Taking into account the large differences in the California 4b price and the FMMO class III price it is easy to envision a one-to-one financial return on the whey value from a California FMMO, e.g., $1.43 average price increase. However, a difficult issue arises in that FMMOs are built around qualification criteria and an ability to "de-pool" under highly specific conditions of exit and re-entry. Participation in the FMMO revenue pooling process is voluntary for milk in manufacturing classes. During the monthly pooling process and after the classified prices have been announced, any non-fluid plant may opt out of the pool and would not be subject to FMMO minimum price provisions. Opting out of the pool during a month may impact the ability to pool in future month(s). As such, de-pooling requires a multi-month cost benefit analysis. Through de-pooling the volume of milk pooled and total financial value of the market-wide pool is reduced. This is advantageous when the classified value of milk exceeds the anticipated uniform price and allows for the revenue from milk sales at this higher classified price to remain outside the pool. Failure to de-pool when manufacturing prices exceed the expected uniform price may result in a manufacturing plant paying into the pool, thus sharing the revenue from this higher valued milk, or not getting a pool draw.
The California state order does not permit de-pooling on a monthly basis. Rather, on an annual basis and prior to price announcements, any manufacturing plant can opt out of the pool. Any Grade A milk processor not opting out of the pool at the beginning of the year must pay minimum milk prices for the entire calendar year. As a result, if monthly de-pooling is permitted, the amount of milk pooled and total value of the milk in the pool would be conditional on the price relationships and the amount of milk de-pooled. Funding quota from a smaller pool of monies could diminish the market value of the pool and reduce the post-quota uniform milk price when compared to a price environment without monthly de-pooling incentives. Thus, with de-pooling, the financial returns from a FMMO pool may be diminished and the ability of a FMMO to facilitate the orderly and efficient marketing of milk is potentially weakened - especially considering the declining share of milk used to produce class I beverage products. Additionally, and importantly, any gains in farm level milk prices due to the adoption of FMMO classified prices in California would be dependent on the market-wide utilization of milk and would be offset if high value milk is consistently de-pooled.