Next, these prices are used to determine two-week and monthly weighted average commodity values. First, each week, through mandatory price reporting, dairy manufacturers report to USDA the value and sales volume of wholesale butter, cheddar cheese, nonfat dry milk and dry whey. There are several steps involved in determining farm-level milk prices for farmers pooling on a FMMO.
The different class prices are derived from various component values, which are in turn derived from several commodity prices. In FMMO milk pricing, we often talk about the three C’s: commodity, component and class. Today, there are 11 FMMOs in the United States. For nearly 20 years there were only 10 milk marketing orders, but in September 2018 California was introduced into the FMMO system as a result of the 2014 farm bill ( 2014 Farm Bill: Key Factors to Consider with a California Federal Milk Marketing Order). Producers in a marketing area (Figure 1) share in the proceeds of all milk sales “pooled” on an order, and the regulated minimum milk prices reflect the end-product pricing formulas and the farm’s share of the revenue sharing pool. Milk pricing regulations in place today stem from pricing reform in 2000 that introduced end-product pricing formulas, by which regulated milk handlers are required to pay producers based on their utilization of the milk. – and four of them are dead.” Milk pricing regulations in Federal Milk Marketing Orders (FMMO) are among the most complicated commodity pricing regimes across all of agriculture. There’s an old adage in the dairy industry that “only five people in the world know how milk is priced in the U.S.
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