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On Monday, USDA AMS released its proposed rule for Federal Milk Marketing Order reform. The draft document is 332 pages long, and most of the dairy world has spent the past few days studying the rule and analyzing its impacts on milk pricing. Friend of the E-News, Julie Walker, did a quick breakdown in the AgCentral Dairy Newsletter earlier this week and broke out some of the main policy changes:
- Milk Composition Factors: Update the factors to 3.3 percent true protein, 6 percent other solids, and 9.3 percent nonfat solids.
- Surveyed Commodity Products: Remove 500-pound barrel cheddar cheese prices from the Dairy Products Mandatory Reporting Program (DPMRP) survey and rely solely on the 40-pound block cheddar cheese price to determine the monthly average cheese price used in the formulas.
- Class III and Class IV Formula Factors: Update the manufacturing allowances to Cheese ($0.2504), Butter ($0.2257), Nonfat Dry Milk ($0.2268), and Dry Whey ($0.2653). This decision also proposed updating the butterfat recovery factor to 91 percent
- Base Class I Skim Milk Price: Update the formula as follows: the base Class I Skim Milk Price would be the higher-of the advanced Class III or Class IV skim milk prices for the month. Additionally, USDA is proposing adopting a Class I extended shelf life (ESL) adjustment equating to a Class I price for all ESL products to equal to the average-of mover, plus a 24-month rolling average adjuster with a 12-month lag.
- Class I and Class II Differentials: Keep the $1.60 base differential and adopt modified location specific Class I differential values.
You can view USDA’s FMMO Recommended Decision Overview here for a summary of the currency and proposed rates and factors in the FMMOs.
USDA Proposed Pricing Formula Amendments to All 11 FMMOs: Recommended Decision Overview
The dairy industry has 60 days to comment on the proposed draft rules. After that USDA will have 60 days to review the comments and then issue a final decision based answering those comments.
We anticipate a lot more analysis on the financial impact of the proposals in the coming days. Check back in here for more info on FMMO Reform
What They're Saying
National Milk Producers Federation Statement on USDA Proposal
American Farm Bureau Statement
Edge Dairy Cooperative Statement
AgMoos:USDA Recommends Changes to Milk Pricing Formulas
Brownfield Ag News: AFBF Economist Talks FMMO Proposal
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