NMPF’s FMMO Modernization Plan hits high note on Cl. I mover, but eliminating barrel cheese from protein formula is head-scratcher

Posted on October 27, 2022 by Agmoos

By Sherry Bunting, Farmshine, October 28, 2022 (updated with additional information after publication)

The National Milk Producers Federation (NMPF) Board gets high marks for passing a Federal Milk Marketing Order Modernization Plan this week at its annual meeting in Denver, Colorado that includes returning the Class I mover to the previous ‘higher of’ formula — a virtually unanimous consensus item that came out of the Farm Bureau Forum in Kansas City earlier in the month.

However, the NMPF modernization plan also includes a few items that were not fully discussed, items that seem to run counter to what dairy farmers were prioritizing, and it leaves out a few items the consensus-builders were vocal about in Kansas City.

The recommendation to return to the higher of Class I mover is an important response by NMPF to dairy farmer concerns. That ball has been in USDA’s court after the first two years of implementation, according to the farm bill language that changed it to an averaging method in the first place. Four years and nearly $1 billion in cumulative Class I net value losses have passed (see chart), but Ag Secretary Tom Vilsack said he needed to see “consensus” before allowing a hearing to be opened.

In post-conference interviews, several Farm Bureau Forum attendees said this was their main priority for participating – to show Secretary Vilsack there is consensus to “fix the mistake.”

For NMPF to include it in their plan is a win.

Another item in the NMPF plan is to develop a process to ensure make allowances are reviewed more frequently through legislation directing USDA to conduct mandatory processor cost studies every two years and to update the make allowances contained in the USDA milk pricing formulas.

There was general agreement from stakeholders in Kansas City that processor costs need to be evaluated and make allowances updated. Over half of the table-groupings identified this. There was also healthy discussion of some ways to do this to minimize the sudden impact on farmer milk checks – all good points for developing a process and for a USDA hearing process to fully evaluate it.

Of the bones to pick, one NMPF recommendation that runs counter to what more than half of the table-groupings prioritized in Kansas City concerns expansion of the pricing survey to include more products. NMPF’s task force decided not to add any products to the price survey, and in fact they are recommending dropping one.

On the chopping block is the 500-pound barrel cheese price in the protein calculation for Class III.

Initially, NMPF’s task force committees looked at adding unsalted butter, skim milk powder (a higher value more standardized product than nonfat dry milk), and they looked at mozzarella cheese. In all three cases, the task force chose not to recommend additional products.

The fact that they are recommending elimination of a product from the pricing survey is curious.

Less than one-third of the Kansas City table-groupings listed elimination of barrel cheese pricing as a priority. Few people questioned NMPF economist Peter Vitaliano on the sensibility of this recommendation – except for yours truly.

I asked this question: “On the blocks and barrels, what do you foresee happening if the barrels are dropped? Right now we’ve got barrels doing more trading than blocks. We’re really not seeing much trading at all in blocks on the CME spot market. Also, would this mean that the cost of making those barrels will be backed out of the processing cost survey in terms of establishing new make allowances?

Vitaliano gave this answer: “That’s an interesting question. I’ve heard different interpretations of what’s going to happen to barrels if they are not used in the formula. Some folks feel they’ll just be priced at a discount to blocks, and the cash market for barrels will go away. I’m not sure I buy into that totally because barrel cheese is becoming a different product.”

The NMPF economist continued with his answer: “Under current quality standards, barrel cheese is the only major way that you can get uncolored whey, which is demanding a premium in the marketplace because all of these nutrition products, these high value nutrition products in demand by millennials and others, they don’t want to show ‘bleached whey’ on the label, they want the white uncolored whey powder that comes from barrel cheese production.”

Apparently, yellow whey from block Cheddar production is less desirable. But we’ve known this for at least 15 years.

In other words, according to Vitaliano, there is right now a ‘subsidy’ effect from the premium paid for the higher value of the uncolored whey that creates the environment to produce more barrel cheese – regardless of what the cheese market is doing.

Vitaliano noted that FDA is going to consider some changes that might alter how this cross-product scenario is playing out by allowing microfiltered milk to be used in plants producing standard-of-identity cheese, but the bottom line is that barrel processors making whey protein concentrate as co-products benefit from the white-whey premium whereas block cheese processors do not.

When the two are averaged together in the Class III protein formula, they represent different markets when they historically moved together, said Vitaliano.

Interestingly, however, barrels have traded higher — not lower — than blocks on the CME for most of this year.

In the purely cheese market history, barrels and blocks moved together more closely, then in times of market shocks beginning in 2009, we would see periods of wide spreads and inversions, sometimes barrels over blocks and most of the time blocks over barrels. During intervals in 2016-17, barrels sold at 10 to 20-cent discounts to blocks. Since 2018, we’ve seen long intervals of barrels over blocks by up to 25 cents and then the flipside with blocks over barrels.

This year (2022), barrels have sold at a premium to blocks consistently since April. The barrel premium over blocks stood at 15 cents per pound last week. That’s a significant impact on farm-level milk prices — to the good.

Coincidentally, barrel prices crashed this week, losing 22 cents, where blocks lost a nickel, thereby pushing barrels under blocks by a few cents on Oct. 25, the same day that the NMPF Board voted unanimously to endorse the multi-pronged modernization plan that includes dropping 500-lb barrel cheese out of the FMMO end-product pricing formula.

For the year (2022), barrels will likely average a nickel above blocks.

There is also the question of price discovery. For the year, we have seen more barrels traded on the CME compared with the volume of blocks.

When following up in a question about what happens to price discovery if the barrels are eliminated from the pricing formula, Vitaliano responded that 15% of the cheese reported in USDA’s weekly price survey is barrel cheese. Rather than reduce the weighted average to reflect that, and rather than including mozzarella in the pricing survey (a higher volume and value item than cheddar), NMPF is simply recommending the elimination of barrels to avoid the block/barrel spread.

Vitaliano said pricing formulas are based on the USDA price survey, not on the CME spot market. However, the CME spot market is used to set pricing for the USDA-reported sales.

Vitaliano also noted that price discovery on the CME spot market is achieved even if no product changes hands because it is a marginal market-clearing trade in the first place.

“The whole industry is watching that market, so if that block price is, let’s say, overvalued, and I have extra blocks and I think that market is high, anybody can go to that market and sell; or if you think it’s undervalued, you can go to that market to buy,” he said. “Just because there’s not a lot of trading, doesn’t mean it’s not necessarily representative of the market… we just have to trade the marginal excess or shortage.”

According to Vitaliano, even the regulators have looked at this and concluded that since the whole industry watches that market — everybody has the opportunity to jump in, and they are not shy if they have a different idea about what the market should be, they can go in and make bids or offers. Those bids and offers move the market whether or not a trade is completed.

Even in light of these explanations, the NMPF recommendation to eliminate barrels from the pricing formula remains a bit of a head-scratcher and needs more discussion and evaluation.

NMPF also wants to expand the forward pricing window for whey and nonfat dry milk (NFDM) price-reporting to 45 days instead of 30 in order to “capture more of the global market in the pricing formula.”

However, when asked why NMPF is not seeking to expand the price reporting to include skim milk powder (SMP) – the globally traded powder – as a means of capturing more of the higher-value global market, Vitaliano said SMP is sold at differing standardized protein rates as a value-added product. NFDM, on the other hand, often has more protein in it, but it’s variable and a lower-priced bulk commodity. It’s a true bulk product that is made to soak up excess milk, he explained.

Vitaliano also noted that NFDM is used by domestic cheese makers, whereas SMP is not.

Ditto the answer for unsalted butter. While the sales of unsalted rival salted butter in volume, and it is a bulk product more consistent with higher-value global markets, the NMPF task force perspective is that the unsalted butter is also a step up as a value-added product for a specific market in foodservice, not a commodity bulk product a plant would make with excess milk.

Ditto for mozzarella, which NMPF maintains is already priced off the USDA-reported cheddar price even though the U.S. sells more mozzarella than cheddar today.

Next week, we’ll dig into the yield factor changes in the NMPF plan and the glaring absence of a recommendation on depooling issues across the country. Solving the depooling conundrum was a priority listed by over half of the consensus-building table-groupings at the Farm Bureau Forum and producers from multiple regions were vocal about it throughout the three-day meeting.

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AFBF milk pricing forum draws 200 stakeholders to KC, some consensus gained, high priority given to return Class I ‘mover’ to ‘higher of’ formula

Posted on October 21, 2022 by Agmoos

By Sherry Bunting, Farmshine, October 21, 2022

KANSAS CITY, Mo. — It was intense, productive, enlightening, and at times a bit emotional. And, yes, there was consensus on some key points during the American Farm Bureau Federation (AFBF) Federal Milk Marketing Order (FMMO) Forum in Kansas City last weekend (Oct. 14-16).

The event was a first of its kind meeting of the minds from across the dairy landscape, involving mostly dairy farmers, but also other industry stakeholders. It was planned by a 12-member committee representing state Farm Bureaus from coast-to-coast, working with AFBF economist Danny Munch.

Farm Bureau president Zippy Duvall kicked things off Friday afternoon, urging attendees to get something done for the future of the dairy industry, to stay cool, leave friendly, and set a pattern for continuing conversations.

“We have the people in this room who I hope can come up with guiding principles,” said Duvall, noting that a meeting like this is something he has dreamed about for years, even prayed for. He talked about his background as a former dairy farmer and assured attendees that milk pricing is a topic he is very interested in.

He challenged the group to come at it with “an open mind. The answers are sitting in this room, not on Capitol Hill. There are some geniuses in this room, people who really understand this system,” said Duvall.

“We all have ideas, and we can lend an ear to other ideas. We learn a lot if we listen to each other,” he said, noting a few of the existing Farm Bureau dairy policy principles: that FMMOs should be market oriented, with better price discovery. They should be fair and transparent, and farmers should be able to understand and compare milk checks.

Hearings not legislation

Duvall noted AFBF agrees with NMPF that future FMMO changes should go through the normal USDA hearing process, not through Congressional legislation. By Sunday, this seemed to be a point of consensus, along with the recognition that FMMOs need updating, but they are still vital for farmers and the industry.

On the Class I ‘mover,’ specifically, Munch noted Farm Bureau already adopted the recommendation through its county, state and national grassroots process to return to the ‘higher of’ — plus 74 cents. The addition of the 74 cents is to make up for the unlimited losses incurred over the past four years.

For NMPF’s part, chief economist Peter Vitaliano and consultant Jim Sleper laid out a series of updates the economic committee’s task force is recommending to the NMPF board, which will vote at the annual meeting at the end of October.

These recommendations include going back to the simple ‘higher of’ for the Class I ‘mover,’ updating make allowances and yield factors, doing a pricing-surface study to update Class I differentials, making changes in the end-product pricing survey to allow dry whey price reporting of sales up to 45 days earlier, not 30 days, and eliminating the 500-pound barrel cheese sales from the Class III cheese price formula to base it only on the block cheese.

Intense, informative, valuable

The three days were intense, covering a lot of information, and were shepherded by expert panels and ‘cat herder in chief’ Roger Cryan, AFBF’s chief economist since October 2021.

Munch served as the emcee — akin to the ghost of milk pricing Past (Friday), Present (Saturday) and Future (Sunday). He introduced the various panels and provided economic snapshots and questions for the 25 breakout tables to discuss, decide and deliver.

Meeting organizers reshuffled the deck of 200 attendees from 36 states and representing nearly 150 state and national producer organizations, Farm Bureau chapters, regulatory agencies, farms, co-ops, processors, financial and risk management firms, and university extension educators.

Attendees were assigned tables with a number on the back of each name tag. The goal was to mix the table-groupings for varied geographic and industry perspectives. Each table was equipped with its own large flip tablet mounted on an easel.

According to Munch, Farm Bureau will scan and collate the information from all of the large tablets and issue a preliminary report to attendees followed by a public report later this year.

On Sunday, the open microphone was lively and most tables reported from their flip tablets. Overwhelmingly, attendees said they found value in the meeting and appreciated the platform. They reported a desire to keep the conversations going, to do this again, not just every 20 years, and not just in response to a problem, but to be forward-looking with the many challenges on the dairy horizon.

Platform for next big issue

For example, Gretl Schlatter, an Ohio dairy producer on the board of American Dairy Coalition (ADC) noted that only Class I milk is mandated to participate in FMMOs, and that today, the FMMOs are weakened with only 60% of U.S. milk production participating in the revenue-sharing pools.

“Where will we be in five years? We do not want to give up on fluid milk – our nutrition powerhouse,” she said. “The issue now is federal milk pricing but the next one coming — fast — is the sustainability benchmarks, the climate scores. We need to keep meeting like this as an industry, keep talking to each other, and get ready for the next big thing affecting our farms and family businesses.”

