In all of agriculture the method of U.S. milk pricing is unmatched in complexity and inequity. Only expert dairy economists, a few U.S. Department of Agriculture personnel and a handful of industry experts can detail the antiquated rationale of federal milk pricing that has failed to keep pace with the technology, consumption patterns and use of farm milk in today’s economy.
Federal Milk Marketing Orders (FMMOs) are in desperate need of change as evidenced by three petitions submitted to USDA in the past two months. Congress members are wading into the debate with legislation that hardens the divide among dairy industry participants.
We must do something different, or we are bound to exacerbate the unfairness and investment-suppressing conditions that determine regulated minimum prices charged to dairy processors and brands that add value to dairy and bring those products to consumers.
We cannot pretend that all milk is alike, or that all dairy processing is alike and that FMMOs should have the same bearing given the differences — it is a conflicted dynamic and doesn’t add up for the modern dairy industry.
My family produces organic milk in New York and my co-op of nearly 1,600 farmers across the country sets a pay price determined by our marketplace performance in selling organic dairy and balancing our organic milk supply with strategic inventory management and processing.
We gain no value from the federally regulated minimum prices or FMMOs. In fact, our co-op has a record of paying farmers above those minimums. Because federal pricing regulations consider all farm milk the same, we are forced to pay a multimillion-dollar pool obligation that goes to a producer settlement fund that our organic producers hardly draw from. A plainer way to describe it is, we finance a conventional minimum pay price, detached from our products, business and a co-op provided organic pay price.
Our position as a business with a desirable product, organic fluid milk, means any number of changes like increasing the price formula component factors, increasing Class I price surfaces, or changing the dynamics of Class I base price and its relationship with the other Classes, means that our farmer-owned cooperative will be forced to contribute more to the FMMO pools, perhaps twice as much as we pay now.
This reality would directly cut against organic dairy farmer pay price or the opportunity for end-of-year patronage. It will force us along with other fluid processors to step back from innovation in processing and products. It will likely increase consumer prices for fluid milk, a super food and staple in many Americans’ diets. We don’t really think increasing Class I pooling costs and consequently prices of fluid milk (organic milk or other) during inflationary times is going to bring us more consumers.
Anyone who tries to claim all dairy farmers are of one mind on changes to FMMOs is either unaware of the tenuous position of thousands of organic dairy farmers who have seen extreme input cost increases the last two years, or views us as only unfortunate collateral damage.
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Well, that is damage my farm cannot accept. We need alternative ideas that recognize the role of specialty milks (like organic) in today’s dairy economy, reforms that understand the correlation of a supply chain’s unique costs to service the fluid milk market, and updates to the milk processing fee structure.
USDA needs to get this right, and base FMMOs modernization on conditions that are equitable and spur innovation, not suppress it or burden one segment of processors and their farmer supply partners.
David Hardy is a highly accomplished dairy farmer hailing from the town of Mohawk, New York. In addition to his role as a dairy farmer, David holds a prominent position on the board of directors for the CROPP Cooperative (Organic Valley,) where he currently serves as board chair. CROPP Cooperative is the largest organic dairy cooperative in the United States, with nearly 1,600 organic dairy farmers across 32 states.
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