As of June 1, 2025, significant updates to the Federal Milk Marketing Orders (FMMOs) have been implemented, marking the most comprehensive overhaul in over two decades. These reforms, approved by dairy farmers across all 11 federal milk marketing regions, aim to modernize milk pricing structures to better reflect current market conditions and production realities.
Michael Dykes, president and CEO of the International Dairy Foods Association, commented on the announcement back in January:
“The reforms included in USDA announcement include important updates to elements of the FMMO system, including much-needed changes to ‘make allowances.’ While the USDA process did not address all issues within the supply chain, particularly for Class I and organic milk processors, IDFA is optimistic that this process has laid the groundwork for a unified and forward-looking dairy industry, and we are grateful to our members who provided testimony and engaged in this process over the past 2+ years.”
Highlights of the New FMMO Changes Include:
- Return to the Higher-Of Formula for Class I Milk Pricing: The base price for Class I (fluid) milk now reverts to the higher of the advanced Class III or Class IV skim milk prices, replacing the previous “average-of” formula. This change is expected to provide more favorable pricing for fluid milk producers.
- Updated Manufacturing Allowances: Adjustments have been made to the manufacturing allowances to better represent current processing costs:
- Cheese: $0.2519 per pound
- Butter: $0.2272 per pound
- Nonfat Dry Milk: $0.2393 per pound
- Dry Whey: $0.2668 per pound
- Elimination of 500-Pound Barrel Cheese From Pricing Surveys: The 500-pound barrel cheddar cheese has been removed from the Dairy Product Mandatory Reporting Program survey, leaving only the 40-pound block cheddar prices to determine the monthly average cheese price used in the Class III milk price formula.
- Revised Class I Differentials: Class I differentials have been updated to reflect the increased costs associated with servicing the Class I market, including transportation and distribution expenses.
- Delayed Implementation of Skim Milk Composition Factors: Changes to the skim milk composition factors — updating to 3.3% true protein, 6.0% other solids and 9.3% nonfat solids — will take effect on Dec. 1, 2025. This delay allows processors time to adjust to the new standards.
These reforms are designed to create a more equitable and transparent pricing system that aligns with the current state of the dairy industry. By addressing outdated components of the FMMOs, USDA aims to support dairy farmers’ profitability and ensure fair compensation across various classes of milk.
For more detailed information on the FMMO changes, you can visit USDA’s official announcement: USDA Issues Final Rule on Amendments to the Federal Milk Marketing Orders.
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