At the request of the four co-chairmen of the Congressional Dairy Farmer Caucus, Congressman Joe Courtney, Congressman Timothy Walz, Congressman Devin Nunes, and Congressman Peter Welch, the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) has analyzed the impact of adopting the current California fluid milk standards throughout the U.S.
Milk as it comes from the cow contains water, nonfat solids and butterfat. Nationally, the average annual composition of milk is 8.72 percent nonfat solids and 3.67 percent butterfat, with the remainder being water.
Food and Drug Administration (FDA) regulations allow fluid processors to affect the composition of milk by adding or removing butterfat or by blending milk of varying compositions to achieve a particular fluid product. Fluid milk processors cannot add water to adjust the butterfat content of milk. Minimum standards for fluid milk are established by the FDA. States can also establish standards for fluid milk marketed within the state.
Imposing California fluid standards in the U.S. has been a policy alternative that has been debated many times over the past several years. When the dairy industry was burdened by large surpluses of nonfat dry milk, many believed it was a way to eliminate those surpluses. Today, with some nonfat solids entering export markets the potential for exports of nonfat solids to grow, the effects of imposing California fluid standards results in a slightly different outcome than was found in a period of surplus nonfat solids.
Imposing California fluid standards increases producer milk prices and consumer fluid milk prices. These effects become less over time as the industry adjusts to the changing standards. Fortification allowances could work to minimize these effects depending on how they would be implemented. The increase in producer milk prices would reduce Commodity Credit Corporation dairy outlays but the effect is small against the current FAPRI baseline.
There is the potential for some differing regional effects depending on the availability of condensed skim to meets the needs of fluid processors who need product to meet the new minimum standards.
The effect of imposing California fluid milk standards is lessened over time as supplies of milk increase in response to higher milk prices.
Source: Food and Agricultural Policy Research Institute at the University of Missouri
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