Three Months In: Early Impacts of FMMO Amendments

By Daniel Munch

For those following dairy policy, the last few months have felt relatively quiet compared to the marathon debates of the most recent Federal Milk Marketing Order (FMMO) hearing. As of June 1, all but one of USDA’s amendments to the FMMO structure went into effect across the 11 orders, giving us our first three months of pricing data to evaluate.

Among the most hotly debated changes, higher make allowances have, as expected, reduced the prices farmers receive for their milk. In the first three months under the new rules, farmers lost more than $337 million in combined pool value, with Class price reductions ranging from 85 to 93 cents per hundredweight. While lower feed costs helped cushion margins over the past year, recent price declines may soon push the spotlight back onto the economic impacts of these FMMO adjustments. This Market Intel reviews the results of FMMO implementation so far.

Background

On Jan. 17, after separate farmer referenda held in each of the 11 FMMOs obtained the necessary two-thirds votes in favor of adoption, USDA published their final rule to amend the FMMO system. This capped a long process that included a five-month hearing in Carmel, Indiana, where dairy stakeholders testified on how to modernize FMMOs to reflect current marketing conditions, followed by months of briefs, comments and decisions. The FMMO framework governs how processors purchase milk from farmers in defined marketing areas including setting minimum uniform prices paid to farmers.