Carmel, Indiana. —The following statement can be attributed to Mike Brown, Chief Economist of the International Dairy Products Association (IDFA).
“The U.S. dairy industry continues to undergo a period of evolution and transition, opening new growth opportunities and creating important new challenges for all participants across the dairy value chain – farmers and processors. IDFA notes that the dairy industry has changed fundamentally since the last FMMO revision in 2008, and that the current FMMO pricing formula has been updated to reflect these new market trends. While nutritious milk remains the foundation of the dairy industry's continued growth, today's U.S. dairy industry is dominated by cheese, yogurt, and dairy-based products. Defined by a robust and innovative supply chain that is increasingly reliant on products such as health drinks and powders, frozen treats and value products.In response to evolving consumer demands, producers and liquid milk to generate similar income for both the and processors. However, today's pricing policy does not match the modern market. Our industry evolves and becomes more efficient. As we grow, we need to put in place policies that position U.S. dairy products for the future without being tied down by outdated regulations. We have spent almost two years translating this approach into our FMMO proposal.
“Forty proposals were submitted to USDA by interested parties for consideration. Of these, USDA accepted 21 for inclusion in the public hearing process, including two by IDFA and one by IDFA. One called on the USDA to update allowances that have become woefully outdated after nearly two decades of rising production costs, and a second proposal on pricing for Class I milk. More dollars go into dairy farmers' pockets than they would receive under a “higher” mover, while allowing dairy processors to effectively manage price risk. Throughout the process, IDFA remained constructive and provided fact-based testimony to urge USDA to make the necessary reforms to help U.S. dairy producers and processors compete and win in global markets. continued to encourage.
“After weeks of testimony and cross-examination, USDA must deliver on its mission to update the federal command system to serve a diversifying and consolidating dairy supply chain, without pushing these complex issues onto the shoulders of lawmakers. That would unnecessarily complicate the effort. Passing a new farm bill would create significant uncertainty for the dairy industry.
“IDFA is grateful to be able to participate in the national FMMO hearing and looks forward to considering USDA's recommended changes, USDA's final rule, and the producer referendum on the revised order that will determine the future of this industry.” I am.”
Background information
After 12 weeks of testimony and cross-examination, the Federal Milk Marketing Order (FMMO) hearing that began in Carmel, Indiana, concluded on August 23, 2023. The purpose of the hearing was to consider a proposal by the United States Department of Agriculture (USDA) to amend the Uniform Pricing Formula that applies to all 11 Federal Milk Marketing Orders (FMMOs). Forty proposals were submitted by interested parties for consideration. Of these, USDA accepted 21 proposals for public hearing, including two from the International Dairy Products Association (IDFA). IDFA believes that significant changes have occurred in the dairy industry and milk marketing since the FMMO pricing scheme was introduced in his early 2000s, and that this pricing scheme needs to be revised.
IDFA's efforts to update federal mandates have been ongoing for several years. We have engaged in an extensive process with dozens of meetings and multiple work streams in-house with his IDFA members from all areas of the industry, including dairy cooperative members. In March 2023, IDFA met twice with the leadership of the National Milk Producers Federation (NMPF) to seek agreement on a set of priorities for Federal Order reform. However, no consensus was reached. IDFA then acted on the board's direction and filed a renewal application to add the allowance at the end of March. In June, we submitted a second balanced proposal for Class I movers. This allows processors to effectively manage price risk while putting more dollars into dairy farmers' pockets over time than they would receive under a “higher” mover proposal. Our diverse membership allows us to propose a balanced approach based on sound data that benefits both processors and dairy farmers.
This is not a farm bill debate. The focus is on USDA and its responsibility to administer her FMMO hearing process to amend these federal regulations to accurately reflect today's dairy market. IDFA remains committed to seeing this process through to completion, in the best interest of our members and the entire U.S. dairy industry.
IDFA proposal
IDFA is proud to support these proposals because they represent a balanced approach based on sound data and are beneficial to both processors and dairy farmers.
IDFA's make an allowance proposal It would update the system to better reflect the cost of processing milk into dairy products, which has not been adjusted since 2008. IDFA's proposal would raise the current 2008 make allowance level to a simple average of the 2022 Scheik study results and the new Stephenson study results. The 2022 survey will be phased in over time. Half of the difference will be applied when (and if) the change order is initiated, and 1/6 of the difference will be added annually over the next three years until the full amount is reached. If an audited mandatory cost study conducted by USDA becomes available during this period, the make allowance numbers from the new study will be used instead. IDFA, NMPF, AFBF, and other stakeholders are all asking Congress to give USDA statutory authority to conduct periodic cost studies, and IDFA members will be in Washington, D.C., this summer to discuss the upcoming farm bill. He urged Congress to include this authority in the
In June, IDFA submitted revised proposals at USDA's request. This amendment adds his $0.0015 adjustment to his Schiek and Stephenson study for marketing fees, as currently allowed by the USDA. The table below provides an overview of the proposed make allowance changes.
IDFA's Class I mover suggestions This provides dairy producers with milk checks equal to or greater than the amount received by the “higher end” mover, while preserving the ability for producers, processors, and their customers to hedge costs. payments will be provided over a long period of time. This is done in the following way:
- Maintains the ability of Class I market participants to manage price risk.
- Encourage increased sales of Class I products, which have been steadily declining for years.and
- This proposal would put more money in dairy farmers' pockets in the long run than the current Class 1 Movers or “Top” proposal.
In June, IDFA submitted amendments to the proposal at USDA's request, further defining the proposed language and providing examples of how the proposal would work.
Under IDFA's proposal, a Class I skim milk mover in a given year would be equal to the simple average of Class III and Class IV advanced skim milk prices, plus the higher of:
- 24-month simple average of advanced “top” skim milk powder prices (rounded to two decimal places) from August to July of the previous two years minus 24-month simple average of III-IV advanced skim milk powder prices (rounded to two decimal places), or
- 74 cents per CWT skim milk (71 cents per CWT 3.5% milk).
An example for 2023 is:
Therefore, if the proposed IDFA Class I mover formula were in effect in 2023, it would pay farmers an average of 41 cents more per cwt and 43 cents more per cwt for 3.5% milk than “Higher-Of.” This means that the Used for Class I skims rather than “Higher-Of” skim movers.
The International Dairy Products Association (IDFA), located in Washington, DC, represents the U.S. dairy manufacturing and marketing industry, supporting more than 3.2 million jobs, generating $49 billion in direct wages and $794 billion in overall economic impact. is producing. IDFA's diverse membership ranges from multinational organizations to single-plant companies, from dairy companies and cooperatives to food retailers and suppliers, all committed to cutting-edge innovation and sustainable business practices. Together, they represent most of the milk, cheese, ice cream, yogurt, cultured products, and dairy ingredients produced and sold in the United States and sold around the world. Delicious, safe and nutritious dairy products offer unparalleled health and consumer benefits to people of all ages.
