Digest highlights
- Class I mover formula change losses add up
- Dairy concentration continues
- NAJ, NMPF file ‘milk’ labeling comments
- NMPF, USDEC form alliance with Italian Dairy Association
- ICYMI (In case you missed it)
Class I mover formula change losses add up
One hot-button item in preparation for the upcoming Federal Milk Marketing Order (FMMO) national hearing is the 4-year-old formula change to the Class I mover. The calculation change, from the “higher-of” Class III-IV skim milk prices to the “average-of plus 74 cents” was approved in the 2018 Farm Bill. It was made without a FMMO hearing, without a comment period and without a producer referendum.
Recently, the American Dairy Coalition (ADC) issued a press release noting the change in the Class I milk price formula, implemented in May 2019, will result in about $1 billion in losses to dairy producers by the time milk checks for August 2023 milk marketings are delivered.
That estimate has also been verified by Progressive Dairy’s own calculations, which shows over the past 52 months since implementation, the average-of plus 74 cents formula resulted in:
- A lower Class I base price in 28 months, averaging $1.29 per hundredweight (cwt) less than what would have been calculated under the higher-of formula. Price reductions hit -$5.01 per cwt in December 2020 and -$4.58 and -$4.25 in August and September 2020, respectively
- A higher Class I base price in 23 months, averaging about 42 cents more than the higher-of formula in those months – highs differences averaged 60-70 cents per cwt in multiple months in late 2019 and 2021.
- The same price regardless of formula in one month, January 2022
When included in the calculation of FMMO uniform prices, the negative impact was the heaviest in high Class I milk utilization marketing areas, where the Class I price makes up a larger share of the monthly blend price.
According to ADC, the average-of formula reduced the Class I milk mover by about 55 cents per cwt over the 52-month period. With Class I utilization averaging about 28% nationwide, the result is a 16-cent loss on every hundredweight of milk shipped.
While the total loss is estimated at approximately $1 billion, the USDA’s Pandemic Market Volatility Assistance Program (PMVAP) earmarked about $350 million to cover losses as result of the formula change and COVID-19 milk market abnormalities.
Distribution of that assistance was split between two rounds: The first round of payments was made on fluid milk marketings up to 5 million pounds from July through December 2020; the second round covered fluid milk sales between 5 million and 9 million pounds during the same period.
Additionally, due to small Class I utilization in some FMMOs, handlers may have elected not to participate in the PMVAP. Distribution of those funds was considered proprietary and not publicly disclosed.
Dairy concentration continues
Milk producers in just 13 counties marketed 25% of the total FMMO milk marketings in December 2022, according to the Central FMMO Marketing Service Bulletin, July 2023. Milk producers in 53 counties accounted for 50% of total FMMO milk marketings that month, down from 59 counties a year earlier.
There were 1,365 counties with FMMO milk marketings in December 2022. While each of the 53 largest counties marketed more than 66.871 million pounds, there were 605 counties (44.3% of the FMMO total) that marketed less than 1 million pounds each in December 2022.
The top 13 counties (ranked by FMMO milk marketing volume in December 2022) were:
- Tulare, California
- Merced, California
- Kings, California
- Kern, California
- Stanislaus, California
- Weld, Colorado
- Fresno, California
- Yakima, Washington
- Hartley, Texas
- Maricopa, Arizona
- San Joaquin, California
- Lancaster, Pennsylvania
- Pinal, Arizona
NAJ, NMPF file ‘milk’ labeling comments
National All-Jersey (NAJ) and the National Milk Producers Federation (NMPF) filed comments to the FDA objecting to allowing plant-based milk alternatives to be labeled as “milk.” The deadline to submit comments was July 31.
Both organizations argued the nutritional content of plant-based milk alternatives is not comparable to dairy milk and products made from dairy milk, and that FDA's draft labeling guidelines allowing voluntary labelling of plant-based milk will only add to consumer confusion.
NAJ General Manager Erick Metzger urged the FDA to enforce its own “standard of identity” that milk is, “[T]he lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more healthy cows.”
Clay Detlefsen, senior vice president of environmental and regulatory affairs and staff counsel for NMPF, urged the FDA "to make nutritional inferiority disclosures mandatory and have them prominently placed front-of-pack while expressly recognizing that anything otherwise would merely perpetuate consumer confusion.”
NMPF, USDEC form alliance with Italian Dairy Association
The NMPF, U.S. Dairy Export Council (USDEC), and Italian Dairy Association (Assolatte) signed an agreement that increases collaboration between the three groups as they promote the nutritional benefits of dairy products and support dairy-friendly policies in international forums.
The memorandum of understanding (MOU) organizes a set of objectives centered around ensuring the accurate and exclusive labeling of dairy terms for milk and dairy products and advocating for international standards and guidelines that recognize the contributions of the global dairy industry to sustainable food systems. The partnership will last through 2025.
The MOU between NMPF, USDEC and Assolatte complements similar agreements signed last year with Sociedad Rural Argentina and the Chilean Federacion Nacional de Productores de Leche, which strengthened NMPF and USDEC’s relationships in Latin America.
ICYMI (In case you missed it)
- The deadline to apply for the USDA Organic Dairy Marketing Assistance Program (ODMAP) has been extended until Aug. 11, at USDA Farm Service Centers. The ODMAP provides a one-time cost-share payment for organic producers’ projected 2023 marketing costs based on 2022 costs and pounds of organic milk marketed in the 2022 calendar year. USDA’s Farm Service Agency (FSA) is making $104 million available to certified organic dairy operations that produce milk from cows, goats and sheep.
