America’s dairy producers and processors are closely watching discussions about the next farm bill and looking for reforms to Federal Milk Marketing Orders. CoBank says the industry feels that current FMMOs don’t reflect today’s market environment, and the consequences could be drastic. Make allowances are an important part of the orders that haven’t been updated since 2008 and were based on data from as far back as 2006. Make allowances estimate dairy processors’ costs of converting milk into dairy products. Many of those production costs, including labor and energy, have risen dramatically since make allowances were updated 15 years ago. While the current make allowances have stayed the same since 2008, prices for industrial power rose 64 percent, and labor costs in dairy manufacturing climbed 48 percent. While industrial natural gas prices have fallen 11 percent, they’ve been highly volatile during that time. Failing to update them could hinder future dairy industry growth.
