A coalition of dairy farmers wants specifics from USDA on what is needed to hold a national hearing on changing the milk pricing formula in federal milk marketing orders.

Agriculture Secretary Tom Vilsack in December said the dairy industry must reach a consensus on milk pricing changes before USDA will consider conducting a national hearing on the issue.

In a letter to Vilsack, the American Dairy Coalition asked whether he is requiring consensus on the need for a meeting or on a specific proposal.

“Currently, there is an industry-wide consensus that the Class I pricing change made in the 2018 Farm Bill needs amending. Some differences lie in how this should be accomplished,” the coalition said. “However, since the change was made legislatively without a vetted hearing process, dairy farmers share a strong consensus that ‘righting this wrong’ is a great place to start in opening an FMMO hearing.”

The coalition is based in Wisconsin.

The issue involves the Class I mover, which sets the base price for Class I milk — sold as beverage — to which a location differential is added. It was changed in 2019 from the “higher of” Class III or IV advance prices to the “average of” those two prices plus 74 cents per hundredweight.

The change was intended to provide better risk management for fluid milk processors. But it caused unintended consequences when Class III prices skyrocketed due to government purchases of cheese for pandemic-related food boxes for the needy.

That left a significant gap between Class III and IV prices, pulling the “average of” lower than what the previous “higher of” would have been.

In addition, processors pulled milk out of federal order pools to avoid paying the high Class III prices. The value in those pools declined, leading to negative producer price differentials, or PPDs. The PPD is the difference between Class III milk prices and the prices of the other three milk classes.

“The change from the ‘higher of’ to an ‘average-plus’ formula for Class I milk resulted in the inequitable loss of ($3 billion) to dairy farmers. This estimate includes the $750 million cumulative devaluation of the Class I milk price (compared with the previous Class I mover) since the new formula was implemented in May 2019,” the coalition said.

“This created an environment for massive de-pooling and negative PPDs further affecting farmers whose milk is used in all classes, and in turn, farmers saw additional losses of premiums they paid for purchased risk management tools that failed to protect them from the dysfunction that ensued within and outside of the FMMOs,” the coalition said.

The coalition pointed out the legislation creating the change states it can be amended via a USDA hearing process after two years of implementation.

“Our voice was pre-empted in the last farm bill when it came to making federal milk pricing changes, and our dairy farmer members paid the price for that. We do not want to see this happen again,” the coalition said.

Therefore, it is necessary to return to the previous Class I mover formula now, while the industry continues building consensus about what milk pricing might look like in the future, the group said.

The group also commented on “make allowances” for processors, transparent milk pricing for farmers and forming a USDA working group with farmer representation to review new pricing solutions.