AFBF Dairy Working Group Identifies Principles Needed to Simplify Milk Pricing

An AFBF dairy pricing task force has identified key principles to help guide the organization as the industry explores reforming the Federal Milk Marketing Orders and milk pricing.

The Dairy Working Group, a task force put together based off a recommendation from voting delegates at the 2021 AFBF Annual Convention, investigated opportunities to simplify milk pricing. Twelve members, including PFB president Rick Ebert, served on the working group.

The group identified five principles to guide reform:

  • Dairy farmers must understand FMMOs for meaningful modifications to occur
  • Consensus across industry stakeholders is needed for meaningful change
  • All dairy farmers should have access to detailed pooling and pricing information related to the marketing of their milk
  • Streamlined economic analysis of FMMO structure alternatives and timely delivery of results and implications are necessary
  • Simplified pricing provisions are essential

One of the Dairy Working Group’s primary conclusions was the direct correlation between understanding FMMOs and the ability to simplify them. Without a streamlined method for dairy farmers to understand the intricacies of how milk is priced and marketed, meaningful modifications cannot be suggested. Discovery, transparency and disclosure are essential to the future stability of the industry.

The working group recommended an AFBF-led industry-wide conference to approach FMMO issues, including how FMMOs are amended and updated. The group also supports the formation of clear, accessible USDA resources that show how each order and its corresponding pooling requirements differ by region.

In discussing the economic analysis of FMMO structure alternatives, the group focused on make allowances, mandatory price discovery, the COVID-19 impact and alternative pricing structures.

Other areas of discussion included risk management opportunities related to producer price differentials, shortcomings of Dairy Revenue Protection to protect against risk during 2020, changing Dairy Margin Coverage pricing basis from national average to more local or regional prices, and consolidation within the dairy industry.


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