This July, following a record 49-day hearing that wrapped up in January, the USDA announced long awaited recommendations for changes to the Federal Milk Marketing Orders (FMMO). These recommendations are the largest changes to the FMMO system since 2000 – but ultimately, they fall short of necessary reforms that would help lift US dairy farmers out of crisis.
The USDA had good intentions to ensure fair representation and participation from industry stakeholders during the hearings, yet many small and medium-scale dairy farmers feared lost markets and income due to retaliation from processors wishing to protect a broken system. This resulted in testimony dominated by processor interests and uneven recommendations that overwhelmingly benefit them. During the hearings, the National Family Farm Coalition (NFFC) continued to advocate on behalf of our farmer members for broader reforms to the current dairy production system that go well beyond FMMO recommendations.
One of the most controversial recommendations from the USDA, underscoring the preference given to processors, is to increase the make allowance credits for processors to the tune of $0.79-0.84 cents per hundredweight (100 pounds, or about 12 gallons of milk). Make allowances are deductions from farmer milk checks paid to processors to offset their manufacturing costs, embedded within dairy pricing formulas. This increase to make allowances is the largest the USDA has ever proposed, more than double the previous record increase of $0.35 cents per hundredweight.
These amounts, measured in mere cents, appear deceptively minor yet have major impacts on milk prices paid to farmers and can drastically shrink their already razor-thin, or nonexistent, margins. But, consider that the average cow produces 24,000 pounds of milk per year and it adds up fast! Assuming the average dairy herd size of 357 cows, an $0.80 cent increase in make allowance credits means $68,544 in lost farmer income.
Many processors argue that substantial increases in make allowances are necessary, given rising costs since USDA’s last update in 2008. In calculating this increase, however, the USDA relied on a single voluntary, unaudited survey that, by their own estimation, only included 17% of the nation’s processors. This survey also failed to account for differences in scale between processors. A single, non-representative survey of a handful of the country’s dairy processors was used to justify increasing make allowances by approximately 20%, inflating the profit margins of these plants at the expense of farmer milk checks. Because plant costs are cushioned from volatility in the dairy market this change will make processing plants less responsive to market demand, further depressing all milk prices paid.
The truth is that FMMO will never successfully work as a tool for equitable price determination in the dairy industry. At the end of the day, the market is the driving force behind price. The industry continues to double-down on a failing system that shortchanges dairy farmers, especially the small and mid-scale businesses, who cannot compete with the whims of corporate industry leaders. The system fails consumers, too, through volatile and uncertain prices that go up at the grocery store when farm prices rise (increases in price that don’t return to the farmer, of course), but rarely track the decline in what farmers are paid.
Farmers can’t wait any longer for fair prices for their products – 40% of US dairy farmers have closed within the past five years alone. Each farm lost means more than just income, infrastructure, and jobs disappearing; it’s the erasure of a proud dairy heritage that has sustained rural communities for generations. Dairy farmers deserve floor prices achieved through an effective supply management system, coupled with a guaranteed, fair income that will cover their real costs of production including their cost of simply living.
The changes that dairy farmers seek will not come from the USDA, but instead from political action taken by Congress. The question is: do they have the political will to act? NFFC will continue to work with our dairy farmer members to scrutinize the USDA recommendations while considering ways to raise the voices and demands of dairy farmers to legislators who seem to have ignored or forgotten their constituents. It’s a simple ask – don’t turn your back on the farmers that feed us.
You can help by asking the USDA to reconsider this increase in make allowances! The proposed rule remains open for comments until September 13, 2024. Comments can be made by individuals or organizations, and can also be made anonymously.
We also need your help to urge our elected officials to take IMMEDIATE action by implement federal policy that lifts US dairy farmers out of crisis by addressing the root causes of price instability and imbalanced supply and demand. Click here to send an easy, customizable email directly to your Senators and Representative, asking them to sponsor NFFC’s Milk from Family Dairies Act!
