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The American Dairy Coalition (ADC) said it is applauding Senator Kirsten Gillibrand (D-NY) for ‘continuing to seek solutions and relief for dairy farmers.’
Depooling isn’t a one-rule fix
First, a quick reminder of how milk may move in and out of the pool. Dairy order director Erin Taylor from USDA described how fluid and manufacturing processors are regulated differently under the Agricultural Marketing Agreement Act of 1937.
“The way the rules are set up, Class I handlers are required to be regulated. They don’t have a choice. They pay minimum classified prices because the orders are set up to make sure the fluid needs of the consumer are always met,” she said. “That allows our Class II, III, and IV processors to make a decision on whether they want to participate in the pool. It’s not really depooling, it’s just choosing to not pool this month.
Converging circumstances weigh down PPDs
In the 19 years prior to 2020 and the COVID-19 pandemic, the monthly difference between Class III and Class IV prices had exceeded $5 per hundredweight (cwt.) on only six occasions. In 2020, that difference occurred six more times. For deeper perspective . . . that was just six times in 228 months prepandemic and six times in the first 12 pandemic months.
“In two of those months, the spread was greater than $10, and in three more of those months, it was greater than $7 per cwt.,” Cornell’s Chris Wolf shared during the May 5
These wide differences in Class III and Class IV prices have framed the discussion surrounding negative Producer Price Differentials (PPDs) in 2020 and have contributed a great deal of fodder to the discussion of Federal Milk Marketing Order (FMMO) change.
Six federal order changes we’d like to see
Reforms to the Federal Milk Marketing Order system have been on many minds lately thanks to the pricing chaos caused by last year’s dairy demand destruction. While a number of different ideas are surely circulating, positive changes will be best served by some industry consensus.
Six big points to focus on for improvements were identified by two experienced cooperative leaders during the April 7
1. The right purpose
“It’s so difficult to get where you’re going if you don’t know how you’re going to get there,” said Calvin Covington. He previously served as the CEO of Southeast Milk based in Belleview, Fla., the state with the largest Class I utilization in the country.