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Processing Must Return to the Southeast. Multiple Component Pricing is the First Step.

Last week, the dairy world eagerly joined online to listen to Senator Kristen Gillibrand's Dairy Subcommittee hearing addressing the need for milk pricing improvements and reform. Those testifying included a panel of dairy farmers, processors, and experts in dairy policy and economics.

The theme of the hearing: the U.S. milk pricing system is broken and someone needs to fix it - FAST. The formula that USDA uses to price milk does not cover the cost of production for dairy farmers. In return, the closure of many small family dairy farms across the country, especially in the Southeast, has occurred.

Among those testifying was Mississippi dairy farmer Michael Ferguson. Ferguson echoed the concerns of other panelists regarding the current Class I milk pricing formula. Changes made during the last farm bill have led to significant on-farm price loss during the pandemic. He believes a return to the ‘higher-of’ pricing formula until the dairy industry can proceed to a national rulemaking process through USDA’s Dairy Programs should be considered.

At the closing of his testimony, Ferguson took a moment to address issues many southeast dairy farmers have with multiple component pricing for federal orders 5,6, and 7.

“It is likely that milk proteins will continue to be a major nutritional and economic value-added dairy product in both domestic and international markets,” he said. “Implementing a more uniform pricing scheme across large portions of the U.S. will help to improve component productivity and drive milk to its highest valued and best use.”

"Importantly, for farms like mine in the Southeast, component pricing could improve the price for the milk we receive and it could facilitate innovation and investment in the Southeastern dairy industry,” he continued. “This too can be addressed through a rule-making process, but I urge the subcommittee to carefully consider this issue in your conversations."

I appreciate Ferguson tackling this topic during the hearing. I support his position and agree that we must consider multiple component pricing in the Southeast. The mass closures of processing facilities in our region is concerning. If farmers want to sustain their businesses and grow it for the next generation, then the return of processing should be our TOP PRIORITY. Since fluid milk consumption continues to decline year-over-year, the logical choice for processing should be value-added or manufacturing.

Change is hard, but it is necessary. If the Southeast wants to remain a player in the U.S. dairy industry, producers should consider multiple component pricing. It's the first step in moving the industry forward and rebuilding our processing capacity.

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