The Agriculture Department should insist on comprehensive reform of U.S. dairy pricing rather than considering a piecemeal approach from dairy processors for an increase in the so-called make allowance, said the American Farm Bureau Federation on Wednesday. “We urge you to reject the current proposals that risk further burden to America’s dairy farmers,” wrote AFBF president Zippy Duvall in a letter to Agriculture Secretary Tom Vilsack.
Make allowances are estimates of the cost to turn milk into products such as cheese or butter and are a factor in determining the minimum prices that processors pay for raw milk. A pair of dairy processor groups, the International Dairy Foods Association and the Wisconsin Cheese Makers Association, have asked the USDA to increase make allowances on the grounds that their costs have risen dramatically. A higher make allowance would mean larger deductions from milk checks and less money for dairy farmers, said the AFBF.
“We believe it is time to consider improvements that better reflect today’s milk markets across a much wider range of topics than just make allowances,” wrote Duvall. The AFBF said revisions should be considered in pricing systems for milk destined for table consumption and for processing into “soft” products, such as sour cream and yogurt, “hard” cheeses, and butter or dry milk. Milk is divided into four classes, depending on its use. “The last major update to the FMMO (federal milk marketing order) system occurred in 2000,” noted Duvall.
“All of these other adjustments to class price formulas would help offset the negative impacts of increased make allowances to our dairy farmers,” said the AFBF president.
The National Milk Producers Federation said on Monday that it would submit its proposal for an overhaul of the milk marketing order system this month. The NMPF board approved the proposal in March. “Through our proposal, dairy farmers have found common ground, and we believe the broader dairy sector can rally around these efforts to strengthen our industry,” said Jim Mulhern, NMPF chief executive.
The NMPF package includes a review of make allowances; updating the “mover” in Class I prices, for fluid milk; and updating the component factors for protein, other solids, and nonfat solids in Class III and IV skim milk price formulas.
Vilsack has said for months that the best path for dairy reform would be for the different members of the industry to reach consensus on a package and then bring it to the USDA for consideration. “Frankly, I think it’s up to the dairy industry itself to work through this process,” he said in late 2021 in Wisconsin.
Milk marketing orders, intended to assure farmers of a minimum price for their milk and consumers a reliable and reasonably priced supply of the perishable commodity, date from the New Deal era and have been revised periodically. Marketing orders can be amended through a multistep process that includes a hearing called by the USDA and a farmer referendum on the changes.
The USDA home page for milk marketing orders is available here.