Tag: class I mover

NMPF Statement on USDA Dairy Announcement

Posted on by Theresa Sweeney

From NMPF President and CEO Jim Mulhern:

“NMPF is grateful to Agriculture Secretary Tom Vilsack and his team for working hard to provide needed support to dairy farmers. This includes implementing the congressionally-enacted Dairy Donation Program, which will foster partnerships between dairy organizations and food banks to help combat food insecurity and minimize food waste, as well as the Supplemental Dairy Margin Coverage program to reflect modest increases in farm milk production history. We also appreciate USDA’s work to incorporate the premium-quality alfalfa price into the Dairy Margin Coverage program; this will improve the DMC feed cost formula and enhance the dairy baseline ahead of the next farm bill, to the betterment of all farmers.

“While we will comment more fully on those initiatives once details are available, today’s announcement includes the Pandemic Market Volatility Assistance Program to compensate for some of the damage resulting from the pandemic. NMPF asked the department to reimburse dairy farmers for unanticipated losses created during the COVID-19 pandemic by a change to the Class I fluid milk price mover formula that was exacerbated by the government’s pandemic dairy purchases last year.

“When Congress changed the previous Class I mover, it was never intended to hurt producers. In fact, the new mover was envisioned to be revenue-neutral when it was adopted in the 2018 Farm Bill. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions that so far have cost dairy farmers nationwide more than $750 million from what they would have been paid under the previous system.

“NMPF has been working on approaches to right this unintended wrong to dairy farmers by recouping as much of the loss as possible. Today’s announcement is an initial step in this effort that will help many producers, but it unfortunately falls significantly short of meeting the needs of dairy farmers nationwide. The arbitrary low limits on covered milk production volume mean many family dairy farmers will only receive a portion of the losses they incurred on their production last year. These losses were felt deeply by producers of all sizes, in all regions of the country, embodying a disaster in the truest sense of the word. Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses.

“Additional work lies ahead to more fully remedy this shortfall for all dairy producers. We very much appreciate USDA’s persistence and efforts to find a way to cover some of these losses using existing authorities, but NMPF represents producers from all regions and of all sizes and believes that losses incurred by producers must be addressed equitably. Consequently, NMPF will work with Congress to seek supplemental funding to close this gap.

“NMPF also is continuing discussions about the current Class I mover to prevent a repeat of this problem. The COVID-19 pandemic may be a once-in-a-lifetime occurrence, but a large spread between Class III and IV milk prices is not, making it necessary to fix the Class I mover and put this problem to rest.

“We appreciate USDA’s attention to this problem as well as those in Congress who have advocated for addressing this unique loss to farmers and ensuring that it does not happen again.”

Dairy Farmers to Seek Emergency USDA Hearing on Class I Mover Reform

Posted on by Theresa Sweeney

NMPF’s Board of Directors voted April 23 to request an emergency USDA hearing on a Federal Milk Marketing Order proposal to restore fairness for farmers in the Class I fluid milk price mover. The endorsement of the board, which represents dairy farmers and cooperatives nationwide, followed approval April 16 from the organization’s Executive Committee.

The NMPF plan would ensure that farmers recover lost revenue and establish more equitable distribution of risk among dairy farmers and processors. The current mover, adopted in the 2018 farm bill, was intended to be revenue neutral while facilitating increased price risk management by fluid milk bottlers. But the new Class I mover contributed to disorderly marketing conditions last year during the height of the COVID-19 pandemic and cost dairy farmers over $725 million in lost income.

NMPF’s proposal would help recoup the lost revenue and ensure that neither farmers nor processors are disproportionately impacted by future significant price disruptions.

“As the COVID-19 experience has shown, market stresses can shift the mover in ways that affect dairy farmers much more than processors. This was not the intent of the Class I mover formula negotiated within the industry,” said Randy Mooney, the dairy farmer chairman of NMPF’s Board of Directors. “The current mover was explicitly developed to be a revenue-neutral solution to the concerns of fluid milk processors about hedging their price risk, with equity among market participants a stated goal.

“Dairy farmers were pleased with the previous method of determining Class I prices and had no need to change it, but we tried to accommodate the concerns of fluid processors for better risk management. Unfortunately, the severe imbalances we’ve seen in the past year plainly show that a modified approach is necessary. We will urge USDA to adopt our plan to restore equity and create more orderly marketing conditions,” Mooney said.

While the current Class I mover was designed to improve the ability of fluid milk handlers to hedge milk prices using the futures market, it was also expected to be revenue-neutral compared to the formula it replaced. But that has not been the case. The significant gaps between Class III and IV prices that developed during the pandemic exposed dairy farmers to losses that were not experienced by processors, showing the need for a formula that better accounts for disorderly market conditions.

NMPF’s proposal would modify the current Class I mover, which adds $0.74/cwt to the monthly average of Classes III and IV, by adjusting this amount every two years based on conditions over the prior 24 months, with the current mover remaining the floor. NMPF’s request will be to limit the hearing specifically to proposed changes to the mover, after which USDA would have 30 days to issue an action plan that would determine whether USDA would act on an emergency basis​. NMPF plans to formally submit its proposal to USDA this month.

Dairy Farmers to Seek Emergency USDA Hearing on Class I Mover Reform

Posted on by Theresa Sweeney

The National Milk Producers Federation’s Board of Directors voted today to request an emergency USDA hearing on a Federal Milk Marketing Order proposal to restore fairness for farmers in the Class I fluid milk price mover. The endorsement of the board, which represents dairy farmers and cooperatives nationwide, follows approval from the organization’s Executive Committee last week.

The NMPF plan would ensure that farmers recover lost revenue and establish more equitable distribution of risk among dairy farmers and processors. The current mover was adopted in the 2018 farm bill and intended to be revenue neutral while facilitating increased price risk management by fluid milk bottlers. But the new Class I mover contributed to disorderly marketing conditions last year during the height of the pandemic and cost dairy farmers over $725 million in lost income. NMPF’s proposal would help recoup the lost revenue and ensure that neither farmers nor processors are disproportionately harmed by future significant price disruptions.

“As the COVID-19 experience has shown, market stresses can shift the mover in ways that affect dairy farmers much more than processors. This was not the intent of the Class I mover formula negotiated within the industry,” said Randy Mooney, the dairy farmer chairman of NMPF’s Board of Directors. “The current mover was explicitly developed to be a revenue-neutral solution to the concerns of fluid milk processors about hedging their price risk, with equity among market participants a stated goal.

“Dairy farmers were pleased with the previous method of determining Class I prices and had no need to change it, but we tried to accommodate the concerns of fluid processors for better risk management. Unfortunately, the severe imbalances we’ve seen in the past year plainly show that a modified approach is necessary. We will urge USDA to adopt our plan to restore equity and create more orderly marketing conditions,” Mooney said.

While the current Class I mover was designed to improve the ability of fluid milk handlers to hedge milk prices using the futures market, it was also expected to be revenue-neutral compared to the formula it replaced. But that has not been the case. The significant gaps between Class III and IV prices that developed during the pandemic exposed dairy farmers to losses that were not experienced by processors, showing the need for a formula that better accounts for disorderly market conditions.

NMPF’s proposal would modify the current Class I mover, which adds $0.74/cwt to the monthly average of Classes III and IV, by adjusting this amount every two years based on conditions over the prior 24 months, with the current mover remaining the floor. NMPF’s request will be to limit the hearing specifically to proposed changes to the mover, after which USDA would have 30 days to issue an action plan that would determine whether USDA would act on an emergency basis​.