A new proposal has come forth from some in the industry to dramatically alter the Federal Milk Marketing Order system, albeit temporarily. While we all want higher milk prices, but arbitrarily bumping prices to a made-up number could cause more harm than good. People buying milk, both at the processing plant and at the store, may simply decide they no longer need it.
While raising the Class I price would help those in Class I (fluid milk) areas, those farms without most of their milk in Class I would be left behind. While a mandated change in Class I milk price could affect government-related risk management programs, it could also limit hedging on the CME, which would adversely affect market liquidity.
Instead of trying to artificially create a price, we prefer the Dairy CORE Program as below:
- Keep FMMOs the same. This is not the time to adjust Federal Milk Marketing Orders, nor would an artificial Class I price benefit farmers or consumers in the long run. We need the market to decide where the milk should go, not a government intervention.
- Raise or eliminate the cap on payments to something more meaningful. Current caps of $125,000 per commodity and $250,000 total are out of touch with the risk undertaken by even small dairy businesses. Further, our friends in the pork industry deserve aid that provides meaningful help to their industry.
- Our analysis proves that raising the cap in the dairy industry would not dilute payments for smaller farms. Whether the cap is raised or not, everyone would see about $1.30/cwt of annual production; and that’s in the first round that covers 85% of losses Jan 1-Apr 15, and 30% Apr 15-Oct 15.
Minnesota Milk looks forward to continuing discussions about the best form of relief for the dairy industry, including farmers, cooperatives, proprietary processors, retailers and consumers.