Federal Milk Marketing Orders have now been in existence for 73 years, and more trees have died debating their merits than any other U.S. dairy program. Numerous attempts have been made during their tenure to reform and simplify the system, the latest coming about 10 years ago.
Under that reform, the number of orders was collapsed to 11. Since that time, producers voted to discontinue the Western Order. Today, the 10 remaining orders regulate about 60% of U.S. milk production. California's state order regulates another 20%. Dairy economists at the Universities of Missouri and Wisconsin have outlined the controversies in a series of four policy briefs. We'll highlight the main issues in this article, and go into more depth in succeeding days.
The primary issues:
• Classified pricing. The system established minimum pay prices for milk and milk components. Minimum prices for some classes of milk are derived through product price formulas that tie milk prices to market prices for products included in class. But they don't do this for all products in all classes.
• Pooling. Handlers pay into or draw from a producer settlement fund depending on the order-determined value of their milk receipts. How handlers qualify for pooling, and how frequently they de-pool, has been an on-going source of controversy.
• Minimum prices. Federal Orders guarantee producers a minimum price for their milk. Within in marketing orders, the producer price is the same regardless of the class of products that are made from the producer's milk. In seven orders, producers are paid for pounds of components (butterfat, protein and other solids), not for pounds of milk. In the other three orders, producers are paid for their deliveries of skim milk and butterfat.