Federal Milk Marketing Order
Unfavorable economic conditions, chaotic pricing of fluid milk, and dealers who set their own prices in the early 20th century left farmers with low prices and disorderly markets. To return market power to producers, the federal government first established the Federal Milk Marketing Order (FMMO) system in the 1930s.
FMMOs establish provisions under which dairy processors buy fresh milk from dairy farmers who supply a marketing area, maintaining stable marketing relationships for all handlers and producers and organizing the complex process of marketing fresh milk. USDA oversees the FMMO program, which includes 11 milk marketing orders and applies to about 75 percent of total U.S. milk production. Federal orders establish minimum prices paid to farmers, ensure payments to farmers are accurate and timely, and provide market information.
Calls to re-examine the federal order system predate the coronavirus crisis of 2020-2021, but have intensified as the lessons of the pandemic have been learned. One example of these concerns is the dramatic disruption of normal pricing patters that resulted in record-level Producer Price Differentials (PPDs) from June through November 2020.
NMPF supports the federal legislation that authorizes the FMMO system, as well as improvements to the order that increase clarity and producer understanding of milk pricing and ensure an orderly market and fair prices for dairy farmers.
NMPF also supports the ability of cooperatives to vote as a bloc on FMMO issues, supporting the goal of dairy cooperatives to effectively market milk for the highest possible financial return to its farmer-owners.
- The experience of the COVID pandemic brought into focus the need for a modernized Federal Milk Marketing Order system. A change to the fluid-milk pricing formula in the 2018 Farm Bill led to more than $750 million in lost revenues for dairy producers in the second half of 2020, a circumstance that can’t be repeated.
- The last major FMMO revamp occurred in 2000, meaning everything from milk component calculations to the so-called “make allowance” for cooperatives that process milk are overdue to be revisited.
- FMMOs exist to promote orderly marketing conditions in fluid milk markets, supervise terms of trade that achieve more equality of bargaining between dairy farmers and milk processors, and assure that consumers have an adequate dairy supply.
- NMPF is leading the pricing discussion by convening its Economic Policy Committee, the broadest gathering of FMMO expertise serving dairy farmers. The committee has broken into task forces and will be making recommendations for consideration later this year.
- While the need for FMMO change is real, it needs to be done deliberately, with a thorough understanding of impacts for producers and cooperatives of all sizes, in all regions. And while some concerns reverberate nationwide, not all issues should be handled on a national level, as significant variation exists among federal orders so local producers have a greater say in their own futures.