Proposed FMMO Changes Could Have Unintended Consequences

Smith: With last week's comment deadline, USDA's Federal Milk Marketing Order reform process is nearing its end. Roger Cryan, chief economist for the American Farm Bureau Federation, says the comment period is one of the last steps in a process that began more than a year ago.

Cryan: Co-ops and processors proposed some changes in the price formulas. USDA asked for more proposals, and there was a hearing to consider the 21 proposals that USDA thought fit to hear. Farm Bureau was there throughout, and USDA put out the recommendations in July, with comments due last week.

Smith: He says Farm Bureau considers USDA's proposed changes a mixed bag, with some positives to be found.

Cryan: Particularly the ones to the formulas that will increase the Class I prices for bottling milk. We are not happy with USDA's huge increases in the make allowances, that part of the milk value that is deducted for the processor. Those make allowances were already big enough that cheesemakers have been building a lot of new plants and plant expansions. The cost survey data USDA used to raise those make allowances is badly biased. It's based on voluntary surveys from small, high-cost processing plants that are not at all representative of the dairy manufacturing business generally.

Smith: A decision on final FMMO changes is expected by the end of the year.

Cryan: USDA should have a final decision in mid-November, which we hope looks a little different from the recommended decision. Then each order will be put up to a vote of farmers and Co-ops. The markets where at least two-thirds of the farmers vote yes, the price formulas go into effect, and in the markets where more than the third vote no, the order will be terminated. Not because USDA is required to terminate but because that's been their practice for a very long time.

Smith: Learn more by searching "FMMO" at fb.org. Chad Smith, Washington.