WRITER’S EXT. NO. 169

mbeshore@johnsonduffie.com

April 27, 2020

Via electronic mail to: Dana.coale@usda.gov

Ms. Dana Coale, Deputy Administrator 

Agricultural Marketing Serivce 

United States Department of Agriculture 

USDA-AMS-1400 Independence Avenue, SW

Washington, D.C. 20250-0225

Re: Request for an emergency national hearing

to amend all federal milk marketing orders 

Dear Ms. Coale:

On behalf of the common marketing agencies, associations of cooperatives, individual 

dairy cooperatives (See Attachment “A”) and their dairy farmer member-owners, we request that 

the Secretary of Agriculture immediately call an emergency hearing pursuant to 7 C.F.R. 

§ 900.1, et seq., to amend all federal milk marketing orders to establish a minimum Class I milk 

price mover of $15.68 for the months of June, July, and August 2020.

The common marketing agencies, dairy cooperatives, and associations of cooperatives

that bring this urgent hearing request represent the great majority of dairy farmers in the United

States whose milk marketings are subject to the minimum price regulations of the federal milk 

marketing orders promulgated pursuant to the Agricultural Marketing Agreement Act, 7 U.S.C.

§ 601 et seq., and administered by the Department. The coronavirus pandemic has caused 

extreme marketing disorder and disastrous plunges in prices in dairy product markets. These 

developments have placed the economic viability of dairy farms in all regions of the country at 

risk. Without immediate intervention, the supply of fresh, wholesome milk and dairy products to 

the public will be jeopardized. Therefore, we request the following amendment to all federal 

milk marketing orders:
Dana Coale, Deputy Administrator

April 27, 2020

Page 2

The proposed amendment to all orders

Amend 7 C.F.R. Section 1000.50 by adding new paragraphs (b.1) and (c.1) as follows:

§ 1000.50. Class prices, component prices, and advanced pricing factors.

. . . .

(b.1) Class I skim milk price. The Class I skim milk price per 

hundredweight for the months of June, July, and August 2020 shall be the 

adjusted Class I differential specified in § 1000.52, plus the adjustment to 

Class I prices specified in §§ 1000.51(b), 1006.51(b) and 1007.51(b), plus 

$9.91.

. . . .

(c.1) Class I butterfat price. The Class I butterfat price per pound for the 

months of June, July, and August 2020 shall be the adjusted Class I 

differential specified in § 1000.52 divided by 100, plus the adjustments to 

Class I prices specified in §§ 1005.51(b), 1006.51(b) and 1007.51(b) 

divided by 100, plus $1.7481.

 

Background of emergency disorderly marketing conditions

The national and global effect of the coronavirus pandemic has resulted in significantly 

diminished market value of the commodities used to determine the Federal Order Class I Price of 

milk from dairy farmers. The Class I Price is expected to drop levels that will create a 

catastrophic impact on farmer income.

The speed at which the pandemic spread worldwide and caused market disruptions is 

alarming. On December 31, 2019, the World Health Organization (WHO) was informed of cases 

of pneumonia of unknown etiology detected in Wuhan City, Hubei Province of China1. A novel 

coronavirus was eventually identified as the cause. The first coronavirus death was reported on 

January 11, 2020. The first confirmed case of novel coronavirus in the U.S. was reported 20 days 

later. On January 30, 2020, the WHO issued a statement that “the outbreak constituted a Public 

Health Emergency of International Concern”2.

Following the WHO announcement, countries around the world began implementing 

protective measures to contain the spread of the virus. These measures included closures of 

businesses, restaurants, sports and entertainment venues, and other public gathering places and

1 https://www.who.int/news-room/detail/08-04-2020-who-timeline---covid-19 2 https://www.who.int/news-room/detail/08-04-2020-who-timeline---covid-19
Dana Coale, Deputy Administrator

April 27, 2020

Page 3

also required citizens to remain in their homes unless leaving for essential reasons. The effects of 

these closures and restrictions compounded the negative impact on dairy product demand. 

