Latest Milk Pricing Bill Points to Need for Fundamental Reform of Federal Orders

IDFA supports streamlining the Federal Milk Marketing Order (FMMO) system, a government program that regulates the price of milk. The introduction of yet another bill (S. 869) to tinker with the milk pricing formulas points to the need to fundamentally reform the current pricing system. Another "quick fix" to one small part of the Federal Order system is not the answer..

FMMO pricing regulations were written for a dairy industry and a marketplace that are drastically different from today's realities. The FMMO system dates back to the Great Depression and was designed to ensure the availability of fresh milk at a time when refrigeration was primitive and transportation costs high. The system today still sets prices for milk based on classes of use. For example, the exact same milk could be sold at four different prices depending on whether it is used as fluid milk (Class I), ice cream and yogurt (Class II), cheese (Class III) or butter and nonfat dry milk (Class IV). The Class I price also varies based on where the milk is sold. In fact, every county in the country has a different Class I price.

Over the years, the pricing and pooling requirements of the FMMO have only gotten more complicated and confusing. The system has simply not evolved since the Great Depression to ensure a viable, dynamic future for dairy producers and processors.

The dairy industry needs substantive regulatory reform. S. 869 is not the answer. The bill only addresses a small portion of the price setting scheme by calling for changes in how county-by-county Class I prices are calculated. The bill acknowledges that FMMOs create price distortions and regional disparities; however, the legislation does not provide a solution to correct this archaic system.

Congress should not opt for another short-term fix. Congress should reject S. 869 and instead invest in achieving more fundamental reform to this entire system.

May 2005