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Milk pricing proposals dividing dairy farmer-owners and private processors

Differences in milk pricing proposals have resulted in some dairy cooperatives withdrawing their membership from the International Dairy Foods Association.

California Dairies, Inc., Dairy Farmers of America, Inc., Land O’Lakes, Inc., and Maryland, and Virgina Milk Producers Cooperative Association, Inc., in April, sent a letter to U.S. Ag Secretary Tom Vilsack about their opposition to IDFA’s proposal which the groups say call for make allowance changes that are based off unreliable data and could negatively impact the U.S. all-milk prices by $1.42 per hundredweight.

IDFA and the Wisconsin Cheese Makers Association are requesting immediate updates to make allowances referencing data from a voluntary reporting study until Congress enacts legislation giving USDA authority for mandatory audited cost surveys.

Manufacturers participating in Federal Orders are legally required to pay the farmers supplying milk money received from selling finished products minus the cost of making products, as set in FMMO regulations, or the “make allowance.”  Some groups argue current prices are 16 years out of date and manufacturers say are not reflective of dramatically higher costs.

American Farm Bureau Federation economist Danny Munch tells Brownfield their organization supports mandatory price reporting of processing costs before make allowance increases are made.  The difference could mean reducing the regulated value of farmers’ milk by as much as $1.45 billion annually.

“If you’re a very large processor that has low cost, there’s not really a lot of incentives for you to participate in a survey that could ultimately decrease make allowances and lower the benefit that you get out of the system,” he says.  “That’s sort of our worry and I know a lot of other organizations are worried about it as well.”

In a statement to Brownfield, Dairy Farmers of America says the divisive milk pricing policy proposal contradicts what the organization believes is in the best interests of their farmer-owners and the dairy industry and as a result are withdrawing their IDFA membership.

IDFA tells Brownfield in a statement with a diverse membership they expect disagreements from time to time and want to be inclusive while balancing diverse interests.  IDFA says they are confident that a balanced, inclusive approach is in the best interest of the full dairy supply chain.

DFA alone represents 11,000 dairy farmers and operates 83 processing plants in the U.S. and more cooperatives are expected to withdraw their membership from IDFA as well.

Land O’Lakes has confirmed with Brownfield they are not renewing their membership with IDFA.

All modified proposals were due to USDA at the end of the day Tuesday.