COLUMNISTS

Farmer-processor relationship must underpin milk pricing reform

Tim Trotter

Dairy farming today looks vastly different than it did at the turn of the century. Farms big and small are more sophisticated in how they conduct business. From implementing more sustainable practices to adopting cutting-edge technologies, the list of ways dairy farmers look toward the future is growing every day.

All the exciting modernizations present an interesting duality: The federal system through which these innovative agribusinesses are paid is nearly 100 years old, with little meaningful reform since its inception.

That could ― and should ― be changing.

The pandemic freshly revealed cracks in the system that have grown too big to ignore. With lingering memories of record-large milk check deductions, seemingly every group tied to dairy is now exploring options for milk pricing reform.

Most of those ideas are more narrowly centered around tweaking the Federal Milk Marketing Orders (FMMOs). Edge Dairy Farmer Cooperative, the third largest dairy co-op in the country, is taking a broader approach.

In developing our reform priorities, which we announced in June, we took a step back from the heat of the moment to focus on the future, just as our farmer leaders do. We asked ourselves, “What will the future dairy farmers and processors need to find success?”

The farmers of the future are looking to not only create but sustain value for the milk they produce. To do so requires adaptation and transformation of their business models to capitalize on market opportunities.

Tomorrow’s processors are looking for farmers who understand their individual milk markets and pricing, align with the strategic vision of their businesses and are built to be financially and environmentally sustainable.

FMMOs have served the dairy community reasonably well over the years by facilitating the orderly marketing of fluid milk. However, a steady decline in fluid milk consumption has tested their sustainability — both today and for the future.

Edge looks to ensure the system’s long-term viability, but also to provide structure and certainty if FMMOs are someday dissolved. We see flexibility and fairness as fundamental principles in this reform.

Differing product mixes and milksheds across the various regions in the U.S. present obstacles to a true one-size-fits-all approach. Uniform change would not be sustainable. It’s time to allow individual orders within the FMMOs to operate with more flexibility to adapt and find relevancy. How can each order better incentivize processors to participate?

Of course, there will still be cases where operating outside the orders makes sense, and there are some areas of the country where farmers have opted out of the federal orders completely. In the cases when milk flows outside the orders, there should be expectations in place to ensure business is done in a fair and transparent fashion. (Go to www.voiceofmilk.com/FMMO to see Edge’s priorities in detail.)

As a cooperative, Edge has a unique perspective in the push for reform because its farmer members around the Upper Midwest ship to more than 30 independent processors, each unique in its product mix and markets. These differences have allowed for friendly competition and options for farmers to align themselves with processors based on values and long-term strategy.

One of the highest-priority items for our members remains building the relationship between farmer and processor. Unfortunately, many of these relationships are frayed. For far too long, they have simply been transactional. Edge hopes to foster stronger relationships built upon common values, trust and transparency.

There is still much work to do. Agriculture Secretary Tom Vilsack put our community on notice when he said he expects consensus before any reform is to be addressed. It’s a tall order to think everyone will agree on all terms, but as an industry we must work to find commonalities in our approaches to improvement. For our part, Edge continues to pursue collaboration, building relationships one at a time, and welcomes participation from as many stakeholders as possible.

Change can be difficult, but it is part of evolution. It cannot be questioned — dairy is evolving. And milk pricing must as well.

We are excited to see a future where farmers and processors are aligned in strong and strategic alliances, working toward success for all.

Tim Trotter

Trotter is CEO of Edge Dairy Farmer Cooperative, a Wisconsin-based verification co-op that represents its Upper Midwestern members on federal dairy policy and is the third largest dairy cooperative in the country.