By Andi Anderson
The long-awaited modernization of the Federal Milk Marketing Orders (FMMOs) is delivering mixed results for America’s dairy farmers.
After years of discussion and hearings, including key testimony sessions in Indiana during 2023 and 2024, the updated system officially went into effect on June 1 of this year.
Federal Milk Marketing Orders regulate how processors buy milk from farmers in specific regions of the United States. The recent updates were designed to reflect today’s market realities and were based on extensive input from dairy farmers, cooperatives, and milk processors.
According to Danny Munch, economist with the American Farm Bureau Federation, the USDA approved five major changes. These include higher make allowances to cover processors’ costs, a return to the higher-of formula for fluid milk pricing, removal of barrel cheese from the protein price survey, increased fluid milk differentials to match modern transportation expenses, and updated composition factors to better represent the protein and solids content of milk.
While some of these adjustments are helpful or neutral, the rise in make allowances has caused significant concern. Make allowances account for processor costs when converting raw milk to products, but higher levels reduce the price farmers receive.
Munch noted that this increase was based on incomplete data, creating challenges for farmers.
In the first three months after the changes took effect, dairy farmers collectively lost an estimated $337 million in pool revenues directly linked to the higher make allowances.
Other updates, such as improved transportation differentials and updated composition factors, are considered more balanced or positive for farmers.
The new FMMO framework shows that modernization can bring both opportunity and risk. Farmers, processors, and policy experts continue to monitor the economic impact closely to ensure the system supports both fair pricing and a stable milk supply across the country.
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Categories: National