After several years of USDA hearings with the dairy industry, changes to the Federal Milk Marketing Orders took effect over the weekend. Danny Munch, an economist with the American Farm Bureau Federation, says the FMMO structure is intended to protect farmers.
“The primary purpose of the federal order system is to set minimum prices milk handlers have to pay dairy farmers for the milk they purchase. This was really meant to avoid any abuse and pricing negotiations with farmers. There are 11 regions in the country with federal orders and the USDA calculates minimum prices that farmers receive in each of those. It’s intended to support fair payments for their milk regardless of where their products end up.”
He says there are several significant changes made to the orders.
“Several of the changes dairy farmers were excited to see included and that will go into effect on Sunday (June 1) are the switch to the ‘higher-of’ Class III and Class IV price formula for the Class I fluid milk price. Class I differentials have also been raised in most regions, which helps offset costs of transportation and servicing fluid milk markets. We also remove the barrel cheese from the protein formula.”
Munch says these changes were a long time coming, but there are still some unknown factors that might have long-term impacts.
“This was a need of the industry to say that the Federal Milk Market Order system has been outdated. These formulas needed to be updated in order to reflect more accurate market conditions. With all these trade disruptions, supply disruptions going on as well, the total impact might be stunted or sort of covered by some of these bigger market movers.”
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