Key Issues

Class I Mover

The Federal Milk Marketing Order system uses classified pricing based on milk use and creates a revenue pool to determine the minimum price of milk that participating handlers pay to dairy farmers. USDA classifies milk into four classes — Class I is used for fluid milk. To compute the base Class I price, USDA uses the Class I mover formula.

The 2018 Farm Bill changed the Class I mover at the urging of dairy processors, who sought greater predictability in managing risk on sales of fluid milk products. The formula was changed from a system that set the mover each month at either the Class III or Class IV price, whichever was higher (the “higher of” formula), to a set $0.74 /cwt added to the average of Class III and Class IV prices. This update reflected historical trends and was designed to be revenue-neutral between processors and dairy farmers.

But the COVID-19 crisis dramatically changed price relationships from historic trends, spotlighting a glaring flaw in the mover that must be rectified to ensure orderly markets and a healthy dairy sector. As USDA purchased large amounts of cheese for the Farmers to Families Food Box program, Class III and Class IV prices sharply diverged. As a result, the new Class I mover led to an estimated $725 million in losses for farmers compared to the “higher of” formula. Even after the pandemic, the current mover has at times significantly underperformed the previous mover for, demonstrating that serious negative impacts to producers from this asymmetric risk are not unique to the pandemic-induced market disruptions. The unequal risk dairy farmers bear compared to processors during unusual market volatility means the mover must change.

Our Position

The current Class I mover carries an asymmetric risk versus the previous “higher of” calculation. This means dairy farmers are exposed to unlimited risk on the downside, while benefits to dairy farmers are limited on the upside. Among the policy recommendations unanimously approved by both the NMPF Economic Policy Committee and Board of Directors on Oct. 25, 2022 is a return to the “higher-of” Class I mover.


Key Points

  • The wild divergence of Class III and Class IV prices during the COVID-19 pandemic highlighted a flaw in Class I milk pricing that needs to be addressed, both for past effects and to ensure orderly markets in the future.
  • Dairy farmers treated as legitimate the original concerns expressed by processors that led to the farm bill change in the mover. Farmer concerns regarding the real-world effects of that change are legitimate and must be addressed to reduce disorderly marketing conditions.
  • The current Class I mover carries an asymmetric risk versus the previous “higher of” calculation. This means dairy farmers are exposed to unlimited risk on the downside, while benefits to dairy farmers are limited on the upside.

More Information

Graph of milk prices by class

Graph of the biennial reset offering farmers fair pricing