April 27, 2023

Ag group calls for milk pricing reform

Ag group calls for milk pricing reform 

By: Sydney Sheffield 

The American Farm Bureau Federation (AFBF) has issued an open letter to United States Department of Agriculture (USDA) Agriculture Secretary Tom Vilsack, calling for milk pricing reform. The letter comes as a response to recent proposals from the International Dairy Foods (IDFA) Association and the Wisconsin Cheese Makers Association (WCMA) to increase allowances. 

“Dairy farmers continue to face market challenges as part of the high cost, high-risk age we live in,” AFBF President Zippy Duvall said. “Trust is critical to maintaining an efficient and resilient federal order system that promotes orderly marketing of milk to consumers across the country. The petitions we oppose here threaten to undercut trust between farmers who produce the milk and the processors who turn it into the dairy products we all know and love.”

While AFBF supports changing parts of the Federal Milk Marketing Order system (FMMO), they also believe the IDFA and WCMA proposals would create additional burdens on dairy farmers. The open letter cites USDA production estimates that show a hundredweight of milk costs dairy farmers $27.50 to produce but only yields a return of $21.23. Loss estimates are even higher for farmers with less than 50 cows. While the AFBF does not oppose updating milk allowances, Duvall says the IDFA and WCMA proposals do not address the wider need for changes to the current milk pricing regulations. 

As an alternative, AFBF proposes replacing the current voluntary reporting system with mandatory cost and yield surveying. This consists of the USDA considering a wider range of improvements to milk markets including adjustments to the Class I and II skim milk price formulas such as updates to the Class I and II differentials, and a return of the Class I base price formula to the “higher-of” the Class III or IV formula. 

AFBF believes this would prevent larger producers from declining to report, potentially distorting the cost survey results. Currently, USDA does not have the authority to institute a mandatory reporting system. However, AFBF officials are pushing Congress to introduce legislation to address this. 

“Large efficient processors may decline to participate, which would skew the cost survey results upward. This would increase the deduction to cover processors’ costs in the milk price formula, which would skew dairy farmers’ milk checks downward. Farm Bureau believes it is critical that any changes in the make allowance be based on mandatory audited cost and yield surveying, which would provide farmers the assurance that any make allowance change reflects true costs borne by processors,” the letter states. 

Read AFBF’s letter here and IDFA and WCMA’s petition here