U.S. Senators Patrick Leahy (D-Vt.), Kirsten Gillibrand (D-N.Y.) and Susan
Collins (R-Maine) Wednesday introduced the bipartisan Dairy Pricing Opportunity
Act, which would direct the U.S. Department of Agriculture (USDA) to initiate
the process of holding Federal Milk Marketing Order (FMMO) hearings within six
months. The hearings would provide an opportunity for producers, who understand
the dynamics of milk pricing first hand, to have a voice in formulating any
potential changes in how the price of Class I milk is calculated.
The introduction of this bill builds on a Senate Agriculture Subcommittee
hearing in September on modernizing milk pricing and the Federal Milk Marketing
Order system (FMMO) and would pave the way for critical FMMO reform in not just
Class I pricing, but potentially other areas of need.
"Even before the coronavirus pandemic upended the dairy economy, producers
in Vermont and throughout the Northeast were already struggling through years
of price volatility, market consolidation, and rising costs. Small- and
mid-sized farms, the very same farms that have underpinned Vermont's rural
communities for generations, have long borne the brunt of these market forces.
As Congress and USDA help farmers recover from the pandemic's immediate
impacts, it's a critical time to reexamine the federal milk pricing system and
ensure it works equitably for all farmers," said Leahy, chairman of the
Senate Appropriations Committee.
"When the dairy pricing system isn't working for farmers, the economic
ramifications are felt across the country. I heard from producers across the
industry firsthand during my subcommittee hearing on dairy pricing and the
message was clear-- our dairy pricing system is inadequate, out of date, and
working against producers. That's why I introduced the Dairy Pricing
Opportunity Act, a bill that would put the power back in farmers' hands and
bring the industry together to build a system that works for the 21st century
dairy farmer. This bill is a great first step and I look forward to continuing
efforts on broader FMMO modernization," said Gillibrand, chair of the
Subcommittee on Livestock, Dairy, Poultry, Local Food Systems, and Food Safety
and Security.
"Maine dairy farmers are resilient, and for years they have been
weathering the storms of market instability and industry consolidation. The
Dairy Pricing Opportunity Act would help restore some stability to this sector
by ensuring that USDA holds public hearings to receive farmers' input on ways
to correct the unintended consequences of a pre-pandemic pricing policy. Our
dairy farmers have always worked tirelessly to provide high-quality, nutritious
products for Maine people, and we must address the obstacles that threaten to
prevent them from carrying on that tradition," added Collins.
Experts agree that the current milk pricing system is one of the most
complicated economic systems in the country and leaves too many farmers without
adequate pay, especially as costs rise and competition intensifies. Even before
the pandemic, dairy farmers across the nation were facing the challenges of
volatile milk prices, as well as increased competition from non-dairy
"milk" products. This has led to a substantial loss of licensed dairy
herds, with the United States losing almost 40,000 dairy herds since 2003. The
Dairy Pricing Opportunity Act would allow dairy producers and industry to
consider and review proposals that could change Class I milk pricing, while
also creating the opportunity for hearings to be held on other areas of the
Federal Order system that are in need of reform.
The Dairy Pricing Opportunity Act has drawn support from across the dairy
industry, including from the American Farm Bureau Federation, New York Farm
Bureau, American Dairy Coalition, Maine Dairy Industry Association, and
Agri-Mark which provided testimony in favor of the bill.
Class I, or fluid milk, is milk that is sold directly to consumers for drinking
and is the milk for which farmers have traditionally been most highly paid.
Prior to the 2018 Farm Bill, the Class I milk price was calculated using the
"higher of" Class III (milk used to make cheese) or Class IV (milk
used to make butter or milk powder) price plus the applicable Class I
differential. This was changed in the most recent Farm Bill to an averaging
method of Class III and Class IV plus $0.74. This change, compounded by
government intervention in cheese markets as a result of the pandemic, has
resulted in hundreds of millions of dollars in lost income for dairy farmers
from May 2019 through April 2021. This combination of factors demonstrates that
when there is a wide discrepancy between the Class III and Class IV price, the
current mover will cause significant loss of Class I skim milk revenue relative
to the previous Class I mover and what was intended by Congress in the 2018
Farm Bill change. This has led to increased calls from producers and industry
for USDA to hold Federal Milk Marketing Order national hearings to resolve this
issue with the Class I mover.
National Milk Producers Federation President and CEO Jim Mulhern said,
"Sen. Gillibrand's legislation, cosponsored by Sens. Leahy and Collins,
adds bipartisan momentum to a range of critical milk pricing discussions that
dairy farmers are having through NMPF's Economic Policy Committee. NMPF is
continuing to work with USDA and Congress on how best to remedy deficiencies in
the Class I mover formula and fully recoup $750 million in unintended losses
felt by farmers of all sizes. NMPF also is leading discussions on a broad range
of Federal Milk Marketing Order reform issues important to producers in all
regions of the country. We look forward to pursuing policy improvements that
will serve all dairy producers more equitably and effectively."