Edge Urges “Yes” Vote on Milk Order Changes

On November 12, the USDA Agricultural Marketing Service (AMS) released a final decision reforming pricing formulas used by the Federal Milk Marketing Order system. Edge Dairy Farmer Cooperative appreciates AMS’s diligent efforts in advancing milk pricing reform.

“While not all our proposals made it into the final decision, we feel the changes won’t negatively impact our dairy farmer members,” said Tim Trotter, Edge CEO. “Overall, we believe the reform will slightly decrease the minimum regulated price that private milk buyers pay to pooled milk producers in the Upper Midwest order, while slightly increasing it for producers in the Central and Mideast orders. In all cases, we expect the impact on milk checks, after considering over-order premiums, to be neutral or positive.”

The final decision aligns with the proposed version released in July. Highlights of interest for Edge members in the Upper Midwest include:

• Updated Milk Composition Factors: True protein changes from 3.1% to 3.3%, and other solids from 5.9% to 6%. This adjustment should modestly increase revenue for Class I pooled producers. However, AMS chose not to update the butterfat solids, which has grown significantly in recent years. Edge cautioned AMS that without this adjustment, dairy producers may face increased butterfat price risk. This risk especially affects those using Class III milk futures or USDA insurance products.
• Removal of 500-Pound Barrel Cheddar from Pricing Survey: Excluding 500-pound barrels and using only 40-pound blocks to set cheese prices aims to reduce distortions. Industry advocates believe this change will improve protein pricing. However, Edge warned that removing barrels now could harm the Class III milk price. This concern arises during a period of increased block-oriented processing capacity.
• Updated Manufacturing Allowances: The allowances increase for Cheese, Butter, Nonfat Dry Milk (NFDM), and Dry Whey. A proposed update raises the butterfat recovery factor to 91%. These changes reduce the Class III price by $0.91/cwt and the Class IV price by $0.85/cwt. Edge has advocated for delaying manufacturing allowance reform until more comprehensive cost data, including a mandatory processing survey, is available.
• Reversion to “Higher-of” Skim Milk Pricing for Class I: The Class I skim milk price will now revert to using the “higher-of” the advanced Class III or IV prices. However, AMS introduced a Class I extended shelf life (ESL) adjustment, allowing ESL milk to use a 24-month rolling average with a 12-month lag. Edge proposed this risk-management-friendly adjustment, which AMS’s approach closely reflects.
• Updated Class I and II Differentials: The new decision maintains the $1.60 base differential but adjusts location-specific Class I values. This change incentivizes milk transportation from surplus to deficit areas, particularly aiding Midwest/Mideast producers in serving coastal markets.

AMS will now hold producer referendums in each of the 11 FMMOs. Producers pooled in January 2024 can vote by returning ballots, postmarked by December 31, 2024, by January 15, 2025. To pass, the referendum requires support from either two-thirds of producers or two-thirds of the milk volume represented. Unlike most members of manufacturing cooperatives, Edge producers pooled in January 2024 can vote individually.

“A vote to disapprove this decision would end the FMMO in that region,” Trotter said. “While more could have been done to improve milk pricing, we encourage a ‘yes’ vote to retain the protections that FMMO brings for producers.”