This was touched upon by Duvall and others, but Cryan reminded everyone that, “Federal Orders are complicated enough without adding the sustainability discussion to it.”

Duvall reminded attendees that this meeting was Farm Bureau’s response to the words of Ag Secretary Tom Vilsack last year, when he said there would be no USDA hearing until the dairy industry reaches some “consensus” on solutions.

This set into motion an already dairy-active Farm Bureau that had formed its own task force, responding to grassroots dairy policy coming up from the county and state levels to national through AFBF’s grassroots process.

In fact, NMPF’s Vitaliano, noted that, “having Roger Cryan at Farm Bureau makes it easier to do this,” to partner on formulating dairy policy because of his background. Prior to coming to Farm Bureau a year ago, Cryan was an economist for NMPF and then for USDA AMS Dairy Programs.

The first hour of the first day included a recorded message from Secretary Vilsack and an in-person presentation by Gloria Montano Green, USDA deputy undersecretary for Farm Production and Conservation.

They encouraged attendees to work together and told them what the Biden-Harris administration has done and is doing for dairy. Primarily, they went through a list of funding and assistance, including the improved Dairy Margin Coverage, the PMVAP payments, Dairy Revenue Protection, Livestock Gross Margin, dairy innovation hub grants and the recent funding for conservation and climate projects that includes 17 funded pilots involving dairy.

They told attendees that the dairy industry is “far ahead” on climate and conservation because it has been involved in these discussions and is already mapping that landscape.

Dana Coale, deputy administrator of USDA AMS Dairy Programs, took attendees through the FMMO parameters. She engaged with the largely dairy farmer crowd in a frank discussion of what Federal Orders can and cannot do. The headline here is that this current time period before a hearing is a time when she and her staff can talk freely and give opinions. Once a hearing process begins, she and her staff are subject to restrictions on ex parte communications.

Consensus to go back to ‘higher of’ formula

If there was one FMMO “fix” that achieved a clear consensus and was given priority, it was support for going back to the Class I ‘mover’ formula using the ‘higher of’ Class III or IV skim price instead of the current average plus 74 cents method that was changed in the 2018 farm bill.

Since implementation in May 2019 through October 2022, the new method will have cost dairy farmers $868 million in net reduced Class I revenue, which further erodes the mandatory Class I contribution to the uniform pricing among the 11 Federal Milk Marketing Orders (FMMO), setting off a domino effect that has led to massive de-pooling of milk from FMMOs and decreased Federal Order participation.

Pa. Farm Bureau presiden Rick Ebert (left), moderated the first panel Friday afternoon (l-r) Dana Coale, deputy administrator USDA AMS Dairy Programs; Calvin Covington, CEO emeritus, Southeast Milk; Anja Raudabaugh, CEO Western United Dairies. After this panel, during the first open-microphone and roundtable breakout, attendees were urged not to leave their flip tablets blank. “Groups with blank boards will have to drink the almond juice in the back,” said AFBF economist Danny Munch, taking note of the hotel offering and to have real milk on-site — provided Saturday and Sunday by Hiland Dairy.

During his presentation Friday, retired Southeast Milk CEO, Calvin Covington, said dairy farmers lost $69 million in revenue for the first 8 months of post-Covid 2022, alone. That figure will rise to an estimated $200 million when September and October Class I milk pounds are tallied.

Noting NMPF’s task force recommends the board approve petitioning USDA to go back to the ‘higher of,’ Vitaliano cited “asymmetric risk” as the reason.

This risk scenario was also explained by others. ADC’s Schlatter, for example, noted the current averaging formula “caps the upside at 74 cents, but the downside is unlimited.”

Vitaliano noted that whenever there is a ‘black swan’ event or new and different market factors, this downside risk becomes unacceptable for farmers, and he indicated these market events that create wide spreads in manufacturing classes are likely to continue into the future.

Dr. Marin Bozic, University of Minnesota assistant professor of applied economics, observed the way this downside ‘basis’ risk becomes unmanageable via new and traditional risk management tools. In his futuristic talk on Sunday, producers asked questions, to which he responded that, “Yes, farmers show me that they can’t use the Dairy Revenue Protection because of this basis risk.”

Bozic is also founder and CEO of Bozic LLC developing and maintaining the intellectual property for risk management programs like DRP.

He also spoke about the concerns of the Midwest as FMMO participation declines.

Presenting his own ideas and separately the ideas of Edge Dairy Farmer Cooperativ, Bozic said Edge is seeking a consensus to support two or three lines in the upcoming farm bill to simply “enable” FMMO hearings to introduce flexibility on an Order by Order basis, so that uniform benefits can be shared instead of a uniform price. Flexibility, they believe, would enable new ‘uniform benefits’ discussion that can help maintain or encourage FMMO participation in marketing areas with low Class I utilization.

Early in the Class I formula loss scenario of 2020-21, Edge had suggested a new Class III-plus formula to determine the ‘mover.’ Bozic said that “the idea of returning to the ‘higher of’ is not a deal breaker for Edge in the short-term.”

Even Mike Brown, senior supply chain manager for Kroger, unofficially indicated IDFA “could be open to the idea” of reverting back to that previous ‘higher of’ formula. As dairy supply chain manager on everything from Kroger’s milk plants to its new dairy beverages, cheese procurement, and so forth, Brown was asked if the averaging formula allowed him to ‘hedge’ fluid milk to manage risk as a processor.

The answer? Not really. Brown said there are ways for processors to manage risk under the ‘higher of’ formula also, but that they haven’t done any hedging under the averaging formula with fresh fluid milk – and very little risk management with their new aseptically packaged, shelf-stable milks and high protein drinks.

Incidentally, he said, the aseptic, ultrafiltered, shelf-stable dairy beverage category “is growing faster than plant-based” in their retail sales.

This exchange and other discussions suggested the averaging formula may have been geared more toward price stability that would encourage processors to invest in expensive aseptic, ultrafiltered and shelf-stable milk-based beverage technologies that result in a storable product needing risk management.

Fresh fluid milk is already advance-priced and quite perishable with a fast turnaround. Aseptic, ultrafiltered and shelf-stable products, on the other hand, can be packaged under one set of raw milk pricing conditions and sold to retail or consumers up to nine months later under another set of raw milk pricing conditions.

Frankly, it appears that the consumer-packaged goods companies (CPGs) may be driving such shifts, just as we heard from Phil Plourde of Blimling/Ever.Ag that CPGs are “all-in” on the climate scoring — the next big thing on the dairy challenge list.

Tacking de-pooling – regional or national?

Attendees came back to the specific concern about de-pooling, which Vitaliano and Cryan both described as an issue to be handled regionally and not through a national hearing.

This did not seem to satisfy some who raised the concern. Toward the conclusion Sunday, Cryan explained it this way:

“De-pooling is a national issue in principle but a regional issue in detail. Every region will have different ideas, needs and situations. If there is consensus (on pooling rules) in a region, then changes could move forward quickly,” he said.

Make allowances are sticky wicket

Attendees appeared to agree that make allowances should be addressed or evaluated through a hearing, but ideas on how to handle this sticky-wicket varied.

Attendees questioned panelists, pointing out that if a farmer’s profit margin on milk is only around $1.00 per hundredweight, then raising make allowances an estimated $1.00 per hundredweight is going to be a tough pill to swallow.

Vitaliano said NMPF is commissioning an economic study with their go-to third-party economist Scott Brown at University of Missouri to show the actual milk check impact of raising make allowances that are embedded into the end-product pricing formulas for the four main products: cheddar, butter, nonfat dry milk and dry whey.

He said the discussions about make allowances as a cost to farmers are “purely arithmetic” but that the “true impact” is not a straight math calculation. Instead, he said, when make allowances are set appropriately, dairy producers ultimately benefit, so in his opinion, it’s not a penny for penny subtraction.

Several other panelists and attendees observed that processors and cooperatives have been creating their own ‘make allowances’ through assessments, loss of premiums, and other milk check adjustments.

*The Saturday afternoon panel of (l-r) Kevin Krentz, Peter Vitaliano, Chris Herlache, and Roger Cryan dove into Class III and IV pricing topics including make allowance formulations and structures.*

Vitaliano stressed that when make allowances are set properly, the industry is stronger and better able to compensate producers. Initially, he said, raising make allowances would have a negative impact on expansion, which in turn would have a positive impact on producer prices.

When asked if raising make allowances would mean lost premiums would return to farmer milk checks, he responded by saying “that depends, and it won’t happen right away.”

In other words, raising make allowances will be painful in the short term, but in the long-term (to paraphrase) that pain leads to gain.

Some panelists and attendees referenced an idea of “phasing in” a future raise in make allowances.

Others wondered why it is necessary with the amount of innovation happening in the 15 years since they were last raised as processors make a wider variety of dairy products – not just those bulk items that are surveyed for end-product pricing formulas.

One idea suggested by a Wisconsin dairy producer was to tie make allowance increases to plant size — much the same way that dairy farmers are only assisted up to a production cap of 5 million annual milk pounds. Cryan said he heard a similar proposal previously to use a graduated scale for make allowance increases according to plant size and presumably age.

This is the crux of the make allowance issue because the new state of the art plants produce many types of products, both commodity and value-added; whereas some of the smaller and older plants that are still vital to the dairy industry are more apt to specialize in producing a bulk commodity with a more limited foray into value-added non-surveyed products.

Modified bloc voting?

While there appeared to be consensus that changes to the FMMOs should be done by USDA petition through the administrative hearing process, not through Congressional legislation, some of the discussion at tables and the open-microphone noted the importance of a producer vote after hearings and USDA final decisions. Many felt farmers should have an individual vote on FMMO changes.

Currently, cooperatives bloc vote for their members to assure that FMMOs are not ended inadvertently by lack of producer interest in following-through on a vote.

One compromise suggested by Bozic was to have a preliminary non-binding vote by individual producers, followed by the binding vote done in its usual way.

This, he said, would at least increase accountability and transparency in the FMMO voting process and bring producer engagement into the FMMO hearing process. To be continued

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Net loss to farmers now $824 mil. over 41 months as change to Class I formula costs farmers $132 mil. so far in 2022

Posted on August 29, 2022 by Agmoos

By Sherry Bunting, Farmshine, August 26, 2022

WASHINGTON — Against the backdrop of declining fluid milk sales, declining Federal Milk Marketing Order (FMMO) participation, coinciding with the accelerated pace of plant mergers, acquisitions and closures in the fluid milk sector, farm bill milk pricing reform discussions are bubbling up.

The two main issues are the negative impact from the Class I price formula change in the last farm bill, and how to ‘fix it,’ as well as how to handle or update processor ‘make allowances’ that are embedded within the Class III and IV price formulas.

Other issues are also surfacing regarding the pricing, marketing, and contracting of milk within and outside of FMMOs as historical pricing relationships become more dysfunctional — in part because of the Class I change.

The change in the Class I price mover formula was made in the 2018 farm bill and implemented in May 2019. It has cost dairy farmers an estimated $132 million in lost revenue so far in 2022 — increasing the accumulated net loss to $824 million over these 41 months that the new average-plus-74-cents method has replaced 19 years of using the vetted ‘higher of’ formula.

The change was made by Congress in the last farm bill in the belief that this averaging method would allow processors, retailers and non-traditional milk beverage companies to manage their price risk through hedging while expecting the change to be revenue-neutral to farmers. No hearings or referendums were conducted for this change.

Instead of being revenue-neutral for farmers, the new method has significantly shaved off the tops of the price peaks (graph) and only minimally softened the depth of the price valleys, while returning net lower proceeds to farmers and disrupting pricing relationships to cause further farm mailbox milk check losses in reduced or negative producer price differentials (PPD), reduced FMMO participation (de-pooling) as well as disruption in the way purchased price risk management tools perform against these losses.

In 2022, we are seeing this Class I ‘averaging’ method produce even more concerning results. It is now undervaluing Class I in a way that increases the depth of the valley the milk markets have entered in the past few months (graph), and as the Class IV milk price turned substantially higher this week against a flat-to-lower Class III price, the extent of the market improvement will be shaved in the blend price by the impact on Class I from what is now a $2 to $5 gap between Class III and Class IV milk futures through at least November.

During the height of the Covid pandemic in 2020, the most glaring flaw in the Class I formula change was revealed. Tracking the gains and losses over these 41 months, it’s easy to see the problem. This new formula puts a 74-cents-per-cwt ceiling on how much farmers can benefit from the change, but it fails to put a floor on how much farmers can lose from the change.

