Farm Bureau: Dairy Products Pricing Report Captures Small Portion Of Sales Volumes

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By Daniel Munch, American Farm Bureau Federation

On August 23, USDA began hearing testimony on proposals to amend the Federal Milk Marketing Order system. The 21 submitted proposals have been categorized under six different subjects by USDA. The second subject, Surveyed Commodity Products, will consider changes and updates to the National Dairy Products Survey Report (NDPSR). Current data reveals the percentage of product volume and number of processing plants captured in the NDPSR remains a small portion of total product sales volumes and total number of plants.

The Federal Milk Marketing Order system establishes provisions under which dairy processors purchase milk from dairy farmers supplying specific marketing areas. One of the primary functions of the federal order structure is the calculation of minimum uniform prices paid to farmers. Prices calculated are intended to reflect fair market prices based on current supply and demand for a variety of dairy products.

To accomplish this, USDA surveys the weekly sales price, quantity and moisture content of certain dairy commodities sold by processors who sell 1 million pounds or more of those dairy commodities. The average prices collected from these surveys are then used as the basis for the first step in calculating minimum prices paid to farmers. Higher prices captured in the marketplace for surveyed products would generally lead to a higher price paid to farmers while the opposite is true of lower prices.

If the prices of the surveyed products do not adequately reflect the mix and value of products purchased by consumers, the price being paid to farmers may not be reflective of the market and could lead to the undervaluing of farmers’ milk.