Revising Federal Milk Marketing Orders

FarmFirst Dairy Cooperative General Manager, Jeff Lyon, spoke at the national Federal Milk Marketing Order (FMMO) hearing in Carmel, Indiana. Lyon shed light on the critical issues about “make allowances” in the dairy industry. Challenges faced by producers as well as processors were a key focus.

One of the central points in Lyon’s testimony was the adverse impact of outdated make allowances on FarmFirst members. “Current make allowances have compressed margins at processing plants. This in turn has been passed on to producers in the form of lower milk prices or premiums so processing plants can manage their margins,” said Lyon. “Make allowances need to be updated in the long-term interest of processor reinvestment in their plants.”

Lyon pointed out the financial toll these outdated allowances have taken. “From 2020 through July 2023, we experienced a 24 percent drop in the average premium paid per pound of milk. Thus, this resulted in about $2.7million that we were not able to pay our Family Dairies USA producers,” he noted.

Lyon also noted the importance of accurate make allowances in determining milk prices. Lyon said, “Manufacturing costs or ‘make allowances’ are key part of setting milk prices. Product Price Formulas (PPF) do not work as intended when make allowances are set below the actual cost of commodity manufacturing.”

To address these challenges, Lyon explained FarmFirst’s support for the National Milk Producers Federation (NMPF) proposal. Lyon stated, “The NMPF proposal makes modest increases to make allowances to partially lessen problems that have led to the disorderly marketing of milk. It also balances producer and processor interests.”

Lyon’s testimony mirrors FarmFirst Dairy Cooperative’s commitment for fair practices in the dairy industry.