The bottomless pit was sorely tested in the second half of 2020, when the Class III and IV prices diverged by as much as $10, creating Class I value losses under the new formula as high as $5.00/cwt.

The bottomless pit is being tested again in 2022. The most recent Class I mover announcements for August and September are undervalued by $1.04 and $1.69, respectively, as Class IV and III have diverged by as much as $4 this year.

In fact, 6 of the first 9 months of 2022 have had a lower Class I milk price as compared to the previous formula. The September 2022 advance Class I mover announced at $23.82 last week would have been $25.31 under the previous ‘higher of’ formula.

This is the largest loss in value between the two methods since December 2020, when pandemic disruptions and government cheese purchases were blamed for the poor functionality of the new Class I formula.

No such blame can be attributed for the 2022 mover price failure that will have cost farmers $132 million in the first 9 months of 2022 on Class I value, alone, as well as leading to further impacts from reduced or negative PPDs and de-pooling.

The graph tells the story. The pandemic was blamed for 2020’s largest annual formula-based loss of $733 million. This came out to an average loss of $1.68/cwt on all Class I milk shipped in 2020.

These losses continued into the first half of 2021, followed by six months of gains. In 2021, the net gain for the year was $35 million, or 8 cents/cwt., making only a small dent in recovering those prior losses.

Gains from the averaging formula were expected to continue into 2022, but instead, Class IV diverged higher than Class III in most months by more than the $1.48 threshold. Only 2 months in 2022 have shown modest Class I mover gains under the new formula, with the other 7 months racking up increasingly significant value losses – a situation that is expected to continue at least until November, based on current futures markets.

Bottomline, the months of limited gains are not capable of making up for the months of limitless loss, and now the hole is being dug deeper.

True, USDA made pandemic volatility payments to account for some of the 2020 FMMO class price relationship losses. Those payments were calculated by AMS staff working with milk co-ops and handlers using FMMO payment data.

However, USDA only intended to cover up to $350 million of what are now $824 million in cumulative losses attributed directly to the formula change.

Furthermore, USDA capped the amount of compensation an individual farm could receive, even though there was no cap on the amount the new formula may have cost that farm, especially if it led to reduced or negative PPDs, de-pooling, and as a result, negatively impacted the performance price risk management tools the farm may have purchased.

The estimated $824 million net loss over 41 months equates to an estimated average of 58 cents/cwt loss on every hundredweight of Class I milk shipped in those 41 months.

Using the national average FMMO Class I utilization of 28%, this value loss translates to an average loss to the blend price of 16 cents/cwt for all milk shipped over the 41 months, but some FMMOs have seen steeper impacts where Class I utilization is greater.

This 16-cent average impact on blend price may not sound like much, but over a 41-month period it has hit mailbox milk prices in large chunks of losses and smaller pieces of gains, which impact cash flow and performance of risk management in a domino effect.

The 2022 divergence has been different from 2020 because this year it is Class IV that has been higher than Class III. During the pandemic, it was the other way around.

Because cheese milk is such a driver of dairy sales nationwide, the FMMO class and component pricing is set up so that protein is paid to farmers in the first advance check based on the higher method for valuation of protein in Class III. Meanwhile, other class processors pay into the pool using a lower protein valuation method, so the differences are adjusted based on utilization in the second monthly milk check.

This means when Class III is substantially higher than Class IV, as was the case in 2020-21, there is even more incentive for manufacturers to de-pool milk out of FMMOs compared to when Class IV is higher than Class III.

The PPD, in fact, is defined mathematically as Class III price minus the FMMO statistical uniform blend. Usually that number is positive. In the last half of 2020 and first half of 2021, it was negative for all 7 multiple component pricing FMMOs, while the 4 fat/skim Orders saw skim price eroded by the variance.

Now, the situation is different because Class III has been the lowest priced class in all but one month so far in 2022. The milk being de-pooled — significantly in some orders and less so in others — is the higher-priced Class II and IV milk. The Class II price has surpassed the Class I mover in every settled month of 2022 so far — January through July — and the Class IV price also surpassed the Class I mover in 2 of those 7 months.

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From DMC to FMMOs, from price ‘movers’ to ‘make allowances’: House Ag hearing reviews farm bill dairy provisions

Posted on June 23, 2022 by Agmoos

By Sherry Bunting, June 24, 2022

WASHINGTON — It was a lot to wade through, but after two panels and nearly four hours, many cards were on the table, even if the full deck was not counted.

The U.S. House Agriculture Committee hearing Wednesday, June 22 was a 2022 review of the current farm bill’s dairy provisions. Chairman David Scott (D-Ga.) set the stage with his opening remarks, noting a significant part of the hearing would be devoted to the dairy safety net, namely the Dairy Margin Coverage (DMC), but also to talk about the Federal Milk Marketing Orders (FMMO) to learn if this system is “the best fit for today’s world.

“We want to continue to listen to farmers and navigate the issue for the best approaches to any changes,” he said, setting the next stage for listening sessions.

Those testifying talked about building consensus for FMMO changes, a charge handed down from Ag Secretary Tom Vilsack last December, and again more recently, when he said a consensus agreement by stakeholders on one plan was needed before a national hearing on milk pricing could be held.

On the Class I ‘mover’ change in the last farm bill, USDA AMS Deputy Administrator Dana Coale noted that the change was authorized by Congress after an agreement was reached between NMPF and IDFA to change the ‘higher of’ to a simple average plus 74 cents. This was designed to be revenue neutral, she said, but the pandemic showed how an unforeseen market shock can create price inversions that significantly change this neutrality. (testimony)

Coale noted that “market abnormalities” brought on a situation where Class I was below Class III, which doesn’t typically happen, and this created losses.

“In the 2018 farm bill Congress authorized a change to the Class I price mover. We implemented that in the department in May 2019. This change was a consensus agreement reached between NMPF and IDFA to benefit the entire industry. Implementation in the farm bill was designed to be revenue neutral. However, nobody foresaw a pandemic occurring, and no one could have projected the implications that pandemic would have on (prices), particularly within the dairy sector. What we saw occur from mid-2020 through mid-2021 was a significant change in that revenue neutrality. As you look at the Class I mover before the pandemic and moving out of the pandemic, it is maintaining pretty much a revenue neutral position compared to the prior mover. However, due to the (class) price inversions that occurred, we had some major losses incurred by the dairy sector.”
Dana Coale, Deputy Administrator, USDA AMS Dairy Programs

On the primary dairy safety net, Farm Service Agency Deputy Administrator Scott Marlow went over the Dairy Margin Coverage (DMC) and explained the beneficial changes that have been implemented since the 2018 farm bill. (testimony)

He noted that supplemental DMC would have to be made permanent in the next farm bill in order for that additional production history between the 2011-13 figure and the 5 million pound cap to be covered in future years.

“In 2021, DMC payments were triggered for 11 months totaling $1.2 billion paid to producers who enrolled for that year, with an average payment of $60,275 per operation. At 15 cents per cwt at the $9.50 level of coverage, DMC is a very cost-effective risk management tool for dairy producers. Ahead of the 2022 DMC signup, FSA made several improvements. The program was expanded to allow producers to enroll supplemental production (up to the 5 million pound cap). In addition FSA updated the feed cost formula to better reflect the actual cost dairy farmers pay for alfalfa hay. FSA now calculates payments using 100% premium alfalfa hay, rather than 50% of the premium alfalfa hay price and 50% of the conventional alfalfa hay price. This change is retroactive to January 2020 and provided additional payments of $42.8 million for 2020 and 2021. We are very concerned about the margins. It is very important the way DMC focuses on the margin. Farmers are facing inflation of costs beyond the feed that is part of this calculation. This margin based coverage has proven to a model and is something we need to look at for other costs and commodities.”
Scott Marlow, Deputy administrator usda fsa farm programs

Dr. Marin Bozic, Assistant Professor Applied Economics at the University of Minnesota gave some long range trends and observed the factors that are decreasing participation in Federal Milk Marketing Orders. (testimony)

He mentioned that a consideration not to be ignored is the status of vibrancy and competition as seen in transparency and price discovery. When asked about proposals to improve this, Bozic said the proposals need to come forward from the industry, the stakeholders, and that the role of academia is to provide numbers, trends, and analysis of proposals, not to decide and determine these marketing structures.

“Farm gate milk price discovery is challenged by this lack of competition,” he said. “If a corn producer wishes to know how different local elevators would pay for corn, all he needs to do is go online or tune in to his local radio station. Dairy producers used to be able to ‘shop around’ and ask various processors what they would pay for their milk.”

Bozic was quick to point out that, “We should not rush to generalize from such anecdotal evidence, but in my opinion, it would also be prudent not to ignore it.”

“FMMOs start from a set of farmer-friendly ideas… They have somewhat lost luster due to declining sales of beverage milk. In regions other than Northeast and Southeast, fluid milk sales no longer provide strong enough incentives for manufacturers to choose to stay consistently regulated under FMMOs. My estimates are that the share of U.S. milk production in beverage milk products is likely to fall from 18.3% in 2022 to 14.5% by 2032. Do Federal Orders suffice to deliver fair market prices to dairy producers? The critical missing ingredient is vibrant competition for farm milk. Whereas just six or seven years ago, many producers had a choice where to ship their milk, today it is difficult. When some dairy producers have asked for milk price benchmarking information from their educators or consultants, those service providers have in multiple instances faced tacit disapproval or even aggressive legal threats from some dairy processors. Further research and an honest debate on competition in dairy is merited.”
Marin bozic, ph.d., department of applied economics, university of minnesota

Where FMMO changes are concerned, Bozic noted some of the broader issues to come out of the Class I pricing change that was made legislatively in the last farm bill. For example in future reforms, when there is lack of wide public debate on proposals, he said: “It increases odds of a fragile or flawed policy design, and lack of grassroots support for the mechanism in changing markets. FMMOs have a comprehensive protocol for instituting changes through an industry hearing process. The Class I milk price formula can be modified through a hearing process.”

From Bernville, Pennsylvania, representing National Milk Producers Federation (NMPF) and DFA, Lolly Lesher of Way-Har Farms shared the benefits of the Dairy Margin Coverage (DMC) program through FSA and other risk management tools through RMA. She said they purchase the coverage at the highest level each year as a safety net for their 240-cow dairy farm. (testimony)

DMC is intended for smaller farms producing up to 5 million pounds of milk annually, but other farms can layer it in with other available tools at the tier one level on the first 5 million pounds or choose to pay the tier two premium to cover more of their milk through that program, but other tools like DRP are also available, Marlow explained.

Turning to the Class I pricing change in the last farm bill, Lesher said the change was an effort to “accommodate a request for improved price risk management for processors, while maintaining revenue neutrality for farmers… but the (pandemic) dramatically undercut the revenue neutrality that formed its foundation.”

“As valuable as the (DMC) program has been, many farmers have not been able to fully benefit because the underlying production history calculation is outdated. It is critical that the (supplemental DMC) production history adjustment be carried over into the 2023 farm bill… The events of the last two years have shined a spotlight on the need for an overall update to the FMMO system. Class I skim milk prices averaged $3.56/cwt lower than they would have under the previous ‘mover’. This undermined orderly marketing and represented net loss to producers of more than $750 million, including over $141 million in the Northeast Order. The current Class I mover saddles dairy farmers with asymmetric risk because it includes an upper limit on how much more Class I skim revenue it can generate… but no lower limit on how much less… those losses become effectively permanent.”
lolly lesher, way-har farm, bernville, pennsylvania, representing nmpf and dfa

According to Lesher’s testimony: “The dairy industry through the National Milk Producers Federation is treating this matter with urgency and is seeking consensus on not only the Class I mover, but also a range of improvements to the FMMO system that we can take to USDA for consideration via a national order hearing.”

Lesher serves on DFA’s policy resolutions committee and she noted that DFA, as a member of NMPF “is actively participating in its process (for FMMO improvements), which involves careful examination of key issues to the dairy sector nationwide… We look forward to working with the broader dairy industry and members of this committee as our efforts advance.”

Representing International Dairy Foods Association (IDFA), Mike Durkin, President and CEO of Leprino Foods Company stressed the “extreme urgency” of updating the “make allowances” in the FMMO pricing formulas. These are processor credits deducted from the wholesale value of the four base commodities (cheddar, butter, nonfat dry milk and dry whey) used in FMMO class and component pricing as well as within the advance pricing for fluid milk. (Leprino is the largest maker of mozzarella cheese in the U.S. and the world. Mozzarella cheese is not reported on the USDA AMS price survey used in the FMMO class and component pricing.) (testimony)

Durkin also noted the importance of making the Dairy Forward Pricing Program that expires September 2023 a permanent fixture in the next farm bill for milk. This program allows forward pricing of milk used to make products in Classes II, III and IV so that longer-duration contracts can be used by this milk when also pooled under FMMO regulation without fear of the authority expiring in terms of the FMMO minimum pricing. (Milk that is used to make products in Classes II, III and IV is already not obligated to participate in or be regulated by FMMOs.)

