Chief Economist Cryan delved deep into the nuances of milk pricing
On October 4, 2023, Roger Cryan, the Chief Economist for the American Farm Bureau Federation (AFBF), provided extensive testimony in support of the AFBF's nearly 6 million members across the United States and Puerto Rico. A large number of these members are dairy farmers who are directly affected by the pricing provisions of the Federal Milk Marketing Orders (FMMOs).
The AFBF placed a significant amount of emphasis, in their testimony, on the requirement to do away with negative producer pricing differentials as well as the de-pooling that is the result of these differentials. According to Cryan, "We believe that an ordered pool is the key to orderly marketing and to ensuring that Federal Milk Marketing Orders continue to serve farmers, cooperatives, processors, and consumers."
The Advanced Food and Beverage Federation (AFBF) desires to do away with the practice of advanced pricing for both Class II skim milk and its constituents as well as Class I milk and its constituents, as stated in their 18th proposal. According to the proposal, the price of Class I skim milk should be set at the sum of the price of Class III or Class IV skim milk plus the Class I differential, whichever is higher. This would bring the price of Class I skim milk in line with the current market.
Prior to this, particularly in the years 2020 and 2021, dairy farmers were forced to contend with unfavorable producer price differentials. Because of inconsistencies like this, the number of milk inspections was frequently cut by a large amount.
Cryan brought attention to the factors that contribute to unfavorable PPDs, citing the Journal of Dairy Science. The value of Class II milk has increased to the point that it has surpassed the value of butter powder in Class IV. The prices of skim milk in Class II and whole milk in Class I have also increased, but these price increases have lagged behind the increases in the costs of Class III components.
According to AFBF, the current method of advanced pricing is a significant factor that plays a role in both the frequency and the magnitude of de-pooling. As a direct consequence of this, the federation has suggested that all Class price announcements be made simultaneously.
