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Dairy Facts 2016
 
 

USDA Final Rule Extends Forward Pricing Program

Mar 26, 2014

The U.S. Department of Agriculture last week issued a final rule extending the Dairy Forward Pricing Program to allow producers and cooperatives to enter voluntarily into forward price contracts with processors through September 30, 2018. All terms of the forward contract must expire prior to September 30, 2021. The program applies to all milk that is not classified as Class I milk or milk otherwise intended for fluid use. 

First pilot tested between 2000 and 2004, the program was authorized in the 2008 Farm Bill through September 30, 2013. In February, Congress reauthorized the program in the 2014 Farm Bill, under the same terms and conditions as the 2008 Farm Bill.

The Dairy Forward Pricing Program allows handlers regulated under the Federal Milk Marketing Order program to pay producers a negotiated price, rather than the federal order minimum blend price, provided the volume of milk under contract does not exceed the handler’s Class II, III and IV utilization for the month on the order that regulates the milk.

According to USDA, participation in the program has been most significant in the Upper Midwest where, during various time periods since 2008, several hundred producers qualified for and participated in the forward contracts. Participation in other regions of the country has been limited.

"Reestablishing and retaining the forward contracting program as an optional risk management tool has consistently been one of IDFA's top legislative priorities," said Ruth Saunders, IDFA vice president of policy and legislative affairs.

IDFA supported the successful pilot program and provisions included in the 2008 Farm Bill. According to USDA, the pilot program substantially reduced price volatility for producers who continued to forward contract through the four-year period.

The final rule, which was published in the March 21, 2014, Federal Register, specifies that new contracts may not extend beyond September 30, 2021.

For more information, contact Saunders at rsaunders@idfa.org.

 
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