Industry groups all to modernize the Federal Milk Marketing Order system

By: Sydney Sheffield 

The Board of Directors of the National Milk Producers Federation (NMPF) has endorsed a proposal that will modernize the Federal Milk Marketing Order (FMMO) system. Overseen by the United States Department of Agriculture (USDA), FMMOs establish provisions under which dairy processors buy fresh milk from dairy farmers who supply a marketing area, maintaining stable marketing relationships for all handlers and producers and organizing the complex process of marketing fresh milk. NMPF’s landmark proposal comes after more than two years of discussions and more than 130 meetings. 

The FMMO system was established in the 1930s, due to unfavorable economic conditions, chaotic fluid-milk pricing, and dealers who squeezed farmers on prices in the early 20th century, which left farmers with low prices and disorderly markets.  The FMMO program includes 11 milk marketing orders and applies to about 75% of total U.S. milk production. Federal orders establish minimum prices paid to farmers, ensure payments to farmers are accurate and timely and provide market information.

“After gathering dairy’s best minds and consulting with partners across the industry, today we are moving forward with a comprehensive FMMO proposal the entire industry can get behind,” Mooney said. “We look forward to leading a thorough, deliberative process as we submit this proposal to USDA and partner with our allies to modernize milk pricing in ways that serve dairy farmers and the entire industry.”

The last comprehensive modification of the FMMO system was in 2000. Since then, the structure of the U.S. dairy industry has shifted significantly, from product preferences and plant costs to the composition of milk itself. Calls to re-examine the federal order system strengthened due to the COVID-19 pandemic’s repercussions. 

The NMPF’s proposal includes:

• Returning to the “higher of” Class I mover
• Discontinuing the use of barrel cheese in the protein component price formula
• Extending the current 30-day reporting limit to 45 days on forward-priced sales on nonfat dry milk and dry whey to capture more exports sales in the USDA product price reporting
• Updating milk component factors for protein, other solids, and nonfat solids in Class III and Class IV skim milk price formulas
• Developing a process to ensure make-allowances are reviewed more frequently through legislation directing USDA to conduct mandatory plant-cost studies every two years
• Updating dairy product manufacturing allowances contained in the USDA milk price formulas
• Updating the Class I differential price system to reflect changes in the cost of delivering bulk milk to fluid processing plants

This proposal will be submitted to the USDA for an FMMO hearing and a potential producer referendum on Federal Milk Marketing Order modernization in 2023. “We believe in a better future for this industry, and this proposal will help build that future,” Mooney concluded.

Read the summary of the proposal here.