Why is Edge proposing this?
Edge is focused on strengthening the relationship between farmers and privately-owned processors in a way that increases transparency, fairness and competition, and gives farmers a reasonable amount of price certainty.
A year ago, Edge announced priorities for reforming the U.S. milk pricing system. The focus was on regional flexibility and fairness in contracting, aiming for broad changes that bring long-term stability and more price certainty.
Edge’s proposal has two prongs: It would provide flexibility by allowing individual orders to try new pricing structures and other approaches that make sense for their geographies. And, the legislation would establish a set of contracting principles to foster fairness in business dealings between farmers and privately-owned processors, and give farmers more price certainty.
Farmers and processors need strong, lasting partnerships to build truly sustainable food systems. Any milk pricing reform must be built on that foundation to be successful.
Building fairness in contracting.
Basic contractual expectations
Competition
Equity
Basic contractual expectations.
Written contracts:
All milk supply agreements are in writing.
Farmers paid twice per month, with no more than three weeks lag. Advance checks are paid in accordance with what is known about the current month’s prices.
Timely payments:
Verification of weights, tests
and samples:
Third-party, certified organizations will be utilized to verify milk weights, component tests and samples. Verification organizations are allowed to provide other services to farmers.
Contract termination notice:
Unless in extraordinary circumstances, a reasonable amount of time must be given as notice before contracts can be terminated.
Fair and balanced competition.
Milk composition and quality incentive formulas (such as SCC, protein and volume premiums) are clearly spelled out in the milk supply agreements, and sufficient notice is given before incentive formulas change. Processors are allowed to set pricing formulas to compete successfully in domestic and overseas markets.
Transparent pricing formulas:
Farmers are able to manage price risk using a combination of processor-specific basis contracts and private or government-supported risk management instruments.
Competitive risk management:
Exclusivity and volume limits:
Processors should not impose exclusivity if volume limits or two-tier pricing are imposed.
Contractual equity
for farmers.
Processors and farmers must act in good faith, and disputes addressed through arbitration process with meaningful penalties for unfair behavior.
Good faith principle:
No special deals allowed. Any incentive offered to one patron must be offered to all current patrons meeting same criteria set by processor, including but not limited to differences for farm location, size and quality.
Equal opportunity for all farmers:
These terms should apply to all milk buyers in the United States, irrespective of their participation in FMMOs. Cooperatives and their plants would be exempt.
Equal treatment of processors:
Building regional flexibility.
Given the wide differences in product mixes across the country, more regional flexibility in the federal orders would benefit everyone. With our proposal, each order would have the authority to operate its milkshed in a way that makes sense for that order.
A regional approach would account for geographic differences in population, farmer base and product mix.
The law does not permit this sort of order-to-order flexibility, so a legislative change would be needed. Each federal order could then decide whether to seek to amend its order through an inclusive USDA hearing in their geographic areas.
NOTE: This change only allows for additional topics to be considered through USDA’s hearing process. Any changes to the orders would still be subject to a hearing.