The first major effect was a loss of export markets for U.S. goods. Ports located in key 

export destinations for U.S. dairy products were closed or experienced a significant drop in cargo 

receiving capacity due to the protective measures implemented to protect worker health and 

reduce the spread of the virus. With the marketing channel for exports significantly interrupted, 

these dairy products were diverted to warehouses in the U.S. leading to growing domestic 

inventories. 

While diminished export opportunities for dairy products were the first wave to the hit 

the dairy industry, the crippling blow was a loss of domestic consumer demand. The first 

“shelter-in-place” orders were not issued until March 17, 2020 and were limited to the state of 

California. Just two weeks later, 45 states had similar measures in place. These measures 

significantly reduced the demand for U.S. dairy products. Recent data indicates approximately 

half of consumers’ food budgets is spent at grocery stores and the other half is spent through 

food service such as restaurants, quick service, and other out of home sources. The shelter-inplace and other protective measures implemented by the states has resulted in significant 

reduction of sales through food service channels. Additionally, the protective measures called for 

the closure of schools which represent 8% of U.S. fluid milk consumption. 

While these preventative measures are in place, consumers will continue to need access 

to food and will transition their purchases from the food service options to primarily retail. 

However, dairy products manufactured for food service applications are not quickly nor easily 

converted for distribution in retail channels. Regulatory requirements for labeling and packaging 

differ between retail and food service. Processing and distribution equipment used for food 

service are typically dedicated to specific package sizes and materials needed in food service. 

These package sizes and materials are not always desired by retail consumers for use in their 

homes. 

Futures market prices for dairy products provide a good example of how market 

participants have reacted to the decline in demand caused by the coronavirus impact on exports 

and consumer consumption. The daily settlements indicate the price level that market 

participants are willing to buy or sell a given product at a point in the future based on 

information available today. The prices for the same future period will fluctuate daily as market 

participants react to changes in current events or market conditions. Figure 1 and Figure 2 below 

illustrate the CME Group (CME) daily futures settlement prices for Class III Milk and Class IV 

Milk for the June, July and August 2020 monthly periods. These prices showed the strength and 

stability that characterize markets with growth opportunities. The Class III and Class IV prices

peaked during the week before the January 30, 2020, WHO announcement that the coronavirus 

pandemic should be considered a Public Health Emergency of International Concern. Following 

the announcement, the prices dropped dramatically and have mostly continued to decline to the 

current trading date. As of April 24, 2020, the Class III futures prices have declined $3.58 to 

$6.17 per hundredweight from their peak and Class IV futures have declined $6.88 to $7.90 per 
Dana Coale, Deputy Administrator

April 27, 2020

Page 4

hundredweight from their peak. This drop represents a loss in value of 27% on average for Class 

III Milk futures and loss in value of 40% for Class IV Milk futures (Figure 3). 

