Christopher Wolf, Photo provided.
By Christopher A. Wolf, Cornell University
In the United States, milk pay price for most dairy farmers is built from Federal Milk Marketing Order (FMMO) minimum class prices which are blended into a uniform price. Recent hearings resulted in changes to the FMMOs that impact the minimum reference prices. There were five categories of change adopted with four of the five implemented on June 1 2025 and the final change coming in December 2025. Increased make allowances are the largest negative effect on the uniform blend price from FMMOs. In order to calculate the minimum component prices, wholesale product prices are surveyed weekly resulting in a monthly average price for cheese, dry whey, butter and non-fat dry milk. The make allowance is the amount of the wholesale price that is allotted for manufacturing costs. All else equal, increasing make allowances results in lower component and minimum class prices.
The other changes in the reform included: dropping barrel cheese from the product survey (so using block cheddar only to determine cheese price); going back to the higher of class III or IV to determine the advanced class I skim milk price (and adding an adjuster for extended shelf-life class I milk); increasing the class I location adjuster in many locations; and increasing base skim milk component content of milk to reflect higher protein levels. These last 4 changes have the tendency to increase the minimum class prices of milk—although that depends on factors such as whether barrels are priced below block cheese and how far apart the advanced skim milk prices are in classes III and IV.
The Northeast is fortunate to have a fairly balanced market utilization across class uses. In particular, the Northeast retains a significant class I (beverage) utilization. The result of this being that the projected effect on the minimum uniform blend price in the Northeast is likely to be small relative to other regions. The specific effect on a given cooperative or farmer depends very much on the market and handler contract situation. The uniform FMMO blend price is only part of the resulting farm milk price and cooperative, handler and farm adjustments must be considered to arrive at the net impact. If, for example, a cooperative manufactures cheese and their processing costs exceeded the previous make allowance but are now covered, it is entirely possible that a previous deduction was made to farm pay prices to cover the loss and is now wiped out. In this example, the increased make allowance may have little to no effect on the resulting farm pay price. Further, the longer-term impacts of increased make allowance should be an increased investment in dairy product manufacturing accompanied by an increase in the derived demand for farm milk. Thus, while it may be a cost in the short-term, the recent reforms to FMMO pricing rules aim to make the entire supply chain sustainable in the long-run.