Dairy Farmers of America (DFA) withdrew a proposal seeking increased milk pooling flexibility in the Northeast federal milk marketing order (FMMO 1). In a letter to Northeast Market Administrator Erik Rasmussen on Feb. 17, Elvin Hollon, DFA vice president of fluid marketing/economic analysis, said the request to withdraw the proposal was due to a lack support from other dairy organizations.

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Dave Natzke
Editor / Progressive Dairy

“DFA’s motivation … was to create fairness and treat all dairy producers in an equitable manner. By doing so, all farmers in the Northeast would have access to the best milk price available, subject to prevailing marketing conditions. However, without support from the entire industry, we understand this request could create additional division and anxiety in an already challenged marketplace,” Hollon wrote.

DFA had submitted the request on Jan. 12, outlining the need to temporarily ease pooling restrictions under the “Dairy Farmer for Other Markets” (DFOM) provision of FMMO 1 language.

For background, read: Back in the pool: DFA seeks flexibility in Northeast federal milk marketing order

FMMO 1 encompasses Connecticut, Delaware, Massachusetts, Maryland, New Hampshire, New Jersey, Rhode Island and Vermont and portions of New York, Pennsylvania and Virginia. The region has seen significant growth in milk production at the same time sales of Class I (fluid) milk and milk processing capacity has been reduced due to plant closures.

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Regional milk supply balancing challenges and disposal of excess milk has resulted in additional costs and lost milk income to cooperative members. DFA contended the pooling flexibility in its proposal would have allowed balancing costs to be shared by cooperative members and independent producers marketing milk within the order, while minimizing the financial impact.

Through its marketing arm, Dairy Marketing Services, DFA markets milk for about 5,000 producers in the Northeast order. Of those, about 4,100 are members of DFA or DMS affiliated co-ops and 900 are independent producers. Due to federal order blend price payment rules, the balancing costs to move or dispose of pooled excess milk can only be spread across co-op members.

Opposition expressed

Numerous dairy farmers and producer organizations submitted letters opposing DFA’s proposal.

Four dairy co-ops – Agri-Mark, Upstate Niagara, Maryland & Virginia Milk Producers and Cayuga Marketing – expressed opposition on both procedural and substantive grounds.

Agri-Mark senior vice president of economics, communications and legislative affairs, Robert Wellington, said any changes to FMMO 1 pooling standards should be subject to a federal order hearing process. They also expressed concern the temporary, seasonal application of relaxed pooling rules could set a dangerous precedent and open the order to litigation.

They warned the proposal could lead to even more “disorderly” marketing, resulting in substantially lower milk prices paid to independent and co-op member producers.

In addition, the co-ops expressed particular concern over inclusion of August and September in the temporary period. DFA’s request had sought pooling/depooling flexibility on an as-needed basis for a six-month period, April 1-Sept. 30, 2017.

While agreeing with DFA over the serious nature of the milk supply/demand imbalance and that the cost of handling excess milk falls disproportionately on cooperative members, the co-ops said the request did not address the causes of the problems and could contribute to further disorderly marketing conditions.

Opposed to depooling milk from independent producers, Progressive Agriculture Organization Manager Arden Tewksbury suggested a more appropriate method would be to allow milk check deductions equal to deductions from DFA-member milk checks.

National Dairy Producers Organization (NDPO) Chairman Mike Eby opposed the proposal, charging the plan would lead to lower milk prices for all dairy farmers and the “destruction of dairy farm families.” Eby called for nationwide milk supply controls to match demand, allowing dairy farmers to receive a price covering production costs and returning a profit.

In the withdrawal request letter, Hollon said DFA will now seek other options to address the milk supply/demand imbalance in the Northeast, while minimizing the negative financial impact on the region’s dairy farmers.

All related documents can be found here.  end mark

Dave Natzke