 $10.00

 $12.00

 $14.00

 $16.00

 $18.00

1-May-19

10-May-1921-May-1931-May-19

11-Jun-1920-Jun-19

1-Jul-19

11-Jul-1922-Jul-1931-Jul-19

9-Aug-19

20-Aug-1929-Aug-19

10-Sep-1919-Sep-1930-Sep-19

9-Oct-19

18-Oct-1929-Oct-19

7-Nov-19

18-Nov-1927-Nov-19

10-Dec-1919-Dec-1931-Dec-19

10-Jan-2022-Jan-2031-Jan-20

11-Feb-2021-Feb-20

3-Mar-20

12-Mar-2023-Mar-20

1-Apr-20

13-Apr-2022-Apr-20

Fig. 1: CME Class III Futures Daily Settlement Price

WHO PHEIC Announcemnt June 2020 July 2020 August 2020

 $10.00

 $11.00

 $12.00

 $13.00

 $14.00

 $15.00

 $16.00

 $17.00

 $18.00

 $19.00

1-May-19

10-May-1921-May-1931-May-19

11-Jun-1920-Jun-19

1-Jul-19

11-Jul-1922-Jul-1931-Jul-19

9-Aug-19

20-Aug-1929-Aug-19

10-Sep-1919-Sep-1930-Sep-19

9-Oct-19

18-Oct-1929-Oct-19

7-Nov-19

18-Nov-1927-Nov-19

10-Dec-1919-Dec-1931-Dec-19

10-Jan-2022-Jan-2031-Jan-20

11-Feb-2021-Feb-20

3-Mar-20

12-Mar-2023-Mar-20

1-Apr-20

13-Apr-2022-Apr-20

Fig. 2: CME Class IV Futures Daily Settlement Price

WHO PHEIC Announcemnt June 2020 July 2020 August 2020
Dana Coale, Deputy Administrator

April 27, 2020

Page 5

Fig. 3: CME Group Daily Futures Price Settlements

Class III Milk Class IV Milk

June 

2020

July 

2020

August 

2020

June 

2020

July 

2020

August 

2020

Price week of January 

20th $17.83 $17.99 $18.05 $18.31 $18.34 $18.40 

Current Price on April 

24th $11.66 $13.23 $14.47 $10.41 $11.00 $11.52 

Change in Price ($6.17) ($4.76) ($3.58) ($7.90) ($7.34) ($6.88)

Percent of Value Lost -35% -26% -20% -43% -40% -37%

The current Federal Order Class I mover price formulas were not crafted for these 

unforeseeable pandemic market conditions. As a consequence, the current USDA announced 

prices for milk do not reflect an appropriate Class I price mover. At present, the Class I price is 

determined by the commodity prices transacted in the AMS price survey for the first two weeks 

of the prior month. The April Class I price was based on prices transacted the first two weeks of 

March, which was when the effects of the coronavirus were just beginning to reverberate across 

the market. Consequently, the April announced price had only decreased $0.82 per 

hundredweight from the March price. The May price, however, was based on transactions 

during the first two weeks of April, a period when the coronavirus effects had become more 

prevalent across the dairy market. The precipitous collapse in the dairy product markets in early 

April led to the May price being $3.69 per hundredweight less than the April price. The next 

USDA Class I price announcement is scheduled to occur on May 20, 2020 We anticipate market 

conditions will further deteriorate resulting in a further decline in the Class I price to a level well 

below the historical averages.

The CME prices are often used by the industry as a proxy for USDA Federal Order 

prices. To provide some insight into how much further the Class I price may decline, we used the 

applicable CME futures prices for cheese, butter, nonfat dry milk and dry whey to represent the 

commodity prices used to calculate the Federal Order Class I price formula and estimated the 

Class I mover price for June, July, and August. The results are as follows:

June 2020 $11.19

July 2020 $11.79

August 2020 $12.79 

These resulting Class I prices estimated using the CME futures prices for June, July and 

August 2020 are disastrously below the USDA Class I announced mover price average of $16.72 

for 2020 year-to-date and $17.35 for the prior 10-year average. These estimated prices indicate

that, without intervention, the announced USDA Class I price will be nearing the lowest levels 

seen since the Federal Order pricing reform was completed more than twenty years ago. 
Dana Coale, Deputy Administrator

April 27, 2020

Page 6

The coronavirus crisis has not only crushed demand and reduced market prices, it has 

also resulted in processing capacity constraints for milk from dairy farms. Dairy processing 

plants, particularly manufacturing plants, have been unwilling to produce product for which sales 

are unknown. As long as food service buyers remain shut down, dairy processing plants have no 

choice but to limit production to what can be sold. Milk processing capacity has been reduced 

since the beginning of March, but the milk supply has continued to increase which has further 

exacerbated the imbalance between supply and demand. Farm milk production typically 

experiences a seasonal increase during the spring months as the weather improves and forages 

are more readily available. The U.S. milk supply for 2020 has not seen a deviation from this 

trend with the USDA milk production data3 indicating year-to-date milk production through 

March has increased 1.8% compared to the same period in 2019. The significant reduction in 

consumer demand and export opportunities has resulted in processing capacity falling short of 

the needs in several regions of the U.S. Data on milk disposals are not publicly available. News 

reports from industry analysts suggest sizeable volumes have been disposed and these disposals 

may continue for the near future. Milk that is disposed will further reduce the value paid to 

farmers below the already historically low Class prices we are expecting to see.

