Milk Marketing Order Reform

Dr. E. Bruce Godfrey
USU Extension Economics Specialist

    On 31 March 1999 Agriculture Secretary Dan Glickman announced the final proposal for the reform of the milk marketing orders. A number of the provisions will likely affect dairy producers and dairy production in Utah.

    The provision that has generally received the most attention would reduce the number of orders from 31 to 11. Most of these consolidations are in the eastern part of the United States. However, the proposal would also combine most of the existing Great Basin order (primarily Utah and southeastern Idaho) with the SW Idaho-eastern Oregon order to form the Western marketing area or order. Like any government action, this change will benefit some producers and hurt others. For example, the latest data from USDA suggest that formation of the Western order will result in a 1.7 percent average increase in the price of milk for those currently in the SW Idaho-eastern Oregon order while those in the Great Basin order will see an average decline of 1.8 percent.

    Marketing order consolidation will affect the price farmers receive for milk, but so will the formulas used to set prices. The current BFP is to be replaced by a Class III and IV price structure that is based on multiple component pricing (primarily cheese). A class I price mover is to be implemented which will be added to the base price for manufacturing milk. The price for the Class I milk would be equal to the price of manufacturing milk plus a Class I price differential. These Class I differentials vary within each marketing order and are designed to �...move Grade A milk from points of production to fluid milk processing plants...� However, local milk prices �...should not exceed the cost of available �distant� milk plus transportation to the �local� market.� For example, the differential for dairies in northern Utah will be larger than for those in southern Utah, which will provide a small incentive to ship milk from counties such as Beaver to the fluid milk plants located in northern Utah.

    The amount of information available concerning the order reforms is voluminous (I have a file that is several inches thick) and includes other changes that are not outlined above (these two will likely have the largest impact on milk prices). Most of this information is primarily available via various Internet sites. Those producers who desire more information should go first to either the USDA web site [www.ams.usda.gov/dairy/reform] or the dairy market site at Cornell University [cpdmp.cornell.edu]. If you do not have access to the Internet go to your local county agent�s office, and have him/her assist you. There may be changes in the proposals that have been published, but this reform in the marketing orders will affect every producer. You are encouraged to become informed and to express your opinions to industry representatives (e.g., Utah Dairyman�s Assn., Farm Bureau) who are actively reviewing the changes that have been suggested. ©