“The costs in the (make allowance) formula dramatically understate today’s cost of manufacturing and have resulted in distortions to the dairy manufacturing sector, which have constrained capacity to process producer milk. Congress can improve the current situation by directing USDA to conduct regular cost of processing studies to enable regular make allowance updates. The need to address this lag is now extremely urgent. While our proposal to authorize USDA to conduct regular cost surveys will eventually provide data to address this in the longer term, steps must be taken now to ensure adequate processing capacity remains. Updating make allowances to reflect current costs will enable producer milk to have a home. Making the (Dairy Forward Pricing Program for Class II, III and IV) permanent could also facilitate additional industry use of this risk management tool for longer durations without concern about the program expiring.”
Mike Durkin, president and ceo, leprino foods, representing idfa

Lesher also thanked House Ag Ranking Member G.T. Thompson for his Whole Milk for Healthy Kids Act, seeking to bring the choice of whole and 2% milk back to schools. The bill currently has 94 additional cosponsors from 32 states, including the House Ag Chair David Scott and other members of the Agriculture Committee. The bill was referred to the House Committee on Education and Labor.

Other key dairy provisions were reported and questions answered, including a witness representing organic dairy farmers. There’s more to report, so stay tuned for additional rumination in Farmshine and here at Agmoos.com

Recorded hearing proceedings available at this link

Written testimony is available at this link

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Future of Federal Milk Pricing Forum got ‘wheels turning’

Posted on March 1, 2022 by Agmoos

‘We need to figure out a way to get farmers’ voices incorporated into this discussion’

Table I reflects a decade of change in FMMO participation as total U.S. milk production grew 13.3% from 2011 to 2021, and the percentage of milk pooled on FMMOs fell from 82% in 2011 to 60.5% in 2021. California became an FMMO in 2018 after previously being a state order, so California’s production is not included in the 2011 pooling comparison so the pooling percentages are relative to production in FMMO and unregulated regions. Class I pounds as a percent of total production fell from 28.7% in 2011 to 18.6% in 2021. Figures for 2021 are shown both ways, including and excluding California to compare to 10 years ago when the number one dairy state had its own state order with different pooling and classification rules and incomplete data, but the percent of change is nonetheless eye-opening. Chart compiled by S. Bunting

By Sherry Bunting, published in Farmshine, Feb. 18 and 25, 2022

GREEN BAY, Wis. — Do dairy farmers want to save the baby, save the bathwater, change the flow of the bathwater, or tighten the plug on the drain before the bathwater drains to the point of taking baby with it?

That’s a brutal take after 90 minutes and a lot of information, starting with the basics and hearing perspectives and questions during the American Dairy Coalition’s Future of Federal Milk Pricing Forum on Feb. 15.

It was a first step in what ADC sees as a continuing conversation and effort to engage dairy farmers to lead the process. They said the next forum will be in March.

Geared specifically for dairy farmers, the forum attracted 160 participants from across the country, representing every element of the dairy industry — including dairy farmers.

The virtual format was moderated by Dave Natzke, markets and policy editor with Progressive Dairy magazine. Featured presenters were Calvin Covington, retired co-op COO with 45 years of experience in federal and state marketing orders; Frank Doll, a third generation Illinois dairy farmer involved in American Farm Bureau’s dairy policy committee, and Mike McCully, industry consultant on the IDFA dairy ingredients board and economic policy committee.

Included were comments presented by attendees, who pre-registered for three-minute slots. Others typed into the queue.

“This is complicated, and many people say it can’t be fixed, but we have a great amount of expertise and value here. We covered a lot,” said Laurie Fischer, CEO of ADC at the end of the forum. “We can’t just let this drop. We need to continue to move forward.”

“We heard a lot of good information that has everyone’s wheels turning,” added ADC president Walt Moore of Walmoore Holsteins, Chester County, Pa. He encouraged producers to reach out and engage to tackle the hard topics.

The goal of this initial forum was to inform dairy producers on the Federal Milk Marketing Orders (FMMO) and pricing process to become engaged and have a greater voice in guiding future policies.

For its part, American Farm Bureau Federation spent the past couple years going through a similar working group with policy recommendations coming from states to national and back to states.

Several commenters concurred with the position of ADC, Farm Bureau and other organizations that Class I pricing should return to the ‘higher of’ method until future policies can go through what could be a long hearing process of potential revision for the future.

In fact, one eye opener during the Forum was Doll’s confirmation that Farm Bureau policy now includes support for going back to the ‘higher of’ — plus adding 74 cents — in the calculation of the Class I mover price, while remaining open to other ideas.

Doll said consensus was hard to find in the Farm Bureau working group of 13 members from across the country due to regional differences in the makeup of processing. But general recommendations found agreement, including the reference to Class I as well as modified bloc voting where co-ops can vote for their members on Federal Orders, but farmers can cast their own votes and be encouraged to do so.

Several attendees cited the need for a vehicle for producers to have real input without fear of retribution, that farmers should collectively ask questions of their cooperatives, seek better representation and together, hold their cooperatives accountable to represent their interests.

“We need to figure out a way to get farmers’ voices incorporated into this discussion. I hear from producers all the time, but there is fear of retribution, the threat that your milk is not going to get picked up. If you are on a board and speak up, you’re not there very long,” said Kim Bremmer, representing Venture Co-op in Wisconsin, a third-party ‘testing co-op’ qualified by USDA.

She addressed bloc voting, saying: “What’s the point of having a hearing if producers can’t vote? We don’t have great representation from some of the groups that say they represent us.”

Bottomline, said Bremmer: “We have to address how to get more of the producer voice and not just the processor voice — because they’re not the same.”

She asked: “Is it a conflict of interest if you’re a processor and you’re marketing milk and you’re also advocating for producers? I think that’s an important question that needs to be answered. We need to stay engaged in this and be able to ask the tough questions and demand some answers.”

ADC’s Fischer said the organization wants to work with farmers and their state and national organizations to provide a vehicle to bring farmers together and compose a list of pricing policy items to explore further with experts.

One clear change in the dairy industry formed the crux of the discussion: The growth of milk production in the U.S. — in concert with growing export sales and declining fluid milk sales — put export sales volume above Class I volume as a percentage of total milk solids in 2021.

McCully described this as “a seismic change.”

Covington confirmed that Class I sales — as a percentage of total milk production — fell below 20% in 2021. The percentage of Class I milk within the 137 billion pounds pooled on 11 FMMOs in 2021 was about 30%.

Contrary to the widely held belief that FMMOs regulate a majority of the milk, they simply do not. Covington confirmed that the 137 billion pounds of milk pooled on 11 FMMOs in 2021 represents only about 60% of U.S. milk production.

The FMMOs aren’t designed for this direction that the dairy industry is going toward global markets, according to McCully.

He said the world will look to the U.S. as the “go-to market,” claiming New Zealand and the EU are maxed out. He described the “white gallon jug” as being the most prime example of a low-margin commodity and predicted ‘value-added’ products will return more dollars to farmers in the future. These are recurrent themes heard from speakers at winter meetings this year.

(Author’s note: In contrast, current industry-wide discussion on the ‘sustainability’ side is for a ‘stable’ U.S. cattle herd to be an indicator of dairy’s climate neutrality. If exports grow, and the U.S. herd remains ‘stable’, then export milk will have to come from growth in output per cow and displacement of Class I production. One can see how geographic camps can set up, since fresh fluid milk sales are vital to the viability of dairy farms in areas outside of the earmarked growth areas for dairy manufacturing in the Central U.S. — the question is how to bridge it.)

At the same time, dragging feet doesn’t seem to be much of an option.

If dairy policy remains ‘status quo,’ leaving the FMMOs ‘as-is,’ they could eventually cover less and less milk and potentially collapse, according to McCully.

Covington also addressed this, noting that FMMOs “were designed for fluid milk, but today, fluid milk is a minority use. People used to drink their milk, now they are eating their milk.”

McCully noted the need for dairy innovation. He said make allowances have facilitated large-scale commodity plant construction supplied by large-scale farms, suggesting it is these built-in make allowance ‘margins’ that favor commodity production and deter innovation.

“If end-product pricing continues, the make allowances will have to be raised,” he said, citing a new make allowance study “fresh off the press.”

In 2019, USDA commissioned Dr. Mark Stephenson, dairy economist at University of Wisconsin-Madison, to do the study. Stephenson recently announced it is complete and will soon be released by USDA. McCully’s glimpse at the report shows make allowance calculations to be “significantly higher” than the amounts embedded currently in end-product pricing formulas.

Western Pennsylvania dairy nutritionist Harry Stugart offered his concise, data-driven argument that the make allowances be removed from the formula for the ‘advance’ Class I mover price because these make allowances do not pertain to fluid milk. In January 2022, he said they amounted to $2.67 per hundredweight.

Another crucial part of the discussion was how FMMOs actually work and what they do, besides pricing.

Covington gave attendees a primer of key points to think about as discussions move forward. What he shared may be old news to some, but it’s surprising how many people do not know these facts:

— FMMOs are not required by law, they are simply “enabled” to exist by law. This means producers vote to have them (California in 2018) or to terminate them (Idaho 2004).

— Only Class I fluid milk plants are required to be regulated under FMMOs.

— Class II, III and IV plants participate voluntarily, and they tend to do so “when it’s economically feasible.” Rules of participation vary from Order to Order.

— FMMOs establish other things besides minimum pricing for regulated plants. This includes setting payment terms, providing market information and market services such as testing and auditing.

— The last FMMO reform (2000) was complicated and took four years. It was a combination of legislation (1995 Farm Bill) and an administrative rulemaking process.

— Today, there are four classes of milk, but that was not always the case.

— Today, the Class I mover (base price), as well as the Class II, III and IV prices are established to be the same in all FMMOs, but in the past different FMMOs had different mechanisms.

— Cooperatives are not required to pay FMMO minimum prices even if they own regulated Class I plants because cooperatives are viewed by the FMMOs as one big producer and can make their own decisions about distributing the revenue received to their farmer-members.

— Today, over half of the Class I fluid milk plants in the U.S. are either owned by cooperatives or by large retail supermarkets. Over the past 60 years of consolidation, FMMOs have gone from regulating 2250 fluid milk plants in 1960 to just 225 in 2021.

— Cooperatives balance the Class I market at a cost. Excess milk can go to unregulated buyers at a price that is several dollars below the minimum price. Some co-ops run their own balancing plants. These costs can result in paying farmers below minimum price.

“Milk pricing should return a fair cost to producers, processors and retailers. A chain is only as strong as its weakest link,” said Sherry Bunting, speaking on behalf of the Grassroots PA Dairy Advisory Committee. She also highlighted the Whole Milk for Healthy Kids Act, H.R. 1861, explaining how support for this legislation is essential — no matter how milk is priced.

“In the process of working on this legislation, our (Grassroots PA) committee has identified other concerns. It is hard for producers to advocate when even such a simple and good thing as whole milk in schools is rebuked,” said Bunting. “Farmers hear from leaders and inspectors: ‘If we sell whole milk in schools, do you think we can just stop making cheese and other products?’ Or ‘All you are doing is disrupting markets and creating a butterfat shortage.’ Or ‘Be careful what you wish for.’ These are veiled threats.”

Bunting highlighted the need for greater competition, accountability, transparency and timeliness of price reporting.

“Dairy farmers have farms to run, cows to care for, and they become paralyzed by the complexity and lack of transparency in the system and their milk checks. They become overwhelmed and unconfident, even fearing retribution,” she said.

Bremmer specifically addressed milk check transparency.

“We have members with attorneys that cannot interpret their milk checks. That has to stop,” said Bremmer. “Why wouldn’t processors want to show farmers what they are paying them? What is the reason? To have attorneys and others looking at it and they can’t figure it out, that’s a real problem. We think they’re probably re-blending some things to make another ‘make allowance’. We know these things are happening all across the United States.”

Payment terms are critical in this conversation. Even the best-made plans for risk management mean nothing if farmers don’t receive timely and consistent payments for their milk due to the high capital costs and cash flow needs of running a dairy farm.

One commenter said farmers want their income to come from consumers, not from the federal government. He wondered why Federal Milk Marketing Orders (FMMOs) are even needed to guarantee payment.

