First Three Months of Updated FMMOs Show Significant Farmer Losses

Smith: The Federal Milk Marketing Orders govern how processors purchase milk from dairy farmers in defined marketing areas across the U.S. Danny Munch, an economist with the American Farm Bureau Federation, provides a refresher on how those marketing orders were updated.

Munch: There was a long hearing process back in 2023 and 2024 in Indiana, where dairy stakeholders submitted testimony to USDA on ways to modernize the federal order system. A lot of folks believed it was outdated, including dairy farmers, cooperatives, and processors, and on June 1 of this year, all but one of the final approved changes went into effect.

Smith: Munch says the result of that hearing process was a slate of changes intended to modernize federal milk marketing orders.

Munch: The five major changes were increases in make allowances, which represent the portion of the milk formulas that account for processors costs to convert fluid milk; a switch back to the higher-of fluid milk formula; removal of barrel cheese from the protein price survey; increases the fluid milk differentials to reflect modern transportation costs; and increases to composition factors, which reflect how much protein and other solids are in milk.

Smith: Munch said that, overall, the impact on farmers has been a mixed bag, with one major negative change.

Munch: Dairy farmers were most concerned about the impact of increased make allowances because they reduce the price farmers receive and were based off of incomplete data during the hearing process. And so far, in the first three months of implementation, dairy farmers have lost $337 million in pool revenues just from that change. The other changes have been either more neutral or beneficial to farmers.

Smith: Learn more on the Market Intel page at fb.org. Chad Smith, Washington.