IDFA releases working paper on modernizing milk pricing
PALM DESERT, Calif. — At its annual Dairy Forum here today, the International Dairy Foods Association released “Modernizing U.S. Milk Pricing: An Exploration,” a working paper to provide a basis for the evolving discussion of changing the Federal Milk Marketing Order system that since the 1930s has divided milk into four classes with Class I fluid milk getting the highest prices.
Americans are drinking less milk, and more and more milk goes into Classes II, III and IV, which are used in manufacturing dairy products such as sour cream, cottage cheese, ice cream, yogurt, hard cheeses, butter and dry products such as non-fat dry milk. The manufactured products are sold in the United States and exported. These changes have led the industry to consider proposing modernization of the system.
IDFA describes the working paper it commissioned from Marin Bozic, a professor at the University of Minnesota, and Blimling and Associates, a dairy market research and consulting firm, as “a landscape overview of global milk pricing and competitiveness intended to serve as an important resource for further discussion among IDFA members” on FMMO modernization. The paper describes the history of the U.S. system of milk regulation and also the systems and changes made in recent years in other countries.
The paper does not make recommendations, but the authors emphasize in the paper that future growth in U.S. dairy is in exports and suggest that the industry may wish to pursue legislative or regulatory changes that would make those products more competitive for overseas sales.
IDFA President and CEO Michael Dykes said here that he wants IDFA members to develop the policy recommendations.
Noting that IDFA includes cooperatives, big companies, small family-owned businesses and retailers, Dykes said that if they come together they will be in a good position to convince Congress and the Agriculture Department to proceed with modernization.
But how the dairy processors and the dairy farmers would reach agreement is an open question.
National Milk Producers Federation President and CEO Jim Mulhern, who represents farmers and is attending the forum, said his group is also seeking FMMO modernization and that he is certain IDFA and NMPF will reach agreement.
Mulhern said he also believes that the United States will be the No. 1 dairy exporter in the future, but that at present “the U.S. domestic market is the best market in the world. It today absorbs 80% to 85% of production.
“The issue is not to abandon Class 1, the answer is to look at the overall program and make sure it is providing the necessary incentives to meet ongoing fluid demand and efficiently move product into the other classes.”
Agriculture Secretary Tom Vilsack has said that he is willing to help the industry develop a new system but that the industry needs to reach consensus on a path forward. Dykes presented a slide of Vilsack’s quote at the event.
Modernization of the Federal Milk Marketing System would likely take place through a formal Agriculture Department process.
There is also interest in the dairy pricing system on Capitol Hill.
In December, Sen. Kirsten Gillibrand, D-N.Y., chair of the Senate Agriculture Livestock, Dairy, Poultry, Local Food Systems and Food Safety Subcommittee, and Sens. Patrick Leahy, D-Vt., and Susan Collins, R-Maine, introduced their bipartisan Dairy Pricing Opportunity Act, which would require the Agriculture Department to initiate the process of holding FMMO hearings within six months, allowing producers and industry to consider and review proposals that could change Class I skim milk pricing.
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