Dairy Cooperative Releases Proposed Dairy Industry Reforms

Edge Dairy Farmer Cooperative, one of the largest dairy co-ops in the country, stressed flexibility and fairness in announcing its priorities for reforming the federal milk pricing system. Edge CEO Tim Trotter in a press conference last week.

“Today we are here as Edge Dairy Farmer Cooperative to share what we see as a path forward on milk pricing reform in the United States. This comes after more than a year of research, conversations with our members, participation in a multi-state task force and engagement with other stakeholders. As we look to the future, we’re announcing two key policy priorities for pricing reforms.” 

Edge’s proposal primarily focuses on two key principles.

“Edge is focused on improving relationships between farmers and processors in a way that will increase transparency, fairness and competition, and give farmers a reasonable amount of price certainty. This relationship must transition from strictly transactional to strategic. One that’s based on a long term view, adaptability to the markets and customers and requirements of products. A transparent business-to-business approach will be critically important to success for our farmers and processors. We also need a system that safeguards us from doing business outside of the current Federal Milk Marketing Order.” 

Discussions about the future of the FMMO system have increased in recent years, drifting from the Class I mover formula to negative producer price differentials to make allowances and beyond. The effects of the pandemic only intensified the debate.

Edge board member Mitch Davis says under the flexibility priority, Edge’s proposal accounts for differences in product mixes across the country.

“Given the wide differences in product mixes around the country, we believe more regional flexibility in Federal Milk Marketing Orders would benefit everybody. Secondly, we believe that regulation should support fair and equitable dealings between farmers and processors. A standard set of contracting principles would make the system more fair and equitable, and we believe strengthen the trust between farmers and processors. Next, we recognize that the participation in Federal Milk Marketing Orders cannot be assumed. We believe that these changes would be positive for both producers and processors, whether the federal orders remain in place or not. Finally, we welcome the opportunity of working with other groups to come to an agreement on priorities. The end result must be a system that fosters transparency, trust and collaboration between farmers and processors, and a more attractive marketplace for both parties.” 

Dr. Marin Bozic, a leading dairy economist who is an advisory member on Edge’s board of directors, says the U.S. dairy industry is changing.

“Federal orders are instituted to ensure that all dairy producers in a certain geographic area can participate in revenue from sales of beverage milk products. And what’s the problem? The problem is that over the next ten years the share of U.S. milk production utilized in beverage products is likely to fall, from 18.3 percent this year to 14.5 percent ten years from now. And since last year, we are now exporting more milk solids than we are using domestically for beverage milk products. My estimates are that over the next decade between 45 and 60 percent of all of additional milk solids, skim solids, will need to be exported.” 

Bozic says the industry needs to go back to the basics.

“So, the only way that federal orders do not become irrelevant is if we go back to basics. If we implement the Uniform Benefits approach, what that would mean is no more cross subsidization between manufacturers, no more negative PPDs. Now, details of this are probably best left for a hearing, but the hearing cannot take place unless enabling legislation allows such hearing to that place. So, the core of Edge’s proposal is to provide enabling legislation so that the hearing can take place. And we need to go beyond federal orders, we need to set a new foundation for success and trust between producers and processors.” 

Learn more about the proposed reforms at voiceofmilk.com.