Let’s start with something we can agree on: 2020 has been an unpredictable year for the dairy industry. We began the year optimistic that the higher milk prices posted at the end of 2019 would carry into 2020 and help us dig out of the hole created by several years of low milk prices. As we know now though, that light at the end of the tunnel turned out to be a freight train. COVID-19 resulted in the immediate closure of restaurants and schools across the country, disrupting the dairy supply chain and contributing to a sharp decline in milk and dairy commodity prices. Following the passage of the CARES Act and USDA’s distribution of billions in ad hoc financial support to dairy farmers and the implementation of a very successful Farmers to Families Food Box program, farm income and cheese prices soared – for some.
Large price spreads between class III milk and the other classes of milk contributed to negative producer price differentials and massive de-pooling of milk. Shortly thereafter, farmers across the country began to ask how the current Federal Milk Marketing Order system could be modernized to prevent the unintended consequences brought on by COVID-19 from ever happening again.
Per USDA, changes to the FMMO require a rulemaking that is industry-driven; Changes must be proposed by the industry, not the department. The process must be all-inclusive, allowing for anyone to take part in the rulemaking-related hearings by providing testimony or submitting public comments. FMMO hearings are transparent in that the department’s decisions are based solely on the record of the rulemaking proceeding. And finally, changes to the FMMO must be ‘farmer-approved.’
Successfully making constructive changes to the FMMO can be hard. Proposed changes need thorough economic analysis demonstrating the need to modify the FMMO (economists needed). The proposal likely also needs to be reviewed by an attorney (lawyers needed). Preparing testimony, readying for cross-examination by the department and industry stakeholders, and drafting public comments are painstaking tasks (economists, lobbyists and lawyers needed). Then, for the final changes to be implemented, a majority of dairy cooperatives and independent producers pooling on the order must approve the FMMO (industry consensus needed).
The good news is that Farm Bureau can be a partner. Working at the county, state and national levels, Farm Bureau has the industry experts and resources needed to participate in the process to modify a FMMO. We also happen to have the best ground game in the industry, thanks to the power of our grassroots members working collectively to advance our policy goals.
So what is the first step? In January 2020, voting delegates to AFBF’s 101st Annual Convention adopted policy to support giving ALL dairy farmers the opportunity to vote independently and confidentially during an FMMO referendum process. For those dairy farmers electing not to cast a ballot, if applicable, their cooperative could vote on their behalf. The concept is called modified bloc voting and would ensure that dairy farmers not only have a seat at the table, but that with the help of their Farm Bureau and other industry resources, they can take an active role in shaping the next generation of dairy policy and milk pricing rules.
An important and much-needed first step, modified bloc voting will put the dairy industry and FMMO milk pricing rules in the hands of farmers for the first time in the nearly 90-year history of the FMMO program.
John Newton is American Farm Bureau’s Chief Economist. Column originally appeared in the December|January 2020-2021 Rural Route.