I have previously written about aspects of the package of dairy policy changes proposed by the National Milk Producers Federation ("NMPF"). In this entry, I am focusing on the federal milk marketing order aspects of the package. As an attorney with a practice involving dairy policy, these proposals have the potential to re-write the landscape for dairy pricing in the United States.
NMPF has released the outline of its federal milk marketing order ("FMMO") reform package. However, rather than providing the specific operation of the plan, NMPF has only provided broad brush overviews for public consumption.
Based on information provided on the NMPF FFTF website, what will be included in legislation are provisions that would eliminate the current system of four classified minimum prices for milk. In its place would be a competitive manufacturing price, resulting from a survey of proprietary cheese manufacturing plants. This competitive price would not be a minimum price. In fact, the only plants required to pay a minimum price would be Class I manufacturing plants.
The minimum Class I price would continue to utilize a "higher of" pricing mechanism, where the Class I mover would be the surveyed competitive manufacturing price, or the price derived from the current Class IV pricing model. For many producers, maintaining the "higher of" feature of the current pricing system was imperative. Those producers should be encouraged by this feature of the NMPF proposal.
NMPF's plan would also change the pooling of returns for producers. Under current regulations, returns from the sale of all producer milk is pooled, and producers are paid a blended price. Under the NMPF proposal, only Class I differentials, plus a flat $0.30 per hundredweight from Class II handlers would be pooled.
NMPF estimates that its plan could increase the returns to producers by 11 to 47 cents per hundredweight, depending on which federal milk marketing order producer is located in. But the specifics of NMPF's analysis has not been widely distributed. instead, NMPF has stated that the details of its plan (and hopefully including the accompanying economic analysis) will be released when finished legislation is introduced in Congress. While several producer groups have endorsed FFTF, several others are waiting to see the proposed statutory language.