WCMA Perspectives | Contributing Columnist

Reform Federal Orders Because Everything Has Changed

John Umhoefer executive director of the Wisconsin Cheese Makers Association

November 1, 2019


Reform federal orders? Why – what’s changed? Isn’t your local dairy still delivering creamline bottles to your doorstep?

Industry groups are gathering to consider reforms for the federal milk market order program, and everything – from price formulas to classes of milk – should be on the table, including the notion of replacing orders altogether.

Not only are 1930s underpinnings outdated in America’s 80-year-old federal milk marketing order program, but the US dairy industry is an entirely different beast than it was even in the year 2000 – the last time orders were thoroughly overhauled.

Is that an overstatement? Hardly. Look at these industry changes in the last 20 years:

Farm Consolidation
Consolidation on the dairy farm side has been a consistent but accelerating trend.

The US held 105,250 dairy operations in 2000 but by 2018, the national total dropped to 37,468 dairy operations, a 7 percent decline from the previous year and only 35 percent of farms that were active when federal orders were consolidated and price formulas born in 2000.

USDA’s 2017 Census of Agriculture counted 3,464 dairy farms with more than 500 cows, and these farms held half the cows in the US.

Despite this consolidation, the national dairy herd actually rose from 9.2 million cows to 9.4 million in the last two decades. Farm consolidation continues apace in 2019.

The Role of Exports
US exports of dairy products in 2000 were largely facilitated through subsidies provided by USDA’s Dairy Export Incentive Program. The US offshored 209 million pounds of dairy products in 2000, generally butter, nonfat dry milk and a small amount of cheese.

Today the success story of dairy exports is the story of the US Dairy Export Council (USDEC) and its member companies and cooperatives strategically focused on sales overseas. In 2018, US manufacturers exported 4.4 billion pounds of milk solids representing 15.8 percent of total US milk production.

Despite crucial growth in exports during the past two decades, there’s challenges as well as opportunities ahead. In the near-term, tariffs and African swine fever have crippled exports into China, and long-term the US must expand its product mix. Nearly 75 percent of US dairy exports are dried milk, whey and lactose; USDEC describes 55 percent of US exports as higher value products while 77 percent of European Union exports are high-value cheeses and dairy products.

The Fall of Fluid Milk
Data continues to spill on reduced consumption of fluid milk: in the last 12 months, beverage milk sales are down 3.9 percent. In its annual consumption summary, USDA estimated per-capita consumption of fluid milk products at 146 pounds in 2018, down 4 pounds from 2017 and down about 50 pounds per person since federal order reforms in 2000.

All told, the dairy industry sold 55.5 billion pounds of Class 1 fluid milk products in 2000 and 47.6 billion in 2018, a drop of nearly 8 billion pounds or the amount of milk now produced in New Mexico.

These trends converge in a snapshot of milk in the Upper Midwest Order 30: In January 2000, 22,521 farms shipped 2.4 billion pounds of milk, with 14.5 percent moving to Class I fluid bottling. In January 2019, the order had 8,798 farms offering 3.1 billion pounds of milk and just 7.9 percent for Class I.

The Rise of Competition
Dairy is in a pitched battle for the exclusive right to describe its products as milk and Cheddar and butter even as plant-based fluid drinks
take a share of consumer beverage spending.

The first shots in this war were fired back in 2000, when National Milk Producers Federation (NMPF) asked FDA to enforce labeling regulations regarding imitation milks.

Today, plant-based beverages are a small but growing sector in the beverage scene, earning about 15 percent of the dollars that dairy beverages take in at retail.

Plant-based imitation cheeses are a smaller competitor, but a media darling. These vegan “cheeses” have sales less than 1 percent of dairy’s $17 billion retail cheese sales.

On the horizon are dairy mimics – dairy proteins produced from genetically-modified bacteria – led by the laboratories at California-based Perfect Day.

All this change provides context to approach reform of federal orders.
Federal orders don’t control every lever in dairy, but they do have a firm grip on how milk is segmented by value and priced for producers and the marketplace.

And that power is due for review in an industry where farm consolidation, export marketing, product sales and aggressive competition are changing with breathtaking speed.


The views, thoughts and opinions expressed by Cheese Reporter columnists are theirs alone, and do not necessarily reflect the views of the Cheese Reporter.



John Umhoefer

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 286-1001 or e-mail John Umhoefer at jumhoefer@wischeesemakers.org

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