Crafting a Sound FMMO Proposal

NMPF’s economics staff led NMPF’s crafting of a comprehensive set of recommendations to modernize and update the Federal Milk Marketing Order’s (FMMO) component and class pricing formulas. Many of these formulas have not been updated since they were first implemented in 2000 and have failed to keep up with the evolving structure of the U.S. dairy industry.

THE TASK FORCE DIVIDED INTO SEVERAL WORKING GROUPS AND HELD MORE THAN 100 MEETINGS TO GATHER CONSENSUS ON HOW THE PROGRAM SHOULD BE MODERNIZED.

Key Advances

1 Provided leadership and analysis for the NMPFled effort to modernize the FMMO system.

2 Reorganized economics staff to create the NMPF/ USDEC Economics Unit, a robust, industry leading analytical hub.

3 Successfully launched the new bi-weekly Leading Indicators Newsletter while maintaining full suite of industry-serving publications.

4 Provided DMI staff with critical analysis to help recraft the Innovation Center’s Vision and Goals for Food Security in the U.S.

Working with the Task Force

NMPF economics staff teamed with an organizationwide Economic Policy Committee Task Force in comprehensively working to craft an economically sound plan to achieve this long-overdue task. Along with NMPF staff, the task force comprised marketing and federal order experts from NMPF’s member cooperatives and Jim Sleper, a consultant engaged to manage this extensive undertaking.

The task force divided into several working groups and held more than 100 meetings to gather consensus on how the program should be modernized. Economics staff provided analytical support on all the manner of topic areas offering in-depth, index-based evaluations of changes in product manufacturing costs.

By summer, the Task Force had a completed set of recommendations, specifically:

• Update Federal Order make allowances to reflect higher costs and establish mandatory cost surveys to improve data quality moving forward;

• Amend mandatory price reporting specifications for nonfat dry milk and dry whey;

• Align milk component factors in the Class III and IV skim milk price formulas with current milk composition;

• Return to the “higher-of” Class I mover; and

• Remove barrel cheddar from the Class III product formula. These recommendations were presented to the Economic Policy Committee and the Board of Directors and approved unanimously by both groups.

Tackling More Complex Tasks

After meeting that challenge, the task force split into regional working groups to undertake the lengthier and more complex task of updating the more than 3,000 counties that comprise the Class I differential pricing surface. NMPF economics staff commissioned an updated and expanded version of the large-scale economic model used to develop the current Class I differentials. The task force completed its work in early 2023 and was approved by the Economic

Policy Committee and NMPF's Executive Committee in February. Upon approval by the NMPF Board of Directors, the complete proposal will be brought forward to USDA for consideration in a national hearing.

Unveiling New Collaboration

The economics staff’s depth of knowledge and experience in the dairy industry enables NMPF to proactively engage in complex issues with data and commercial impacts readily at hand.

NMPF expanded its collaboration with the U.S. Dairy Export Council (USDEC) to craft a joint NMPF-USDEC Dairy Economics unit. While cooperation between NMPF and USDEC has been long-standing, especially for the Cooperatives Working Together (CWT) export assistance program, the new team further streamlines knowledge sharing, expands staff expertise, and maximizes farmer and member dollars.

Together, the NMPF-USDEC Dairy Economics team provides expert insight into U.S. and global dairy markets for the industry, management and analysis into the CWT program, and offers analytical support to NMPF staff and members, USDEC and Dairy Management, Inc. under a contractual agreement. To assist cooperatives and farmers alike, the team regularly publishes numerous actionable intelligence reports, including the U.S. Dairy Market Report, Leading Indicators, the U.S. Trade Data Report, and the International Demand Analysis— all written with an eye towards future market conditions.

Trade Policy

Supporting Another Record Export Year

Dairy exports enjoyed another recordbreaking year in 2022, with year-end export numbers eclipsing $9 billion and amounting to approximately 18% of U.S. milk production. NMPF’s trade policy activities support those sales and help expand global opportunities for U.S. dairy products. That work is done in close partnership with USDEC, strengthening and broadening the industry’s trade voice.

NMPF SHAPED AND CHAMPIONED PASSAGE OF THE OCEAN SHIPPING REFORM ACT (OSRA), WHICH ENACTS NEW RULES AND REGULATIONS TO ADDRESS OCEAN CARRIER BEHAVIOR THAT DISADVANTAGED DAIRY EXPORTERS.

Key Advances

1 Shaped and championed the Ocean Shipping Reform Act to address ocean carrier practices and fees that disadvantaged dairy exporters.

2

Helped secure a U.S. victory in first-ever U.S.-Mexico-Canada Agreement dispute settlement panel regarding expanded dairy market access into Canada, then secured initiation of a second case against Canada in the face of Canadian non-compliance.

3

Tackled nontariff export barriers, including ironing out the introduction of a new EU dairy certificate, fending off Latin American anti-import policies and driving progress in U.S. dairy facility approvals in Indonesia.

