continue to trade and manage risk at 3.5%, but this is a sign that our value system is not keeping pace with our milk production improvements.
We realize more work is needed, especially in the Upper Midwest Federal Milk Marketing Area (FMMO 30). Incentivizing processors to utilize the pool to provide mutually beneficial incentives is paramount. Farmers must have surety to wake up every day, milk cows, send their milk down the road, and be paid for it two weeks later. We support a “yes” vote for the current federal order recommendation, but we look to the future to bring the dairy community together and make additional improvements.
With the threat of more farmers losing protection from federal milk marketing orders, we are working to move two important protections currently part of the FMMO structure to the farm bill to give farmers protection regardless of if their milk is pooled or not – timely payments and accurate testing. These two basic protections farmers count on – twice-a-month payments and verification of testing – need to be given to farmers regardless of their processor’s participation in the FMMO.
We hope that sometime soon, dairy farmers and processors can work towards greater reforms that will help advance market opportunities for all regions, considering our geographical differences and the markets we serve. Our industry must be in the attitude of cooperation and willing to consider innovative ideas. Until then, the relevance of the federal orders will continue to slip away.
Tim Trotter is the CEO of Edge Dairy Farmer Cooperative, a leading voice in national dairy policy delivering positive outcomes for dairy farmers. It is also the third-largest milk cooperative by volume in the country. Trotter has led the Edge team as CEO since 2014.
