The U.S. Department of Agriculture (USDA) administers the Federal Milk Marketing Order (FMMO) program. The FMMOs establish the minimum prices dairy farmers receive for milk. The program, introduced during the 1930s, covers 11 areas of the country and includes about 65% of total U.S. milk production.
Each of the 11 FMMOs establishes provisions under which dairy processors purchase fresh farm milk from dairy farmers. The FMMO program uses classified pricing and market-wide pooling to ensure stable and orderly marketing of farm milk.
The system has four classes of milk based on end use: Class I (fluid), Class II (soft products such as ice cream and yogurt), Class III (cheese) and Class IV (butter and milk powder). USDA determines the minimum price for each class based on the monthly average wholesale commodity prices for cheese, dry whey, nonfat dry milk, and butter.
USDA uses market-wide pooling to determine the weighted average blend of the four class prices for each FMMO. This blend price is the minimum price that dairy farmers must receive for milk marketed under a FMMO. At times, processors pay premiums above this minimum based on supply and demand in the current market.
USDA’s Dairy Education Resource Center has information on FMMOs, including an overview of the program and explainers on the calculation of the class prices. The USDA AMS YouTube channel has videos on the program including FMMO 101, classified pricing, and marketwide pooling. USDA Market News provides monthly price announcements as well as many other reports on farm milk production and dairy commodities. USDA ERS prepares data and reports on dairy markets, including domestic and international supply, demand, trade, and prices. USDA NASS surveys and the census of agriculture include monthly and annual statistics regarding dairy cattle, milk production, milk prices, and dairy product inventories.
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