“Why? So you get paid,” replied panelist Covington. “The FMMOs all establish dates when advance and final payments are made. Having been a co-op manager working with fluid milk plants, I can’t emphasize enough how important this is.”

He also pointed out the important auditing, weights and measures, and market information the FMMOs provide.

McCully said these other services provided by FMMOs are “something we need more of going forward. We need less (price) regulation and more (market) information,” he added. “What’s not working is the milk pricing.”

Here’s where the crux comes into play: The FMMOs are not set up to regulate a global product market, and the industry has set its sights on exporting even more. This is leading the dairy industry to look at how other countries price milk as it relates to the U.S. pricing system and its ability to “be globally competitive.”

As the percentage of Class I sales have declined in relation to growth of U.S. milk production over the past decade, the percentage of milk pooled on FMMOs has also declined from 82% in 2011 to 60% in 2021 (See Table I).

Covington explained how pooling plays out within the FMMO system: “A regulated plant is required to pay its direct shippers and any co-op supplying milk a minimum blend or uniform price. Each Order takes the revenue from each class at the minimum price and pulls it together into one pool to come up with the uniform price.”

He said Class I differentials “have two purposes, to move milk to fluid use and to gain additional revenue for dairy farmers.” They range from $1.60/cwt in the extreme northern U.S. to $6.00/cwt in Miami, Florida and are added to the base Class I mover price.

The regulated Class I plants pay the difference between the uniform price and the Class I minimum price into the FMMO. Other class plants voluntarily participate to take a draw from the FMMO to add to what they pay their producers. That’s how it has worked most of the time – until now.

Diminished Class I sales as a percentage of total milk flip this switch, and the 2018 Farm Bill change to averaging Class III and IV skim plus 74 cents — instead of the ‘higher of’ — along with the advance pricing element, have increased the de-pooling pressure on this system, especially during times of volatility.

When asked about wide price inversions that occurred in some months over the past two years, both Covington and McCully observed the impact on bottlers paying above minimum prices to attract milk away from then higher-value Class III.

In thinking about the future, Covington reminded attendees of the past. He said at one time some Orders had individual handler pools — not marketwide pools — a nod to the idea of how FMMOs could continue to regulate Class I, if handlers in the other classes lose interest in participation.

Back when California was a state order, virtually all milk was pooled. Plants had to make decisions about pooling annually by January 1.

McCully contended that this scenario led to dumping of milk and inefficient transport to other areas. According to his analysis, the idea of making the pooling rules more restrictive and uniform across all FMMOs would lead processors to completely leave the system, and they can do that because their participation is voluntary, except for Class I.

Risk management was on the mind of several commenters, including Doll. He pointed out how the ‘holes’ in the Class I pricing change were exposed by the pandemic volatility. (Significant losses to Class I value are occurring again in the February and March 2022 Class I price.)

Joining Doll as a fellow Illinois dairy farmer was Bryan Henrichs. He said the class price inversions during the pandemic left many farmers on the losing end of what they thought were ‘safe’ $18 Class III forward contracts. The up to $9 negative PPDs kept them from achieving that price when the Class III price exceeded the contract level, but the farmer didn’t receive that price in the milk check — a double whammy.

Henrichs and others noted that milk should be priced competitively and simplified. Henrichs mentioned the idea of pricing milk at one price — no matter what it is used for — allowing market participants, including farmers, to manage risk and trade location basis, like for corn.

Arden Tewksbury’s comments from Progressive Agriculture Organization based in Meshoppen, Pennsylvania were presented by Carol Sullivan — highlighting the need for cost of production in the pricing equation, along with a realistic supply management program.

Annual FMMO pooling decisions (instead of in and out), and his longtime support for whole milk in schools were other key points offered by Tewksbury.

One attendee stated that if processors are looking to raise their ‘make allowances,’ why not add a ‘make allowance’ for producers?

On cost of production, McCully pointed out that the range is wide between a 50,000-cow dairy in western Kansas and a 40-cow dairy in northern Vermont, for example. He said interstate movement of milk and the fact that FMMO participation is voluntary for over 80% of the milk outside of Class I creates issues for using a blanket national average cost of production.

McCully said ‘cost-plus’ contracts are being used today by some processors and producers, but this is only for milk sold outside of the FMMO system.

As confirmed by Covington, 40% of the U.S. milk supply was priced outside of the FMMOs in 2021. He said this could increase as Class I becomes a smaller slice of the growing pie, especially in areas of the country where Class I is already quite small.

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Senate Ag subcommittee hearing on milk pricing: Agreement that Federal Orders need reform, but how? That’s the billion-dollar question

Posted on September 17, 2021 by Agmoos

By Sherry Bunting

WASHINGTON, D.C. — Federal Milk Marketing Orders, their purpose, performance, problems and solutions — including a recent change in the Class I fluid milk pricing formula — were the focus of a Senate Ag subcommittee hearing on ‘Milk Pricing: Areas of Improvement and Reform” Wednesday, Sept. 15 in the Capitol.

“We are in the midst of a modern dairy crisis, magnified by a Class I pricing change in the 2018 Farm Bill. The pandemic and economic downturn are not the only causes of this problem, but they did exacerbate it. This system cannot adapt to market conditions and thus is not fairly compensating our dairy farmers. The formula change is a symptom of larger problems in a system that is confusing, convoluted and difficult to understand,” said Gillibrand Wednesday.

She recounted the more than $750 million in producer losses when looking at the previous Class I fluid milk ‘mover’ formula that used the higher of Class III or IV manufacturing milk prices and comparing it to the current formula that uses an averaging method plus 74 cents.

The hearing was a first step Sen. Gillibrand had previously indicated in a press conference last June, when the full extent of dairy farmer financial losses was becoming known.

As the hearing got underway, Gillibrand observed that from 2003 to 2020 there has been a 55% decrease in the number of dairy farms in the U.S.

“We are using an almost 100-year-old system with the last reform 20 years ago, where dairy farms are not operating as they were then. We need to put the power back in the farmers’ hands.” said Gillibrand.

The power to make the issues known was in the hands of three dairy farmers making up the first panel — Jim Davenport, Tollgate Farm, Ancramdale, New York; Christina Zuiderveen, Black Soil Dairy, Granville, Iowa, and Mike Ferguson of Ferguson Dairy Farm, Senatobia, Mississippi.

This was followed by a panel with Dr. Chris Wolf, ag economics professor at Cornell University, Dr. Robert Wills, president of Cedar Grove Cheese and Clock Shadow Creamery, Plain, Wisconsin, and Catherine de Ronde, vice president of economics and legislative affairs with Agri-Mark cooperative based in Massachusetts with members in New England and New York.

One thing everyone agreed on, in differing degrees, is that reforms are needed in the Federal Milk Marketing Order System.

Testifiers agreed that a key purpose of the FMMOs is to make blended payments more equitable between producers supplying different classes and uses of milk.

All three producers agreed the FMMO system should continue, although they shared differing ideas about how reforms could improve it.

There was also agreement that the new Class I ‘mover’ formula is not adequate for changing and uncertain markets. They agreed that using the USDA rulemaking process is the way to make such changes to be sure all parties are heard.

However, the current change in the Class I ‘mover’, implemented in May 2019, was made legislatively during the 2018 Farm Bill, not through the USDA hearing process.

Ferguson, a 150-cow dairy producer in Mississippi said he supported bringing back the previous ‘higher of’ method while a longer-term solution can be considered through the USDA hearing process. He noted periodic reviews of the adjuster could also be helpful, and that the situation should be addressed in the short term.

He explained that the Southeast producers across FMMOs 5, 6 and 7, produce about 45% of the annual fluid milk needs of their growing population, and when supplemental milk has to be brought in, those Southeast producers pay the price to get it there. That was very difficult and costly when class pricing inversions happened last year for a prolonged period of time.

Davenport, milking 64 cows in New York observed that the Class I price was aligning better in the past few months, but “we’re not out of the woods yet,” on Covid-19, he said.

“The FMMO system has served farmers well but needs adjusted to reflect current product mixes and market swings,” said Davenport, adding that the fluid market is very important for smaller sized dairies and regional supply systems. He proffered the hope that Class I, long-term, could be stabilized by basing it on something other than the volatility of cheese, butter and powder prices.

“The rulemaking process USDA uses will work, it just takes time,” he said, adding that the Class I price should reflect how hard it is to supply the fluid market.

Zuiderveen, whose family has dairies totaling 15,000 cows in Iowa and South Dakota, said FMMO pricing for milk of the same quality should align and foster innovation and competition instead of consolidation. It should also be transparent and promote a nimble industry that can respond to changes, she said.

“Distortions can cause the system to become unglued,” she said, noting that if producers can’t anticipate which classes will participate in the pool and don’t know how that will drive their milk price, then they can’t manage their price risk effectively, losses become compounded, and this discourages risk management.

Zuiderveen and others noted a variance as wide as $9 per hundredweight was experienced in mailbox milk prices from region to region and neighbor to neighbor at intervals last year.

“That creates a sense of helplessness among producers,” said Zuiderveen.

Dr. Wolf noted multiple reasons for the negative PPDs and milk check losses under the new formula, including declining Class I fluid milk sales and increased milk components, but said the two biggest reasons for milk check losses under the new formula compared with the old formula were the large volumes of de-pooled milk that reduced FMMO pool funds as well as the Class I change itself.

Wolf explained multiple factors in the wide divergence between Class III and IV. A primary one was government purchases being tilted to cheese during that time. “This large divergence in butter and cheese prices meant that the Class I milk prices were lower than they would have been under the former pricing rule,” he said.

Ferguson noted that the government cheese purchases were intended to support dairy producers as well as the public during the pandemic, but it ended up having a “devastating effect on our fluid market,” he said, noting that a more balanced approach may have helped.

Through difficult times in the past, price alignments were more stable in large part because of the ‘higher of’ method keeping the Class I price above the blended price so no matter what was purchased, all farmers, supplying all classes of products, benefited more equitably.

Under the current formula, the pandemic cheese purchases helped support dairy producers, but also led to distortions that contributed to large differences in milk prices at the farm level.

Dr. Wills was the only processor testifying. He said the survival of dairy depends on being able to evolve on these pricing issues. “Farmers are only better off if the premium (shared in the FMMO pools) exceeds the value of other classes, and that’s inefficient,” he said, adding his opinion that FMMOs have outlived their purpose.

“The redistribution makes it appear that all farmers are winners, when the evidence shows pricing equity is being lowered,” said Wills. “I fear for the future of the dairy industry. The federally administrated milk pricing now functions opposite of its intent, resulting in higher prices for consumers and lower prices for farmers. It responds slowly, encourages inefficient trucking and promotes consolidation.”

Wills also mentioned the wave of competition from an array of plant-based and blended products as well as cellular agriculture and bio-engineered analog proteins, none of which are included in the FMMO pricing structure.

Wills brought home the reality for rural communities when small and mid-sized farms are lost. Near the end of the hearing, he responded to a question from Senator Roger Marshall (R-Kansas) asking what are his farmers’ biggest concerns, what do they talk about when he sits down with them for coffee at a restaurant?

“My farmers tend to be smaller producers,” said Wills, president of two Wisconsin cheese companies supplied by 28 dairy farms. “They are concerned about having continued access to markets as the industry continues to consolidate. Even in Wisconsin, where we have more competition than most places, it is hard to find homes for those dairies that are cut loose from big plants.”

As consolidation accelerates, he said, there is a trend toward plants not wanting to make multiple stops. “The impact of losing all of those producers … that 10% per year loss (over time) just hollows out our communities. There’s not a restaurant in town anymore to have coffee at,” said Wills. “We lost our hardware store, our grocery store. A lot of it has to do with our rural communities being hollowed out. The ability to maintain those small farms is also important for our communities.”

On program safety nets and risk management tools, Dr. Wolf noted that the Dairy Margin Coverage program has a very positive impact on small producers vs. large producers, and that the Dairy Revenue Protection and Livestock Gross Margin are aimed at bigger farms. He said farms with those programs in place were “in a better place” last year.

However, elsewhere in his testimony and in that of others, the risk management difficulties during the unusual price inversions were also mentioned, when the Class I pricing change was exacerbated by pandemic disruptions creating those misaligned conditions.

As for simply nationalizing the FMMO pooling rules or making them more rigid, Zuiderveen said this would lead to more processors staying out of the pool, and Wills said de-pooling is the pressure relief valve processors need.

With a nod to pricing delays that affect the transparency in sending market signals through the FMMO system, Wills said he found out that week (Sept. 13) what he will be paying for the milk he bought on August 1, and his producers who sold that milk to him were also just finding out what they would be paid. That’s six weeks after shipping the milk.