Purpose of the proposal4

The purpose of this proposal is to minimize the destructive impact on the Class I price of 

the dairy commodities’ price plunge caused by the coronavirus pandemic. While the proposal 

will not mitigate all the market value loss dairy farms are expected to experience, implementing 

the temporary Class I price will meaningfully help reduce the overall impact. According to the 

most recent USDA Dairy Market News data for February, Class I sales accounted for 

approximately 28% of the milk marketed that month under the FMMOs. Curtailing the decline in 

the price on 28% of federal milk marketing order sales will substantially benefit dairy farmers.

Utilizing the previously stated Class I prices calculated using CME futures commodities 

prices, the average forecast price for the months June, July and August is $11.93 per 

hundredweight. This is the lowest price level during the preceding 10-year period of January 

2010 through December 2019 and $5.42 less than the average price during this time (see Fig. 4). 

At these low-price levels over multiple months, dairy farms will experience significant financial 

hardships. Unfortunately, we often see financial institutions and lenders withdraw lines of credit 

or limit financing options in order to protect themselves from the risk associated with the market 

instability. We are entering a period of severe market volatility and dairy farms will likely have 

little or no options for supplementing critical cash flow until milk prices eventually recover. In 

these instances of low market prices and limited cash flow, we often see dairy farms forced out 

of business. At some point, we anticipate market conditions will improve and processors will 

look to the dairy farms to supply the milk needed to fill the rebounding domestic and global 

3

 https://usda.library.cornell.edu/concern/publications/h989r321c

4 Attachment B further addresses the purposes, operation and impact of the proposal in the context of the specific 

questions enumerated in the “Supplemental Rules of Practice Governing Proceedings to Amend Federal Milk 

Marketing Agreements and Marketing Orders”, 7. C.F.R. § 900.22.
Dana Coale, Deputy Administrator

April 27, 2020

Page 7

demand. The milk supply may be limited for the processors should a considerable number of 

farms go out of business.

Dairy farmers are not an economic island. The dairy industry creates an economic ripple 

effect that touches many people and industries across the United States. The ripple effects 

directly extend into other agricultural commodities such as beef and commodity feed crops. As 

mentioned previously, under the current state of the industry, significant volumes of milk are 

being disposed. Without a means to increase demand, the only option to avoid the costs of milk 

disposals is to reduce milk production. The most effective means for a dairy farmer to reduce 

production is culling cows from the milking herd. Some analysts estimate demand for dairy is 

currently down 10%. In order to reduce the milk supply by 10%, an estimated 940,000 dairy

cows would need to be culled from the milk herd. The addition of this many dairy cows to the 

supply side for beef packing houses would overwhelm the market and severely depress prices for 

the beef industry. In addition, the reduced feed needs from dairy farms would also significantly 

reduced demand for commodity feed crops. 

Requested Emergency Hearing Procedures

It is urgent that these requested amendments be effective for the month of June, which is 

projected to have the lowest prices during this crisis. To accomplish that, we request that special 

procedures be utilized for this hearing. The Department has previously found that these 

procedures are appropriate for formal rulemaking hearings, see 82 Fed. Reg. 51149 (November 

3, 2017) (promulgating 7 C.F.R. § 1.800-1.819), and utilized similar procedures for a marketing 

order hearing. For notice to all, the procedures should be published in the Notice of Hearing. 

We request the following:

1. The hearing should be called on three (3) days’ notice as authorized by 7 C.F.R.

§ 900.4(a).

