The next month could be telling for whether or not the dairy industry can finally unite on changes to pricing regulations for milk.

During the week of Feb. 20, leaders from the National Milk Producers Federation and the International Dairy Foods Association plan to see if they can narrow their differences on a proposal to USDA for changes in the Federal Milk Marketing Order system, NMPF President and CEO Jim Mulhern said in an interview with Agri-Pulse Tuesday.

“If you don't like the status quo, and I don't think anybody does, we need to try to come together to change that,” Mulhern said. “And that is what I hope we can sit down in February with our counterparts at IDFA and see if we can find that common ground.

“If we want to go to a hearing and have a contentious hearing, I have no doubt that the outcome will take longer, and we will get less as an industry,” Mulhern said.

Discussions around the issue have been taking place this week during IDFA's annual Dairy Forum in Orlando. 

NMPF has undergone an extensive review process for the past year with over 150 meetings to look at all the issues in the milk marketing system. This includes an October discussion with the American Farm Bureau Federation in Kansas City as well as ongoing discussions with a large, Wisconsin-based co-op that is not a member of NMPF, Edge Dairy Farmer Cooperative. 

Jim Mulhern, NMPFJim Mulhern, NMPF

NMPF wants USDA to start a hearing process to tackle their comprehensive reform plan, including modifications to a provision of the 2018 farm bill that changed how Class 1 fluid milk prices are established. The plan also would address fluctuations in regional price differentials and update the make allowance that determines processors' share of milk revenue. 

Mulhern said the biggest issue involves the make allowances, how a milk check is divided between a processor and farmer on what is determined to cover costs of production to make a finished milk product for cheese, butter, whey and nonfat dry milk. USDA has not updated these factors since 2006. Mulhern said both IDFA and NMPF support an increase, but the size of the make allowance is important to maintain both profitability at the farm level and plant level.

IDFA’s Economic Policy Committee approved a resolution Jan. 17 recommending that IDFA file a petition with USDA requesting a hearing that only looks at adjustments to make allowances. If approved by their boards, the IDFA petition would be consistent with a petition that the Wisconsin Cheese Makers Association will file.

IDFA President and CEO Michael Dykes said his group will move forward with petitioning USDA the week of Feb. 20, with or without the support of NMPF. Speaking to reporters, Dykes expressed optimism that NMPF and IDFA could come to an agreement. “I believe we’ll be able to unite on that,” Dykes said.

The IDFA petition won't offer any specific recommended new make allowances. IDFA will propose that USDA consider an updated cost study by Bill Schiek, CEO of the Dairy Institute of California that was presented to USDA in early November. IDFA’s request will cite his most recent cost projections for 2022. 

IDFA will also propose that USDA consider an updated version of the USDA-commissioned study “Cost of Processing Study for Cheese, Whey, Butter and Nonfat Dry Milk Plants” released by economist Mark Stephenson in 2022. IDFA and WCMA have commissioned Stephenson to update his study with 2022-23 data.

NMPF is finalizing its final review of the methodology and needed data updates within its proposal. Mulhern projects it would seek to file its broader petition by the end of March, as NMPF’s board plans to meet on March 7 to discuss any of the discussions coming out of the February meeting with IDFA.

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Edge Dairy Farmer Cooperative CEO Tim Trotter said in a statement to Agri-Pulse that they’ve had ongoing discussions with both IDFA and NMPF members. 

Michael DykesMichael Dykes, IDFA

“While we want to see solutions soon, we also need to take time to make sure we get it right. A comprehensive review of the entire system will ensure nothing is missed,” he said. 

Mulhern said he feels confident NMPF's proposal will address producers’ needs, but he continues listening to Edge and IDFA to see if there are additional areas of agreement. 

At the end of the process, producers will have to approve any changes proposed by USDA through a producer referendum. He said he believes the producer community is largely aligned. “We’ve done a lot of work to address these issues to make sure everybody’s on the same page. And now it’s trying to close whatever gaps there are with our proprietary processor colleagues,” he said. 

Agriculture Secretary Tom Vilsack has urged the industry to come with a united approach in its petition. 

IDFA’s board already approved asking Congress to put a provision in the next farm bill authorizing USDA to periodically update make allowances and require all processing plants to report production costs.

USDA conducts surveys of plants, but the lack of a mandate for them to participate can lead to a distorted picture of production costs based on the age and size of plants. NMPF also supports that policy change within the farm bill.

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