Wills said this kind of inefficiency makes it difficult to plan and compete in business.

Another positive to come out of the hearing was when Davenport brought up legalizing whole milk in schools, to which Chairwoman Gillibrand, Senator Marshall, a doctor, and a few other members of the Senate Subcommittee gave hearty verbal support.

Here is the link to the recorded Senate Ag subcommittee hearing https://www.agriculture.senate.gov/hearings/milk-pricing-areas-for-improvement-and-reform

Look for more in a future Farmshine.

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USDA moves forward with $350 mil. for dairy producers targeted to Jul-Dec 2020 FMMO Class I ‘mover’ losses

Posted on September 1, 2021 by Agmoos

Eligible producers to be paid by agreements with milk handlers, co-ops

By Sherry Bunting, Farmshine, August 27, 2021

WASHINGTON, D.C. — According to USDA, milk handlers and cooperatives were contacted Aug. 23-27 about entering into signed agreements to distribute the approximately $350 million in Pandemic Dairy Market Volatility Assistance payments the agency announced on Aug. 19.

The agreements will be to disburse funds to their qualifying producers and provide them with education on a variety of dairy-related topics.

Handlers and cooperatives have until Sept. 10, 2021 to indicate to USDA their intention to participate. USDA will then distribute the payments to participating handlers within 60 days of entering into an agreement. Once payment is received, a handler will have 30 days to distribute monies to qualifying dairy farmers.

These funds will be disbursed to “eligible” dairy farmers through “eligible” Federal Milk Marketing Order (FMMO) independent milk handlers and cooperatives, not through FSA. There will be no signups for this program, and payment rates have not been published.

What is unique about the volatility payments is they will be producer-specific and targeted based on FMMO records and agreements with milk handlers to be the payment conduit.

USDA indicates this program is a “first step” and is aimed at compensating producers for volatility and federal pricing policy changes. The payments will cover 80% of the calculated lost value on Class I fluid milk pounds for July through December 2020.

This language suggests the payments will be limited to producers whose milk was pooled on FMMOs during those six months.

One point of contention with the “volatility assistance” is that the eligible producers will be limited to payments associated with up to 5 million pounds of annual production — even though farms of all sizes incurred these losses due to a combination of pandemic volatility and federal pricing policy changes. The Adjusted Gross Income verification will also be required, like for the prior administration’s CFAP payments.

A special webpage at the USDA AMS Dairy Programs website has been created where more details were provided this week. Officials responding to Farmshine questions said this webpage will be updated on an ongoing basis with more details as they become available. The webpage link is https://www.ams.usda.gov/services/pandemic-market-volatility-assistance-program

A brochure is also available at https://www.ams.usda.gov/sites/default/files/media/PandemicAssistanceMarketVolatilityBrochure.pdf

The actual cumulative net Class I value losses to dairy producers over a longer 27-month period (May 2019 through July 2021) were more than twice the amount of the program, pegged at over $750 million.

During the six months covered by the volatility assistance program – July through December 2020 – the difference between Class III and IV milk prices was $5 to $10 per hundredweight. Further amplifying the impact of this volatility on producer blend prices was the 2018 Farm Bill change (implemented May 2019) to use an averaging method instead of the previous ‘higher of’ Class III or IV skim prices to set the Class I ‘mover.’

This change also led to massive de-pooling and severely negative producer price differentials (PPDs) for most of the past 27 months. Even in some of the positive PPD months, the PPDs were smaller than normal, representing lost value to producers in excess of $3 billion.

In disbursing these volatility assistance payments, milk handlers and cooperatives will be reimbursed for limited administrative and educational costs, according to the USDA brochure.

The education piece stipulates that each participating handler or cooperative “will provide educational materials to all producers by March 1, 2022. The USDA brochure indicates that they may provide the education in the form of mailings, recorded online trainings, live virtual webinars, and/or in-person meetings.”

This education revolves around federal dairy programs, according to USDA. Example topics are Federal Milk Marketing Orders; Dairy Margin Coverage, Dairy Revenue Protection, Dairy Mandatory Price Reporting, Chicago Mercantile Exchange, and Forward Contracting.

USDA will make these education materials available, or the participating handlers and cooperatives may use their own educational materials or training.

Each participating handler will have to verify how many producers were provided with the information and the methods that were used for the education.

The Pandemic Dairy Market Volatility Assistance Program was announced during meetings with farmers and a tour of farms with Senator Patrick Leahy in Vermont last Thursday. Back in June, Agriculture Secretary Tom Vilsack had committed to provide additional pandemic assistance for dairy farmers in an exchange with Sen. Leahy during an Appropriations hearing.

“This (program) is another component of our ongoing effort to get aid to producers who have been left behind and build on our progress towards economic recovery,” said Vilsack. “This targeted assistance is the first step in USDA’s comprehensive approach that will total over $2 billion to help the dairy industry recover from the pandemic and be more resilient to future challenges for generations to come.”

In a press statement this week, NMPF president and CEO Jim Mulhern stated that the $350 million only compensates for some of the damage resulting from the pandemic.

“NMPF asked the department to reimburse dairy farmers for unanticipated losses created during the COVID-19 pandemic by a change to the Class I fluid milk price mover formula that was exacerbated by the government’s pandemic dairy purchases last year,” said Mulhern. “When Congress changed the previous Class I mover, it was never intended to hurt producers. In fact, the new mover was envisioned to be revenue-neutral when it was adopted in the 2018 Farm Bill. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions that so far have cost dairy farmers nationwide more than $750 million from what they would have been paid under the previous system.”

NMPF and IDFA suggested and agreed to the Class I pricing change during 2018 Farm Bill negotiations, and no hearings were held before the FMMO method for calculating the ‘mover’ was implemented in May 2019.

Mulhern went on to say that the arbitrary low limits on covered milk production volume mean many family dairy farms will only receive a portion of the losses they incurred on their production last year.

“Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses,” Mulhern said, adding that NMPF is “continuing discussions about the current Class I mover to prevent a repeat of this problem.”

For its part, the American Dairy Coalition has been facilitating nationwide discussions with other dairy groups on the dairy pricing, de-pooling, negative PPD losses and risk management impacts since last winter, including a letter signed by hundreds of dairy producers and organizations sent last spring to NMPF and IDFA seeking a seat at the table on solutions for the concerns about the Class I ‘mover’ change and supporting a temporary return to ‘the higher of’ until other methods can be appropriately vetted with a hearing process.

ADC’s nationwide discussions brought attention to this issue and contributed to Senator Kirsten Gillibrand and 20 other U.S. Senators sending a letter to Agriculture Secretary Tom Vilsack seeking financial assistance for dairy farmers for these milk price value losses. A dairy situation hearing is anticipated in the Senate Subcommittee on Dairy, Livestock and Poultry that is chaired by Sen. Gillibrand.

— The Aug. 19 Class I volatility program announcement also mentioned $400 million for the Dairy Donation Program. The DDP implementation process was announced Aug. 25.

— In addition, USDA announced on Aug. 19 an estimated $580 million in Supplemental Dairy Margin Coverage (DMC) to allow “modest increases” in the production history of enrolled dairy producers up to the 5 million pound annual production cap for Tier One coverage. Specific details for adjusting DMC production history have not yet been provided.

— Additionally, USDA announced the inclusion of premium alfalfa prices in the calculation of the feed cost portion of the DMC margin.

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Sen. Gillibrand calls for dairy farm payments, Senate hearings on pricing, investigation of corruption, antitrust concerns

Posted on June 3, 2021 by Agmoos

Summertime is pastoral on this central New York dairy farm, but U.S. Senator Kirsten Gillibrand (D-NY) says she is concerned about the state’s diverse dairies.

By Sherry Bunting, Farmshine, June 4, 2021

WASHINGTON, D.C. — Senator Kirsten Gillibrand (D-NY), chair of the Senate Agriculture Subcommittee on Dairy, Livestock and Poultry, told reporters last week that she is working on milk pricing legislation and wants to have dairy pricing hearings before the August congressional break.

She also said she believes a thorough review and recommendations are needed regarding her concerns about corruption and antitrust activity in milk pricing.

After sending a bipartisan letter with 21 Senate co-signers to Agriculture Secretary Tom Vilsack, Sen. Gillibrand called a press conference by zoom on May 26 to cite dairy farm losses and push for use of existing funds to provide direct payments to dairy farmers for the first half of 2021, retroactive to Jan. 1.

“I’m working on legislation right now to change how we do dairy pricing in America, but ultimately we need something like a 9/11 style commission to actually investigate the industry. You’ve seen it in New York. We’ve had dairy farmers that have committed suicide. We’ve seen the dairy industry steadily decline over the last 20 years,” said Gillibrand, calling food production an issue of national security.

“We cannot lose the ability to feed our own people. If you have a market that’s fundamentally flawed and constantly are leaving producers unable to survive in the industry, there’s a problem. So I think we need a very thorough investigation of my concerns of corruption and antitrust activity,” she said.

Gillibrand told reporters that her office has “already asked to hold hearings. on dairy pricing to start the ball rolling on an investigation and have not been given permission yet from the larger committee,” she said, noting the Senate subcommittee she chairs would be appropriate to hold the hearings.

“I want to hear from producers, I want to hear from the middlemen, I want to hear from retailers. I want to figure out where this corruption lies, and then perhaps, based on the information we get, set up the commission, and I want it ready for the next farm bill,” Gillibrand explained.

Right from the outset of the press conference, the Senator raised concerns about the Class I milk pricing change in the last farm bill that has had devastating effects in dairy farm income losses when hundreds of millions of dollars in collective Class I price devaluation occurred, contributing to de-pooling of milk, negative Producer Price Differentials (PPDs) and failure of risk management tools amid the volatility of pandemic market disruptions.

Referencing the bipartisan letter from senators to Secretary Vilsack, Gillibrand said USDA has the funds available through the existing CFAP and Pandemic Assistance for Producers initiative to move right now to make direct payments to dairy farmers she said are necessary to help them recover.

“One of the few things that has helped dairy farmers offset some of their losses was the CFAP dairy payments,” she said. “This assistance was critical to farmers, but these payments were put on pause in January, when the administration announced it was doing a 60-day regulatory review. When the review was concluded, no further payments to dairy farmers were announced.”

Gillibrand noted that USDA announcements cite funding for purchases through the Dairy Donation Program within the new Pandemic Assistance for Producers, but USDA has failed to announce direct dairy farm payments in 2021.

“That’s why we sent the letter to Secretary Vilsack,” the senator said. “My colleagues and I outline the need for USDA to continue issuing payments to dairy farmers for the first six months of 2021 retroactive to January 1^st.”

Senate Majority Leader Chuck Schumer (D-NY) also weighed in on dairy farm relief last week in a joint press release with Gillibrand. The two New York senators cited the importance the Empire State’s dairy farms and noted that U.S. dairy farmers collectively received a smaller and inequitable share of pandemic ag assistance payments to-date.

“For an industry that had razor thin margins before the pandemic, for some of our dairy farmers, receiving additional federal assistance is the difference between keeping their farms and losing their livelihoods,” Schumer said in a statement.

Asked how much money should be allocated for direct payments to dairy farmers, Gillibrand said it needs to be responsive to individual producers and their market conditions, to be flexible like the Paycheck Protection Program in being tailored to businesses that lost money during the pandemic.

“I’d like it to assess losses in any given market and what would make these dairy farmers whole. I’d like it to be nimble and specific,” she said. “The money’s there. This is in USDA’s hands, so we need to have a response from Secretary Vilsack.”

On dairy pricing, Senator Gillibrand was emphatic.

“Even before the pandemic, dairy farmers were struggling to receive a fair price for their milk,” she said, noting the change in the method of calculating the Class I mover “compounded this issue. That one change caused dairy farmers to lose out on $725 million in income since 2019.”

The 2018 Farm Bill changed the Class I price at the request of International Dairy Foods Association (IDFA) and National Milk Producers Federation (NMPF) to an averaging method plus 74 cents. This was implemented in May 2019.

Previously, the Class I base price ‘mover’ was calculated using the ‘higher of’ Class III or IV prices.

This Class I mover change not only resulted in net losses of now over $750 million from May 2019 through June 2021 but also contributed to negative PPDs across Federal Milk Marketing Orders for 17 of the past 24 months.

When government cheese purchases for food boxes and stop/start domestic and global economies during the pandemic created volatile shifts in demand, there were intervals of higher cheese and Class III milk prices that could have provided some much-needed milk-pricing relief for dairy farmers.

However, as the averaging method devalued Class I in relation to Class III, milk handlers depooled massive volumes of milk — changing the blend price equation. While a few handlers may have passed some of that value on to their own producers, most did not.

