The United States Department of Agriculture (USDA) Agricultural Marketing Service (AMS) has unveiled a pivotal final rule that amends the uniform pricing formulas for all eleven Federal milk marketing orders (FMMOs). This substantial shift follows a 49-day national hearing that took place from August 23, 2023, to January 30, 2024, in Carmel, Indiana. During this hearing, the AMS gathered testimonies and evidence supporting 21 proposals from the dairy industry, leading to essential reforms in milk pricing.
After the hearing, a recommended decision was issued on July 1, 2024, and subsequently published in the Federal Register on July 15, 2024. This marked the commencement of a 60-day public comment period, during which a total of 128 comments were received.
Industry Responses
Michael Dykes, President and CEO of the International Dairy Foods Association, commented on the announcement: “The reforms included in today’s USDA announcement include important updates to elements of the FMMO system, including much-needed changes to ‘make allowances.’ While the USDA process did not address all issues within the supply chain, particularly for Class I and organic milk processors, IDFA is optimistic that this process has laid the groundwork for a unified and forward-looking dairy industry, and we are grateful to our members who provided testimony and engaged in this process over the past 2+ years.”
Additionally, National Milk Producers Federation (NMPF) also thanked USDA and the dozens of farmers and cooperative leaders who successfully steered Federal Milk Marketing Order modernization to what they call a successful conclusion.
“Dairy farmers and cooperatives have done what they do best – lead their industry for the benefit of all,” Gregg Doud, president and CEO of NMPF said. “This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive for years to come. We appreciate the monumental contributions across government and the dairy industry that made this happen. The industry, and all dairy consumers, owe all of you a debt of gratitude.”
Edge Dairy Cooperative CEO, Tim Trotter said that they are pleased with this announcement today, but also recognize there is more to be done.
“We are glad that AMS recognized the importance of risk management, through the introduction of ESL pricing for beverage milk, and lag for implementation of higher skim component tests. More work should be done to improve milk check transparency so dairy farmers know if their milk is pooled or not pooled. We hope all future changes will also be done in a way that does not interfere with other USDA programs that benefit dairy farmers, such as livestock insurance,” he said.
Key Amendments to Pricing Formulas
The final rule contains several significant updates to the pricing formulas:
Skim Milk Composition Factors: Updated to 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids, with a six-month delayed implementation.
Survey Adjustments: Removal of 500-pound barrel cheddar cheese prices from the Dairy Product Mandatory Reporting Program survey.
Manufacturing Allowances Update: Class III and Class IV manufacturing allowances are updated as follows:
• Cheese: $0.2519 per pound
• Butter: $0.2272 per pound
• Nonfat Dry Milk: $0.2393 per pound
• Dry Whey: $0.2668 per pound
• Butterfat recovery factor adjusted to 91%
Class I Pricing Formula: Reverting to the higher-of advanced Class III or Class IV skim milk prices for the month, with an additional extended shelf life (ESL) adjustment based on a 24-month rolling average adjuster with a 12-month lag.
Class I Differential Values: Updates reflect the increased cost of servicing the Class I market.
Implementation Timeline
The majority of these rule changes will take effect on June 1, 2025. However, adjustments to the skim milk composition factors are scheduled for December 1, 2025. These modifications will impact milk marketed from those dates, influencing the advanced prices, pricing factors, and component prices announced monthly.
For those seeking more detailed information, copies of the final rule, educational materials, and the entire hearing record are accessible via the hearing webpage or by contacting USDA/AMS/Dairy Program at STOP 0225 - Rm. 2530, 1400 Independence Ave. SW, Washington, DC 20250-0225. Inquiries can also be directed to fmmohearing@usda.gov.
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