4 Worked with the Consortium for Common Food Names to defend a federal court ruling that “gruyere” is a generic cheese style, an important U.S. precedent on common food names.

5 Ensured that tariff waivers for formula imports to address the temporary production capacity shortfall in 2022 remained shortterm and expired when the crisis had passed.

Leading Supply Chain Solutions

Working with USDEC and a coalition of agriculture organizations, NMPF proactively and successfully employed an advocacy and media campaign to drive solutions to the supply chain challenges that daunted dairy exporters last year. With the help of member feedback, NMPF shaped and championed passage of the Ocean Shipping Reform Act (OSRA), signed into law on June 16, which enacts new rules and regulations to address ocean carrier behavior that disadvantaged dairy exporters.

To drive further progress on supply chain issues, NMPF provided detailed input to the Federal Maritime Commission to steer OSRA implementation in a strong direction, prompted Congress and the Biden Administration to step in and preempt a rail worker strike on Dec. 2, and secured additional supply chain support through new USDA funding for pop-up locations that offered off-terminal locations for empty container storage, increasing access for agriculture shippers and freeing up much-needed terminal space.

Holding Canada Responsible for USMCA Violations

While Canada continued to flout its dairy trade obligations under the U.S.-Mexico-Canada Agreement (USMCA), NMPF, together with USDEC joined forces with the U.S. Trade Representative’s (USTR) office and USDA to ensure that those violations would not go unaddressed and unpunished.

USTR announced in Jan. 2022 that the first USMCA dispute panel convened by the United States found that Canada was improperly restricting access to its market for U.S. dairy products in violation of its USMCA tariff-rate quotas (TRQs) commitments. Canada then revised its TRQ system,

Nmpf President And Ceo Jim Mulhern Joined President

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Biden And Usdec President And Ceo

but only superficially; on Dec. 20 USTR filed a new request for dispute settlement consultations to expand the scope of the second USMCA dairy dispute to include additional elements necessary to ensure that Canada fully complies with its USMCA obligations.

USTR followed that action by requesting on Jan. 31, 2023, a panel to hear this case. NMPF and USDEC have collaborated closely with USTR and USDA throughout to craft the strongest case to prove Canada’s violations and bring its policies into compliance.

Strengthening Key Partnerships Around the Globe

To strengthen NMPF’s ability to impact policy and standard development in international forums such as Codex and the World Organization for Animal Health, NMPF and USDEC expanded key partnerships with influential dairy organizations around the world. Growing relationships in Latin America, which has become a battleground over protectionist trade policies, has been particularly important. NMPF secured new agreements with like-minded agricultural organizations in Chile and Argentina, while building upon prior partnership arrangements with Mexico, the Inter-American Institute for Cooperation on Agriculture and the Pan-American Dairy Federation. These relationships set a foundation for NMPF and USDEC to draw upon in confronting emerging threats, such as regulatory trade barriers or proposals from anti-animal agriculture interests in international forums.

SHERYL MESHKE, PRESIDENT AND CEO OF ASSOCIATED MILK PRODUCERS INC., EMPHASIZED THE IMPORTANCE OF MARKET ACCESS DURING A SENATE SUBCOMMITTEE HEARING JUNE 9.

Beating Back Nontariff Barriers

Maximizing existing dairy market access opportunities is becoming more vital with the lack of new trade agreements, making NMPF and USDEC’s work with government officials on numerous nontariff trade barriers critical. Examples from 2022 include:

• Ensuring that new Mexican dairy regulations did not upend trade;

• Blocking a proposed ban in Ecuador on imported milk powder; ironing out the messy introduction of a new EU dairy certificate;

• Securing delays in the implementation of problematic Egyptian import requirements;

• Making headway on U.S. dairy facility approvals in Indonesia;

• Stood up for the right to use common cheese names, including defending against the appeal of a 2022 district court ruling upholding the generic nature of “gruyere”; and

• Championing projects in USTR’s non-tariff trade initiatives, such as the Indo-Pacific Economic Framework, that could yield improvements in U.S. dairy exporters’ trading conditions.

Ensuring Policy Responses Match Needs in the Temporary Formula Crisis

Confronted with a nationwide shortage of infant formula that demanded immediate remedy, NMPF engaged with Congress and the administration to ensure that policy tools designed to temporarily encourage additional infant formula imports were carefully crafted and didn’t become a tool for weakening the longer-term secure domestic production necessary to ensure robust supplies. Due to those efforts, NMPF was able to support legislation granting short-term tariff waivers on formula imports and make certain that they expired at the end of 2022 as the production crisis abated.

17.8%

THE PERCENTAGE OF U.S. MILK SOLIDS

PRODUCTION SHIPPED OVERSEAS IN 2022, AN ALL‑TIME HIGH.