As previously reported in Farmshine, American Dairy Coalition has been facilitating grassroots phone conference calls since early March on the Class I pricing, depooling and negative PPD issues to foster industry dialog on solutions. One idea that came from those grassroots discussions was to return, temporarily at least, to the higher-of method for calculating the Class I mover until a future path can be properly vetted by what is normally a lengthy USDA FMMO hearing process.

On April 12, after collecting signatures from hundreds of producers and state and national organizations, ADC sent a letter to NMPF and IDFA seeking a seat at the table for producers to seek solutions.

On April 23, NMPF floated its proposed solution to adjust the average-of ‘adjuster’ every two years and publicly announced its intentions to ask USDA for an expedited emergency FMMO hearing.

On April 27, four midwestern dairy groups — Edge Cooperative, Minnesota Milk Producers, Wisconsin Dairy Business Association and the Nebraska State Dairy Assiciation — put forward a Class III-plus proposal for calculating Class I and were joined by the South Dakota Dairy Producers in a May 19 request that USDA broaden the scope should there be an emergency FMMO hearing.

On April 26, Ag Secretary Tom Vilsack told reporters during a meeting of the North American Agriculture Journalists that the issue is “very complex,” and that “conversations need to mature before anybody makes a decision that there’s going to be a significant change.”

On May 5, Farm-First cooperative, based in Madison, Wisconsin, announced it would submit a proposal to revert to the higher-of method of Class I mover calculation if a USDA FMMO hearing is held.

On May 15, producers in the Southeast FMMOs began circulating a letter addressed to Secretary Vilsack seeking payments to dairy farmers that reflected inequitable losses in high Class I FMMOs.

On May 18, the letter from senators to Secretary Vilsack called for assistance in the form of direct payments to U.S. dairy farmers.

In the absence of action or response from USDA on relief or solutions at the time of the May 26 press conference, Sen. Gillibrand described a potential “two-part” Senate subcommittee hearing on dairy pricing, where experts could give testimony on all aspects of the problem.

The bipartisan letter from senators to Sec. Vilsack noted more than a decade of decline in dairy, multiple consecutive years of milk prices below cost of production and even mentioned competition from plant-based dairy alternatives labeled as ‘milk’.

“Our dairy farmers have really been hit hard for the last six years,” said Gillibrand, stressing the critical role dairy farmers play in the food supply chain, the economy, their communities and national security.

“We really need answers now,” she said.

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Grassroots efforts continue seeking solution to Class I formula change losses

Posted on May 14, 2021 by Agmoos

While the buck is being passed, dairy producers are talking with lawmakers about the unintended consequences from the Class I mover change Congress enacted in the 2018 Farm Bill.

This illustrates the Class I mover formula since May 2019. Prior to that, the ‘higher of’ Class III or Class IV advance skim pricing factors was plugged into the first item under step 1 without the +74-cent adjuster to automatically be used as the Base Class I Skim Milk Price in the rest of the formula. Image Source: USDA

By Sherry Bunting, Farmshine, May 2021

WASHINGTON, D.C. — The Class I ‘mover’ is the subject of much discussion — two years after the averaging method plus 74 cents replaced the ‘higher of’ method to determine the base producer price of Class I beverage milk in May 2019.

A letter drafted by Senator Kirsten Gillibrand of New York is gathering signatures from Senators and will be sent to Ag Secretary Tom Vilsack regarding financial assistance to cover direct and indirect losses borne by dairy farmers due to the formula change exacerbated by the pandemic.

“By allocating more direct payments through CFAP, USDA could take action to reduce the strain that dairy farmers are facing. Specifically, the agency should continue issuing payments to dairy farmers under CFAP, or through any further assistance programs that USDA conceives, including the Pandemic Assistance for Producers initiative, for the first six months of 2021 and make these payments retroactive to January 1st,” the Senator’s letter states.

The American Dairy Coalition is urging producers to contact their Senators about signing onto the letter by end of day Monday, May 17. Senators should contact Dominic Sanchez at Senator Gillibrand’s office by email at Dominic_Sanchez@gillibrand.senate.gov

A transparent USDA hearing process was used 20 years ago to originally set the ‘higher of’ as the method when USDA rejected proposals for averaging Class III and IV due to depooling and negative differentials. However, in the 2018 Farm Bill, the Class I mover was changed from ‘higher of’ to an averaging method legislatively without hearings, without comment, without the producer referendum — without vetting.

Dairy groups are working to raise awareness among key lawmakers and USDA about the 24-month net loss of over $750 million in the Class I mover price from May 2019 through April 2021. In addition, these losses impacted orderly marketing and other factors, contributing to net losses exceeding $3 billion nationwide from inverted class price relationships that produced negative PPDs and led to depooling. In addition, dairy farmers had risk management losses when their milk was devalued, but they paid for risk management that failed because it was aligned with a “market value” they did not receive.

Sen. Gillibrand’s letter highlights the concern about the unintended consequences of the Class I formula change to averaging and away from ‘higher of’.

In the Northeast FMMO 1, for example, the Class I change, alone, accounted for a net loss of over $160 million in Class I devaluation over 24 months, and there were broader impacts of basis losses from reduced and negative producer price differentials (PPD) and depooling.

Northeast producer blend price losses are estimated to be $1.10/cwt, net, from May 2019 through April 2021. (Calculations are being done for other FMMO regions so stay tuned.)

Similar loss estimations can be made for broader impacts across the U.S., depending upon how cheese plants determined pay prices for farmers when the FMMO uniform blend prices were suppressed by $1 to $10 across 7 of the 11 FMMOs that report producer price differentials. These PPDs were severely negative from October through December 2019 and from June 2020 through April 2021.

These formula-related losses are expected to continue through most of 2021 due to current market factors affecting how the class pricing formulas, with the change to Class I, relate to each other and how this impacts depooling.

Producers from the Southeast U.S. also began circulating a letter to Secretary Vilsack this week highlighting the steep losses in the three Southeast FMMOs and seeking direct payments through Coronavirus stimulus funds.

The Southeast letter asserts that milk producers in FMMO 5, 6, and 7 (Appalachian, Florida and Southeast) disproportionately bore 21% ($155 million) of the lost revenue directly attributable to the Class I mover change, because the 21% of Class I value loss fell on dairy farmers shipping just 5.5% of total milk pooled across all orders in the U.S.

Southeast producer blend price losses are pegged at $1.25/cwt.

The Southeast letter states that the loss was not shared equitably among all dairy farmers, due to depooling, which the letter indicates made it possible for dairy farmers marketing milk to cheese plants (Class III) to receive the shortfall.

However, many producers whose milk was depooled from FMMOs did not receive that shortfall from milk buyers, unless they had milk contracts based directly on cheese prices. Many manufacturing class handlers use the FMMO blend price as the benchmark for paying producers outside of pooling.

Several industry sources observe that this change turned out to be a big benefit to processors at great expense to producers. The problem surfaced under market conditions before the pandemic and was made worse by market conditions since the pandemic.

Even National Milk Producers Federation (NMPF) has admitted as much, stating that the International Dairy Foods Association (IDFA) wanted this change in the first place. NMPF indicates they went along with it after studying some historical trends thinking the 74-cent adjuster to the average would produce a result that was “revenue-neutral” for dairy farmers.

It was anything but ‘revenue-neutral’ for dairy farmers, even before the pandemic. The pandemic impact simply magnified the severity of loss.

Proposals continue surfacing since NMPF announced its intention to seek a USDA emergency hearing with a proposal to tweak the adjuster to the average every two years.

Minnesota Milk Producers, Wisconsin Dairy Business Association, Edge Cooperative and the Nebraska State Dairy Association joined together with a concept to change the Class I mover to a Class III-Plus that would be based on Class III announced prices instead of advance prices.

FarmFirst Cooperative based in Madison, Wisconsin, announced it would put forward a proposal to return to the ‘higher of’ calculation — if USDA holds a hearing. However, to-date, no official FMMO hearing requests have been received by USDA.

The first few months of the new Class I mover formula in 2019 were net-positive to the Class I price, but this dissolved by July, almost a year before the pandemic, when the gap between the rising Class III price and the averaging method for the Class I mover narrowed because the spread between Class III and IV widened.

Government food box dairy purchases through the pandemic included more Class III products (cheese) than Class IV (butter/powder) or Class II (soft products that are priced by Class IV).

But food boxes included plenty of Class I (fluid milk). Trouble is, fluid milk is not ‘market valued’ except for the value of its components in manufacturing. Fluid milk is discounted as a ‘loss-leader’ by large supermarkets, especially those that process milk.

Another factor that contributed to the wide spread between Class III and IV pricing has been the difference in product inventory as a factor of production, exports and imports.

In 2020, butter inventory reached a 20-year high, while cheese inventory declined. Butter production increased, especially in the first half of 2020, to exceed the record-breaking production of 2018, making less cream available for cheese production. Meanwhile, cheese exports rose 16% while butter exports declined 5%.

On the flip side, cheese imports declined 10% while butter imports were the second largest on record, up 15% over the previous year for the first 7 months of 2020. The U.S. ended 2020 with butter imports 6% above 2019.

The Class I formula change made FMMOs even more vulnerable to massive depooling against this volatile and divergent backdrop of Class III vs. IV. As averaging reduced Class I pricing, and the Class III milk was depooled, the net result was blend prices that reflected a larger portion of the much lower Class IV (and II). Dairy farmers have been educated to produce milk with higher component levels of fat and protein as a method to improve profitability, but negative PPDs snub this value at the farm level.

Looking through USDA Federal Milk Marketing Order statistical bulletins, this reporter calculates over 70 billion pounds of milk were depooled across all FMMOs from July 2019 through March 2021 due to inverted class pricing.

PPDs reflect the difference between the Class III market value of components minus the blend price of all classes in the pool. When PPDs are negative, it reflects insufficient pool funds to pay that value).

The depooling of Class III milk and the negative PPDs (above) began on the West Coast in July 2019. By September through December 2019, all multiple component FMMOs had negative PPDs, that became more negative as volumes of depooled milk were noted in the central part of the country, moving east.

The four skim/fat pricing FMMOs in the Southeast and Arizona were quite negatively affected by lower Class I minimums in the fall of 2019 and for many of the months thereafter. Topsy-turvy All-Milk and Mailbox Milk prices reported by USDA are further proof of shrinking basis in producer milk checks affecting the performance of purchased risk management tools. Even those USDA-reported All-Milk and Mailbox prices do not tell the whole story because USDA states that “the value is in the marketplace” even if it is not equitably shared with producers.

In essence, the Class I mover change was made to give large global companies buying large volumes of milk a means of ‘hedging’ their risk through forward-contracting on the futures markets. But this ‘benefit’ has resulted in taking real money out of dairy farm milk checks and has made it difficult, in some cases impossible, for producers to manage their risk with tools they purchase in the marketplace and through USDA.

Interestingly, the nation’s largest Class I fluid milk company — Dean Foods — filed for bankruptcy sale and reorganization in November 2019 in the midst of the first appearance of negative PPDs and depooling pre-pandemic.

By January 2020, PPDs turned positive but narrow in comparison to prior history, so that’s still a loss. Then, in February, a month before the Coronavirus shutdown, negative PPDs and depooling again showed up in the Central, Pacific and California FMMOs.

By June 2020 — in the midst of the Covid-19 pandemic and one month after the bankruptcy sale of most of the Dean Foods Class I fluid milk plants to DFA — severely negative PPDs of -$1 to -$10, exacerbated by depooling, were prevalent across all FMMOs, most every month from June 2020 through the present.

Even in the Northeast FMMO, where statistics show positive PPDs in some months when other FMMOs were negative, the basis loss to Northeast producers is real because even the positive PPDs in FMMO 1 over the past 24 months are $1 or more below where they were just two years earlier.

As reported in Farmshine last week, Secretary Vilsack says it’s “complicated” and the industry is “divided” so no “significant” changes can be made “quickly.”

NMPF says it intends to request an FMMO hearing of its proposal to adjust the adjuster to improve equitable treatment of producers.

IDFA is publicly silent.

Other groups are floating a proposal that, if officially proposed in an emergency hearing, would turn the deal into a full and lengthy FMMO hearing.

During a Hoards Dairy Livestream session May 5 with Erin Taylor from USDA AMS Dairy Division, a little more was learned about how USDA handles ‘emergency’ FMMO hearings. Taylor said proposals can be put forward with arguments as part of the package, explaining the emergency to make a case for why the USDA should move quickly. USDA then typically responds and gives the industry a 30 day notice if a hearing is granted, but the statute only requires 15 days, and 3 days at a minimum — depending on the emergency conditions.