 $10.00

 $15.00

 $20.00

 $25.00

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Fig. 4: USDA Announced Class I Price Mover, 2010 to May 2020 and 

Forecacast June-August 2020

USDA Class I Price 10-year average Forecast Class I Price
Dana Coale, Deputy Administrator

April 27, 2020 

Page 8 

2. The hearing notice should expressly state that issues in the hearing will include the 

need for: (1) omission of a recommended decision; and (2) the publication of a final 

order less than 30 days prior to it being effective. 

3. The hearing should be conducted using the Department’s Zoom meeting technology, 

as was the recent Walnut marketing order hearing. See 85 Fed. Reg. 20202 (April 10, 

2020). 

4. The hearing notice should incorporate the procedures provided in 7 C.F.R. § 1.807 

and require pre-submission 24 hours before the hearing of written testimony and 

exhibits. 

5. The hearing notice should also incorporate the procedures in 7 C.F.R. § 1.809(c)(1)-

(4) relating to the presentation of testimony and extent of allowable crossexamination. 

6. The hearing notice should indicate that the presiding judge may allow deviations 

from the limitations of the procedures in the hearing notice, but only for ‘good cause’ 

shown. 

Summary and conclusion 

The proponents wish to thank Secretary Perdue and the Department for the assistance 

provided to date and announced to be forthcoming to dairy farmers. The direct assistance with 

federal funds is greatly needed and greatly appreciated. In contrast to that assistance, however, 

this request for regulatory action to quell disorder in federal milk markets requires no federal 

funds and will benefit multiple sectors of the economy directly and indirectly. Dairy farmers 

will benefit directly with a stabilized Class I price. Other agricultural producers will benefit 

from the alleviation of pressure on beef and grain markets. Consumers will also benefit from the 

stabilizing of the dairy farm sources for fresh milk and at prices below historical levels.

 Thank you in advance for your consideration of our request. 

 Very truly yours, 

 JOHNSON, DUFFIE, STEWART & WEIDNER

 Marvin Beshore 

 Jason A. Statler

Attorneys for Proponents 

MB/tls
Dana Coale, Deputy Administrator

April 27, 2020

Page 9

Attachments:

1. List of proponents and market orders represented

2. Response to 7 C.F.R. § 900.22 requests

cc: Erin Taylor, AMS Dairy Programs

 John A. St. Peter, Esquire

 Federal Milk Market Administrators

 All Proponent Cooperatives
Attachment A

List of Proponents and Market Orders Represented

The following marketing agencies-in-common, associations of cooperatives, and 

cooperative milk marketing associations support this request for an emergency national hearing 

to amend all federal milk marketing orders:

Name of Agency Members Federal Order 

Number

Dairy Cooperative Marketing 

 Association, Inc. (DCMA)

Appalachian Dairy Farmers Cooperative, Inc.

Cobblestone Milk Cooperative, Inc.

Cooperative Milk Producers, Inc.

Dairy Farmers of America, Inc.

Lanco Dairy Farms Co-op, Inc.

Lone Star Milk Producers, Inc.

Maryland and Virginia Milk Producers’ 

 Cooperative Association, Inc.

Premier Milk, Inc.

Select Milk Producers, Inc.

Southeast Milk, Inc.

F.O. 5

F.O. 6

F.O. 7

F.O. 32

F.O. 126

Agri-Mark, Inc. F.O. 1

California Dairies, Inc. F.O. 51

Central Milk Producers 

 Cooperative (CMPC)

Dairy Farmers of America, Inc.

FarmFirst Dairy Cooperative

Foremost Farms USA

Land O’ Lakes, Inc.

NFO, Inc.

Scenic Central Milk Producers Cooperative

 Association

F.O. 30

Common Marketing Agency 

(CMA)

Dairy Farmers of America, Inc.

Southeast Milk, Inc.

F.O. 6

Great Lakes Southern Milk 

 Marketing Agency 

 (GLSMMA)

Dairy Farmers of America, Inc.

Foremost Farms USA

Michigan Milk Producers Association

NFO, Inc.

Prairie Farms Dairy, Inc.

Select Milk Producers, Inc.

