From National All-Jersey Inc. General Manager Erick Metzger: This morning USDA released details associated with the next round of pandemic relief. The biggest chunk will be funneled through the FMMOs to compensate producers based on the Class I milk in their Orders.
As has been documented, the ‘new’ Class I formula adopted in the 2018 Farm Bill set the Class I price to be the average of III and IV, plus $0.74 instead of being the higher of III or IV. Last year when the Class III price exceeded IV by large amounts, the new ‘average of’ formula resulted in Class I prices well below the old ‘higher of’ formula.
Class I milk is required to be pooled, while manufacturing milk can opt out of FMMO pooling. USDA has agreed to make up 80% of the difference between the ‘average of’ Class I price and ‘higher of’ Class I price, but only up to 5 million pounds of annual production per producer. This limitation is not being received well in the Southeast which has high Class I utilization, but many herds well over five (5) million pounds annual production.
In addition to the Class I payments, USDA is revising part of the feed cost calculation for DMC, and will make that change retroactive to January 2020.
The full announcement can be read here USDA Announces Improvements to the Dairy Safety Net and New Pandemic Market Volatility Assistance Program | USDA