Like other FMMO hearings, testimony is taken, and if USDA agrees with the proposal based on the evidence, the department could do a recommended decision, receive public comment and then publish a final decision and conduct the producer vote. Or, the Secretary can do a tentative final decision for immediate producer vote while taking testimony concurrently. In such a scenario, USDA would come back and consider that testimony, and if a change to the tentative final decision is made — based on testimony and comment — then a second producer vote would be conducted.

Generally speaking, according to Taylor, a move to use a tentative final decision cuts about 4 to 5 months out of the hearing process, but this is not done without proponents showing good cause and when there is no opposition to the proposal.

And the Congress? They made the change from ‘higher of’ to ‘average-plus’ at the request of IDFA with agreement by NMPF in the last Farm Bill.

Many members of Congress don’t know what they did. Others are “blowing it off” as “pandemic-related,” when in reality the issues began in 2019.

Lawmakers are also being told the 2018 ‘average-plus’ deal was an historic agreement between “producers” (NMPF) and “processors” (IDFA), when in reality the grassroots in either of those categories had no opportunity to be heard, to testify, to comment, and producers were denied a referendum on the change. In addition, there was little industrywide discussion.

National and state dairy organizations have been collaborating on weekly calls facilitated by American Dairy Coalition to thoughtfully approach a solution from both the short- and long-term perspectives.

While most would agree hearings on long-term FMMO reforms are needed, the short-term fix for the unvetted Class I formula change by Congress could be undone with legislation reverting to the previous formula, or through an expedited FMMO hearing as the flaws of the new formula have been revealed in both the pre- and post-pandemic markets by this average-plus change that was not vetted.

Grassroots efforts seek to raise awareness in Congress to move something forward legislatively.

While the Congress has always said it does not want to set precedent for making milk price formula changes outside of the vetting process of an FMMO hearing, and while the Congress rebuffed numerous requests for a national FMMO hearing in every Farm Bill since 2008, the Congress did go ahead and set that formula-changing precedent in 2018 by passing language in the Farm Bill to change the method for determining the Class I mover from the ‘higher of’ Class III or IV to ‘average-plus’… and here we are.

Producers can point this out when talking with lawmakers, to let them know that the current situation is unsustainable. Producers can explain to their legislators how this impacted them, to help them understand there is more to this story than “it’s the pandemic and you’ll be fine.”

If nothing is done, several industry observers see dairy farm exits rising at a faster rate in the coming year.

In short, the Class I mover change in the 2018 Farm Bill:

— was not vetted through a transparent hearing process,

— disrupted orderly marketing,

— undermined Federal Order purpose,

— created NET losses for producers of $751 million in Class I value (May 2019 through April 2021), and contributed to a net loss of over $3 billion in negative PPDs and depooling,

— created additional losses for producers in the failure of risk management tools not designed for inverted pricing, and

— undermined performance of the DMC safety net due to basis loss.

While the American Dairy Coalition continues to facilitate grassroots producer discussion and seeks a seat at the table for producers with NMPF and IDFA, ADC has also sent an email to dairy producers and organizations with a letter they can provide to lawmakers.

The most important thing is for lawmakers to understand how the pricing change, and the domino effect of negative PPDs and depooling have affected their already struggling dairy farm constituents over the past two years.

To locate the Senators and Representatives for your state, visit https://www.govtrack.us/congress/members

Proposals, hearing requests, grassroots outreach to lawmakers as Class I ‘mover’ debate heats up

Posted on April 30, 2021 by Agmoos

By Sherry Bunting, Farmshine, April 30, 2021

WASHINGTON, D.C. — National Milk Producers Federation (NMPF) announced Friday, Apr. 23 a Class I mover reform proposal and intention to request a USDA Federal Milk Marketing Order (FMMO) hearing that would be limited to proposed changes to the Class I mover, after which USDA would have 30 days to issue an action plan that would determine whether the department would act on an emergency basis.

According to NMPF, their proposal would “modify the current Class I mover, which adds $0.74/cwt to the monthly average of Classes III and IV, by adjusting this amount every two years based on conditions over the prior 24 months, with the current mover remaining the floor.”

This adjuster change, if done today for the next two years, would pencil out above the current 74 cents (estimated $1.63).

The NMPF action comes after eight weeks of discussion by grassroots dairy producers and state and national dairy organizations seeking a seat at the table to address lost income and risk management disruptions influenced in part by the Class I mover change that was passed by Congress in the 2018 Farm Bill and implemented by USDA in May 2019.

While NMPF and IDFA have reportedly had conversations on the issue, IDFA has not yet publicly-announced a position.

On Tuesday (April 27), another proposal — called Class III Plus – was announced by a collaboration of state dairy groups in the Midwest. This proposal would also end Class I advance pricing factors.

Seasoned dairy policy analysts and economists suggest more proposals may be forthcoming.

USDA “will do the things it knows it can do to impact the (milk income) concern by providing better market opportunities, new market opportunities,” said U.S. Agriculture Secretary Tom Vilsack answer questions from North American Ag Journalists Monday, calling FMMO reform a “tough issue.”

On the specifics, though, the Secretary said simply that USDA would look to the industry “to work with them on the changes that need to take place.

“It’s a very very complicated issue, and not one that should be easily characterized. Anyone that tries to do that doesn’t understand the complexity of that particular topic. It’s very complex,” Vilsack explained.

He acknowledged that conversations are occurring within the dairy industry, but said: “Those conversations need to mature a bit more before anybody makes a decision that there’s going to be a significant change.”

However, in contrast to the Secretary’s observations, a “significant change” has already been made across all FMMO’s, legislatively, and it was done without hearings, without comment, without a producer referendum, without much conversation and without the knowledge of many dairy producers.

So here we are. The buck is being passed as the ball is being volleyed between industry, legislative and administrative. The volley started when NMPF and IDFA proposed the mover change in 2017-18. Congress then passed it, thereby replacing the mover that had been set by administrative hearing process 20 years ago, when USDA chose the higher of instead of an averaging method and documented disorderly marketing, negative differentials and depooling, back then.

Now, the volley is open again for what looks to be a toss from legislative to industry to administrative hearing requests.

For its part, NMPF states that the current mover was “intended to be revenue neutral while facilitating increased price risk management by fluid milk bottlers. The new Class I mover contributed to disorderly marketing conditions last year during the height of the pandemic and cost dairy farmers over $725 million in lost income.”

Analysis by various industry experts, including Farm Bureau’s Market Intel, peg the broader net farm losses at $3 billion when the change influenced a domino-effect of negative producer price differentials (PPDs) and massive depooling.

In the three fat/skim pricing FMMOs of the Southeast U.S. where PPDs are not shown, Calvin Covington calculates dairy farmers in FMMO 5, 6 and 7 collectively had net loss of $1/cwt off the blend price for 23 months due to the mover change from higher of to average-plus.

NMPF’s proposal is described as helping “recoup the lost revenue and ensure that neither farmers nor processors are disproportionately harmed by future significant price disruptions.”

A Penn State Ag Law Center webinar already planned on FMMOs this week, turned into a hot topic. Brook Duer, staff attorney for the center and moderator asked webinar guest Dr. Andrew Novakovic, Cornell professor emeritus about the specifics of the NMPF proposal.

“This proposal would recalculate the adjuster every two years, except the adjuster can never be less than 74 cents,” Novakovic said. “They are not talking about changing the ‘average of’ back to the ‘higher of.’”

In weekly producer conference calls facilitated by American Dairy Coalition after a letter was sent to NMPF and IDFA signed by hundreds of dairy farmers and organizations, a return to the higher of was identified as a short-term option while long-term proposals are vetted. American Dairy Coalition, and the grassroots groups who have been part of the conversation since February, sent emails with talking points, urging producers to contact key lawmakers and talk to them about the situation.

Proponents of a return to the higher of point out it was already vetted by USDA hearings, whereas the current average plus 74 cents was not.

“As the COVID-19 experience has shown, market stresses can shift the mover in ways that affect dairy farmers much more than processors. This was not the intent of the Class I mover formula negotiated within the industry,” noted Randy Mooney, chairman of NMPF’s Board of Directors in a press release. “The current mover was explicitly developed to be a revenue-neutral solution to the concerns of fluid milk processors about hedging their price risk.

“Dairy farmers were pleased with the previous method of determining Class I prices and had no need to change it, but we tried to accommodate the concerns of fluid processors for better risk management,” Mooney stated further.

“Unfortunately, the severe imbalances we’ve seen in the past year plainly show that a modified approach is necessary. We will urge USDA to adopt our plan to restore equity and create more orderly marketing conditions.”

Modifying the adjuster every two years is backward-looking for forward-adjustments.

The current mover is already challenged by timing between Class I advance-pricing and Class II, III, IV announced prices as well as the higher protein production on farms in a system that prices protein in manufacturing classes but prices fat and skim solids in the fluid class.

In the Class III Plus proposal jointly announced by Wisconsin Dairy Business Association, Edge Dairy Farmer Cooperative, Minnesota Milk Producers Association and Nebraska State Dairy Association, advance pricing of Class I would also be ended.

The mover would be linked to the Class III announced skim price, not the advance skim pricing factor. The proposal includes an adjuster that would be revised annually in September by USDA for the forthcoming calendar year. It would equal the average of the monthly differences between the higher of Class III and IV skim milk prices, and the Class III skim milk price during the prior 26 months.

This adjuster would be floored at 36 cents just for the 2021-25 period “to facilitate faster convergence toward revenue-neutrality after COVID-19,” according to the announcement.

For its part, NMPF states that, “The significant gaps between Class III and IV prices that developed during the pandemic exposed dairy farmers to losses that were not experienced by processors, showing the need for a formula that better accounts for disorderly market conditions.”

To be sure, all FMMOs also saw gaps and inversion for three to six months in the pre-pandemic summer and fall of 2019.

When asked about the FMMO purpose and the ‘mover’ being set at the higher of to move milk to Class I use, Novakovic said USDA would have to look at the actual effect of the ‘average of’ on that purpose.

“Do we see any problem getting milk into Class I markets? Are they complaining there is not enough milk going to Class I?” he asks. “Probably the opposite direction is more true.”

Moving milk to Class I may be more of a discussion for the high fluid utilization areas of the Southeast, where producers end up indirectly ‘paying’ to bring milk in during deficient times of the year. This can be costly when there are price gaps and inversions as documented in the fall months of both 2019 and 2020.

When asked what recourse dairy producers may have in this, Novakovic indicated that lobbying the legislature is “theoretically possible” but that a legislative change is not likely apart from the next Farm Bill, which is three years away.

He also speculated that if someone put forward a proposal to return to the higher of for the next two years — and referred to the reasons given by USDA in its 2000 hearing decision – it’s “not inconceivable” that USDA could say they like what they had better than what Congress made them do, and perhaps like it better than changing adjusters or other ‘new’ proposals that would require a more lengthy hearing process if the industry is divided.

Novakovic was also asked how the Class III Plus proposal from the Midwest would affect Pennsylvania, given the state’s mostly Class I and IV utilization.

He responded to say Pennsylvania is part of FMMOs that include Class III (Northeast Order 1 and Mideast Order 33). He did not see any particular effect for the Northeast markets.

“Class IV would still be Class IV and II will be driven by IV values, and III would be unaffected, so the only question is what you would see happening with Class I,” said Novakovic. “The only way I see this proposal being viewed as a surprise is on the occasions when IV is higher than III, and that has occurred with some frequency in the past.”

The Northeast FMMO has seen a decline in Class III percentage relative to increase in Class IV and II over time. Class I sales also declined precipitously over the past decade but stabilized in 2019 and 2020 with rising sales of whole and 2% milk.

Novakovic confirmed that part of the problem in pricing Class I is the lack of beverage milk market indicators to do so.

As mentioned previously in Farmshine, Class I is required to participate in FMMO pooling, other classes are voluntary. Class I also has regulation at some state levels. On the other hand, in most states, beverage milk is used as a loss-leader in supermarkets, especially as large processing retailers dramatically cut the gallon price to compete for shoppers.

Under these factors, there is no way to gauge a ‘market value’ for Class I beverage milk apart from piggy-backing the other classes that value milk’s components in the manufacture of cheddar, butter, nonfat dry milk and dry whey.

The issue at hand is how to do that, now, in hindsight, after a significant surgical change was quietly made, and failed, and in the future within the context of FMMO reform.

-30-

Ag Moos

Tag Archives: Class I Mover

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Grassroots efforts continue seeking solution to Class I formula change losses

Proposals, hearing requests, grassroots outreach to lawmakers as Class I ‘mover’ debate heats up

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