Nothing in milk marketing compares to the complex, tedious, boring details of Federal Milk Marketing Orders. Nor does their importance.
If you doubt this, think of the millions of dollars being spent on attorney fees this fall in Clovis, California. California dairy co-ops, frustrated with the state’s local market rules, have petitioned to join the Federal system.
The implications are national. A USDA analysis of the four proposals that were submitted suggest prices in California will have a ripple effect across the country. Under the co-ops’ proposal, California prices might jump $1/cwt while prices everywhere else would decline, from 10¢/cwt in cheese producing regions to nearly 25¢/cwt in heavy fluid utilization areas.
Not everyone agrees with this analysis. Mike Brown, Director of Dairy Economics and Policy for Glanbia Foods, says higher milk prices will make California cheese less competitive nationally. If California’s cheese costs go up 5 or 6¢/lb., it will make California cheese less of a buy. And once these higher prices are in the Federal Order formula, California will never be able to catch up. In other words, it’s complicated.
And it doesn’t stop there. Another provision in the co-ops’ proposal is mandatory pooling. Unlike other Federal Orders, this provision would not allow cheese manufacturers to de-pool when they might be forced to contribute into the pool. Though pooling provisions have been tightened in many of the Federal Orders, manufacturers still have the option of whether to participate. If mandatory pooling becomes embedded in California, you can bet it will be sought everywhere else.
And then there’s the announcement last week that organic dairy farmers have petitioned USDA for an exemption to Federal Orders.
They argue that because they cannot draw milk to fill organic fluid needs from conventional processors, they should not be required to contribute to Federal Order settlement funds.
On the face it, the argument does make some sense. But opponents also rightly point out that an exemption for organic milk could lead for exemptions for all other specialty, niche fluid products. If they all are granted an exemption, it further erodes Federal Order clout. And it would toss aside the ability to enforce Federal Order minimum pricing for organic and niche, fluid milk products. Right now, they command a premium over conventional milk. But there may come a time when that is no longer true.
Finally, there is a feeling, particularly here in the Midwest, that Federal Orders are no longer worth the effort that goes into them. After all, fluid utilization is less than 15%. But even that frustration is tempered with one glaring fact.
In the absence of a federal system, it is inevitable that state legislatures will fill this vacuum. Without Federal Order minimum pricing, times of milk surplus will lead to processors picking and choosing their farm suppliers and setting terms of payments. This will lead to state-by-state legislation.
If you think Federal Orders are complex and cumbersome now, image what 50 state milk marketing orders would lead to. It’s a heck of a reason to keep the Federal Order system intact. But the devil you know is better than the one you don’t.
