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United StatesDepartment ofAgricultureAgricultural Marketing ServiceAn Overviewof theFederal MilkMarketingOrderProgram
The U.S. Department of Agriculture (USDA)oversees the Federal Milk Marketing Order (FMMO)program which includes 11 milk marketing ordersand applies to about 75 percent of total U.S. milkproduction. The regulatory provisions of theindividual orders apply to handlers, not dairyfarmers, and specify how dairy farmers supplying amarketing area will share the money from their rawmilk sales.What is a Marketing Area?A geographic area where dairy processors competefor their sales. FMMO regulations and area-specificprovisions in each marketing area are administeredby a regional “Market Administrator.” Areas notcovered by an FMMO are either unregulated orare regulated by a state system. A map of the 11marketing areas is at:https://tinyurl.com/FMMOmapWhat is a Handler?A handler is a processor of raw milk or a cooperative(an association of dairy farmers which has fullauthority in the sales of its members). There aretwo types of handlers: fluid (beverage milk) andmanufacturing (cheese, ice cream, butter, etc.).An FMMO must regulate fluid milk handlers—manufacturing handlers typically participate whenit is economically beneficial.page 2
What doesthe FMMOProgram do?1Establishes MinimumUniform PricesFMMOs establish minimum prices paid to farmersthrough a three-step process:1. Collect dairy commodity market prices2. Determine handler prices based on end-use3. Establish minimum uniform prices throughpoolingFMMOs establish monthly uniform prices paid tofarmers by first classifying milk by its end-use. TheFMMO then combines the value of that milk (thisis referred to as pooling) and shares the value amongthose farmers whose milk is pooled. There are fouruniform “classes” throughout the FMMO system:yy Class I: fluid milkyy Class II: milk used to make soft products (icecream, cottage cheese, yogurt, etc.)yy Class III: milk used to make hard cheese productsyy Class IV: milk used to make butter and powdereddry milk products2Ensures ProperPaymentsThrough auditing, each FMMO ensures paymentsto farmers are accurate and timely. In addition,FMMO dairy scientists establish or verify tests ofmilk components (butterfat, protein, other solids) toensure farmers are paid for the proper componentlevels in their milk.page 3
3Provides MarketInformationIndustry, academia and other government agenciesrely on the dairy-related regional and national datacollected and analyzed by the FMMO program. Theweekly, monthly and annual publication of FMMOprogram data is a comprehensive and timely sourceof dairy information currently not reported by anyother entity.How DoesPoolingWork?FMMOs establish monthly uniform prices paidto farmers by first classifying milk by its end use.The FMMO then pools the value of that milk andshares that value among the farmers participatingon that marketing order. Pooling allows farmersto receive the uniform price of all milk in the poolregardless of what end product their milk was usedfor. In this way, pooling makes a farmer’s paymentindependent of how the milk was used.The chart on the following page shows a simplifiedexample of how pooling works for two different dairyfarmers, Farmer A and Farmer B. CWT stands forhundredweight, or 100 pounds.page 4
This is a simplified example of how pooling works for two different dairy farmers.page 5
How can anFMMO beamended?Changes to the FMMO require a rulemakingprocess that is:1. Industry-driven: changes are proposed by theindustry, not USDA.2. All-inclusive: anyone can take part in the hearingand public comment periods.3. Transparent: decisions are based solely on therecord of the rulemaking proceeding.4. Farmer-approved: farmers must approve anychange via a voting process.More information about Understanding theMilk Order Amendment Process is at:https://tinyurl.com/MilkAmendmentTo learn more about FMMO's, visit:https://tinyurl.com/learnaboutFMMOsThis booklet is designed to provide an overview ofthe Federal Milk Marketing Order program. It is notintended to provide comprehensive guidance. Programrules can be found in Title 7 of the Code of FederalRegulations (CFR), Part 900-General Regulations.USDA is an equal opportunity provider, employer,and lender. October 2019page 6
y Class III: milk used to make hard cheese products y Class IV: milk used to make butter and powdered dry milk products. 2 . Ensures Proper Payments. Through auditing, each FMMO ensures payments to farmers are accurate and timely. In addition, FMMO dairy scientists establish or verify tests of milk components (butterfat, protein, other solids) to
