Dairy farmer groups propose new Class III Plus milk pricing
Dairy farmer organizations are offering their own solution for milk pricing problems. Leaders from Minnesota Milk, the Nebraska State Dairy Association, Edge Dairy Farmer Cooperative, and the Dairy Business Association introduced their Class III Plus plan Tuesday.
Dairy Business Association President Amy Penterman says their proposal has three goals. “Number one, provide stability to the pricing system without distorting the markets. Number two, it reduces the likelihood of negative producer price differential. And, three, it makes producer risk management more effective in future crisis.”
Penterman says a proposal from the National Milk Producers Federation, which represents processors, does none of these things, only clawing back some lost revenue while leaving larger problems unsolved.
Minnesota Milk Executive Director Lucas Sjostrom says tying the Class I price to the Class III price will discourage processors from de-pooling milk and will help producers. “We’re just trying to make the price discovery system better, which of course means selling the most product at the right price that our dairy farmers can, so I think that’s our overall goal.”
Kris Bousquet from the Nebraska State Dairy Association says if USDA grants the National Milk Producers Federation a hearing on milk marketing orders, it could have consequences for farmers. “If we’re going to have a hearing, and National Milk’s forthcoming formal request makes that more likely, we should make lasting and beneficial changes that will leave us with a better system overall.”
Bousquet says the Class III Plus proposal is fair and allows farmers to forward contract with locked-in prices. “We think based off of the research that we’ve done and the information that we’ve gathered that this is the best path forward for the Nebraska dairy farmer and, if you look at it, it really is one of the best option if not the best option for the nation as well.”
Penterman says being able to better use risk management and having certainty in prices will help producers. “Knowing that our floor is our floor, that negative PPD’s don’t come into play when we thought that we might have had a floor and then all of the sudden we have more taken off. We need to eliminate some of that volatility.”
John Holevoet with the Dairy Business Association says their Class III Plus plan ties the Class I skim milk price to the Class III skim milk price plus a 36-cent adjuster that would be reviewed annually to stay revenue-neutral to other milk classes and be equitable to farmers, processors, and consumers. Class III Plus would also end advanced pricing.
The producer groups plan to continue discussing their Class III Plus plan with producer groups in other regions and states and they will be prepared to engage in the USDA hearing process if the National Milk Producers Federation is successful in getting one.