The dairy industry has suffered unprecedented financial challenges the past several years. Despite this, industry expansion has continued in nearly every region of the U.S. over the last decade with Michigan’s cow numbers up 40% and more than 9.4 million cows nationally. Financial issues, coupled with continued expansion, have led to a loss of more than 200 dairy farms in Michigan over the past two years. While we have lost 13% of our state’s farms, cow numbers in Michigan remain virtually unchanged.
Over this same period, production per cow has also steadily increased in both the U.S. and abroad, and elimination of the quota system in the European Union has led to tremendous growth of milk on the market further challenging world market prices.
Yet, our dairy pricing structure remains virtually unchanged. The Federal Milk Marketing Order (FMMO) system, which was last updated in the 1996 Farm Bill, is approximately 90 years old, leading many to question if it’s time for a dairy pricing system overhaul. The FMMO system was established in the 1930s to help provide an orderly system for marketing fresh milk throughout the country, as most milk was utilized in the same region it was produced. The FMMO also set minimum milk prices. The FMMO can be updated through a United States Department of Agriculture hearing process and approved by farmers through a referendum process.
Today, with rapid advancement in technology and transportation, milk can be easily moved and marketed across our entire country in a relatively short amount of time. Additionally, many dairy farms have marketing agreements with individual processors and retailors and market outside of any FMMO provisions. Farmers and industry experts are asking if there is a need to modernize the FMMO and dairy pricing systems.
The rapidly changing production system and sustained poor prices have fueled discussions regarding eliminating the FMMO, implementing supply management and/or a two-tier pricing structure, and whether changes should be industry-managed or government-controlled.
Contact: Ernie Birchmeier | 517-679-5335 or John Kran | 517-679-5336
MFB Policy #21 Dairy Industry
AFBF Policy #238 National Dairy Program