Needed FMMO Reform Undermined by Make Allowance Giveaway

USDA recently announced that a final Federal Milk Marketing Order decision was approved by dairy farmers and cooperatives across all 11 orders through separate referenda conducted within each order. AFBF has called for changes to the Federal Milk Marketing Orders dating back to 2019.

"We're grateful that USDA listened to not only our calls but also calls from the broader dairy industry to switch back to the 'higher of' Class I milk formula, increase Class I differentials, improve cheese price discovery and update milk composition factors," said AFBF President Zippy Duvall. "However, the positive changes that will come as a result of these reforms will not be uniform for dairy farmers across the country and will be greatly offset by large, unjustified increases in make allowances."

In October 2022, AFBF brought together representatives from a broad swath of the dairy sector, including dairy cooperatives, proprietary processors, state dairy associations and dairy farmers from across the country, for a successful first-of-its-kind industry-wide Federal Milk Marketing Order Forum, where industry consensus was reached on a variety of issues.

In addition to the consensus reached at that forum, a thorough grassroots policy process led by AFBF dairy farmer members has resulted in AFBF advocacy for a mandatory, audited survey of milk processing costs that are used to help establish make allowances. USDA instead bases make allowances on an unscientific, voluntary survey that allows processors to opt out, skewing the results in a direction that results in lower milk prices for farmers.

In fact, AFBF analysis has shown that changing the make allowance without a mandatory, audited survey could lead to unjust penalties for dairy farmers, which directly defies the intended purpose of the FMMO system.

All 11 orders approved the final decision with the required two-thirds majority. Under USDA's interpretation of the amendment process, a "no" vote would have eliminated all existing milk pricing regulations in an order, leaving farmers with a stark choice between losing federal order protections or accepting the proposed changes.

"The FMMO system relies on fairness and transparency, and without a mandatory, audited survey of processing costs, dairy farmers' checks will be reduced based on flawed and incomplete data," Duvall added. "We now call on Congress to help restore the balance of fairness in the federal order system. Legislation can and should direct USDA to collect a more accurate survey of processing costs, which will level the playing field for all."

AFBF representatives were present throughout the entire months-long hearing process and testified on a number of proposals. At the conclusion of the hearing, Duvall sent a letter to Agriculture Secretary Tom Vilsack relaying AFBF's concerns with the proposed increases in make allowances.

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