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NMPF, Dairy Farmer Groups Offer Alternative Class I Price Proposals

Both the National Milk Producers Federation (NMPF) and a group of four midwestern dairy organizations are proposing changes to the Class I price formula in federal milk marketing orders.

As required under the 2018 farm bill, the federal order Class I price formula was changed two years ago. Under the amended formula, the Class I skim milk price is the simple average of the monthly advanced pricing factors for Class III and Class IV skim milk, plus 74 cents per hundredweight, plus the applicable adjusted Class I differential.

Prior to that change, the Class I skim milk price was the higher of the two advanced pricing pricing factors, plus the applicable adjusted Class I differential.

NMPF’s board of directors last Friday voted to request an emergency USDA hearing on the Class I milk price mover.

The new Class I mover contributed to disorderly marketing conditions last year during the height of the coronavirus pandemic and cost dairy farmers over $725 million in lost income, NMPF said. The organization said its proposal would help recoup the lost revenue and ensure that neither farmers nor processors are disproportionately harmed by future significant price disruptions.

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, NMPF noted. 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 74 cents per hundredweight 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 said its request to USDA 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 the agency would act on an emergency basis​.

“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, chairman of NMPF’s board and a Missouri dairy farmer. “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 deter-


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