By: Mike Brown, Chief Economist, IDFA
Earlier this week, IDFA’s outside counsel submitted our post-hearing brief to USDA. This comprehensive document reiterates IDFA’s positions on the 22 proposed changes to the Federal Milk Marketing Order system that were considered during a recently concluded public hearing. You can read IDFA’s comments here. Following several years of preparation and execution, we now look forward to USDA’s recommended decision expected this summer, followed by USDA’s expected final rule this fall and the outcome of the producer referendum on the orders as modified.
USDA must recognize that the U.S. dairy industry continues to go through a period of evolution and transition that has opened new growth opportunities and presented significant new challenges for all participants throughout the dairy value chain, namely farmers and processors.
IDFA values nutritious fluid milk as a sizable portion of our industry’s continued innovation. The hearing record amply demonstrates that fluid milk consumption is price sensitive within the category as well with competing non-dairy beverages. An updated federal order structure must ensure that consumers can continue to purchase milk at a reasonable price point relative to other non-dairy beverages.
The Federal Milk Marketing Order system must recognize the consistent year-over-year declines in fluid milk consumption while the remainder of the dairy industry is stable to growing. USDA must not unduly raise the regulated cost of any dairy products and must take into account the competitive impacts on the growing product offerings throughout the category in the areas of cheese, cultured products, dairy-based health beverages and powders, frozen treats, and valued-added milk, among others.
Creating policy that forces American consumers to purchase less fluid milk without economic justification is not a viable solution for the dairy industry and unfairly impacts consumers, who are struggling to make their purchasing decisions at the grocery store as we work to recover from one of the most abrupt food price inflation scenarios in generations following the pandemic.
The dairy industry has fundamentally changed since 2008 when the previous FMMO revisions were made, and the current FMMO pricing formulas should be amended to reflect these new market dynamics while positioning U.S. dairy for the future.
IDFA has spent two years developing FMMO proposals that truly reflect a balanced, inclusive approach that is in the best interest of the full dairy supply chain, as well as consumers. Throughout the hearing process, IDFA has remained constructive, offered fact-based testimony, and has continued to encourage USDA to make necessary reforms that allow both U.S. dairy producers and processors to compete and win in a global marketplace.
Both IDFA’s Make Allowance and Class I mover proposals are designed to help all dairy processors grow the industry to the long term benefit of all participants, from farm to consumer.
The IDFA make allowance proposal would update the system to better reflect the cost of processing milk into dairy products – something that has not been adjusted since 2008 while the Consumer Price Index has increased by 47% from 2007 to 2023. The IDFA proposal increases the current 2008 make allowance levels based on two new studies, stepwise over a four-year period.
IDFA’s proposal also requires USDA to update the new make allowances if an audited mandatory cost survey conducted by USDA becomes available during this time; in that case, the make allowance numbers from the new survey would be used instead. All major stakeholders, including IDFA, are asking Congress to provide USDA with the statutory authority to conduct regular cost surveys in the next Farm Bill.
IDFA’s Class I Mover proposal would provide dairy producers with a regulated minimum Class I milk price equal to or greater than what they would receive under the “Higher of” mover over time while preserving the ability for producers, processors, and their customers to hedge their costs. It would do so in a manner that:
- Preserves the ability of Class I market participants—from producer to processor to end-users—to forward price their milk without extraordinary basis cost risk.
- Encourages increased sales of Class I products, which have been in steady decline for many years; and
- Keeps the regulated Class I price paid to dairy farmers higher over time than either the current Class I mover or the “higher of” proposal.
IDFA developed and supported these proposals because they represent a balanced approach to Federal Order regulation that is based on sound data and is beneficial to processors, dairy farmers, and consumers alike. We expect USDA to now fulfill its statutory obligation to amend the federal regulations to accurately reflect today’s dairy market conditions for all segments of the dairy supply chain. IDFA will continue to work in the best interest of our members and the full U.S. dairy industry to see this process through.
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The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation’s dairy manufacturing and marketing industry, which supports more than 3.2 million jobs that generate $49 billion in direct wages and $794 billion in overall economic impact. IDFA’s diverse membership ranges from multinational organizations to single-plant companies, from dairy companies and cooperatives to food retailers and suppliers, all on the cutting edge of innovation and sustainable business practices. Together, they represent most of the milk, cheese, ice cream, yogurt and cultured products, and dairy ingredients produced and marketed in the United States and sold throughout the world. Delicious, safe and nutritious, dairy foods offer unparalleled health and consumer benefits to people of all ages.
If you have questions about IDFA’s positions or participation in the FMMO hearing, please contact Matt Herrick at IDFA: mherrick@idfa.org.
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