F.O. 33

Land O’ Lakes, Inc. F.O. 51
Pennsylvania Association of 

 Dairy Cooperatives 

 (PADC)

Dairy Farmers of America, Inc.

Lanco Dairy Farms Co-op, Inc.

Land O’ Lakes, Inc.

Maryland and Virginia Milk Producers’

 Cooperative Association, Inc.

F.O. 1

F.O. 33

Southern Cooperatives 

Marketing Agency 

(SCMA)

Dairy Farmers of America, Inc.

Lone Star Milk Producers, Inc.

Select Milk Producers, Inc.

F.O. 126

United Dairymen of Arizona 

 (UDA)

F.O. 131

Upper Midwest Marketing 

 Agency (UMMA)

 (supporting members listed)

Bongards’ Creameries

Dairy Farmers of America, Inc.

First District Association

Foremost Farms USA

Land O’ Lakes, Inc.

NFO, Inc.

Plainview Milk Products Cooperative

F.O. 30
Attachment B

Supplementary responses to topics addressed in 7 CFR §900.22

7 CFR §900.22 requires several questions to be answered by proponents in a Federal 

Milk Marketing Order hearing request. 

§900.22(a). Explain the proposal. What is the disorderly marketing condition that the 

proposal is intended to address?

All federal milk orders build up the Class I price from the base of the “Class I mover”

prices specified in §1000.50. The Class I mover, in turn, is the direct product of formulas based 

on the market prices of manufactured dairy products. The effects of the coronavirus pandemic 

have significantly diminished the market value of these commodities used to determine the 

Federal Order Class I Price paid to farmers such that absent immediate intervention, the Class I 

price is expected to drop to levels that will have a catastrophic impact on farmer income. The 

proposal addresses this extreme disorderly marketing condition by establishing a fixed Class I 

mover price for the months of June, July, and August 2020.

§900.22(b). What is the purpose of the proposal?

The intent of the proposal is to minimize the destructive impact of the dairy commodity 

market prices to the Class I price caused by the coronavirus pandemic and, thereby, cushion the 

drastic drop in dairy farmer income throughout the federal order system, from coast to coast. 

The proposal will also minimize the impact to other agricultural prices -- including beef prices, 

as well as corn, hay, alfalfa, cotton seed and other dairy feed input prices – an impact which 

would be caused by extraordinary dairy cow culling and dairy farm closures.

§900.22(c). Describe the current Federal order requirements or industry practices relative to 

the proposal.

The current federal order provisions inextricably link Class I prices to the dairy product 

commodity market prices, the result is disorderly and inappropriate in the circumstances of the 

coronavirus pandemic events.

§900.22(d). Describe the expected impact on the industry, including on producers and 

handlers, and on consumers.

As described in more detail in the letter, the Class I prices which will result from the 

proposal will be higher for producers than without adoption of the proposal; but the prices for 

processors and consumers will remain substantially below the 10-year average of Class I prices.
§900.22(e). What are the expected effects on small businesses as defined by the Regulatory 

Flexibility Act (5 U.S.C. §601-612)?

The great majority of dairy farmers whose milk is priced by the federal order system are 

small businesses which will be benefitted by the proposal.

A number of regulated handlers are also small businesses. They will not be adversely 

impacted. Their regulatory status will not change, and their minimum prices will continue to be 

uniform with all market participants.

§900.22(f). How would adoption of the proposal increase or decrease costs to producers, 

handlers, others in the marketing chain, consumers, the Market Administrator 

offices and/or the Secretary?

a. Producers will see no cost impact. This improves revenue.

b. Fluid handlers will see a reduction in the anticipated market-related cost decrease.

c. Other non-fluid handlers and others in the marketing chain are not expected to be 

impacted.

d. Consumer impact is unknown as retail prices are not regulated under the federal 

orders.

e. Market Administrators and the USDA will not see a cost impact.

§900.22(g). Would a pre-hearing information session be helpful to explain the proposal?

The emergency time schedule for the hearing will not readily accommodate a pre-hearing 

information session.