Policy

The U.S. Department of Agriculture (USDA) provides regulatory framework, assists, and promotes the U.S dairy industry. Dairy related programs administered by USDA include Federal Milk Marketing Orders, risk management programs, dairy grading and standards, dairy research and promotion programs, a Dairy Indemnity Payment Program, donation programs, and various food purchase programs. A brief overview of some of the major Federal policies follows with links to sources for further information.

Federal Milk Marketing Orders

The Agricultural Marketing Agreement Act of 1937 authorized Federal Milk Marketing Orders (FMMOs), to help establish orderly marketing conditions to benefit dairy farmers and dairy product consumers. The program is administered by USDA, Agricultural Marketing Service. Classified pricing and revenue pooling are two key elements of FMMO regulations. FMMOs set minimum prices paid by milk processors for milk from dairy farmers according to how the processor utilizes the milk. These minimum milk prices are set by formulas and change monthly to reflect wholesale prices of major dairy commodities. Minimum prices of milk used for fluid beverage purposes, as well as minimum prices paid to dairy farmers for their milk, differ according to a geographic price structure. For more information, see Federal Milk Marketing Orders.

The rules have been modified over time as the dairy industry has changed. Amendments to the FMMOs are carried out through a formal public hearing process overseen by USDA. The most recent hearing process started August 23, 2023, and concluded at the end of January 2024. A recommended decision was issued in July 2024. More information on this process can be found here: Federal Milk Marketing Order National Hearings.

Although most U.S. milk is marketed through an FMMO, a small share is marketed through similar State programs while some milk is not marketed under either the Federal Orders or State programs.

Dairy Forward Pricing Program

The Dairy Forward Pricing program allows milk producers to voluntarily enter into forward price contracts with handlers for pooled milk used in Classes II, III and IV products under the FMMOs. However, the forward contracts cannot cover Class I fluid milk. Handlers entering these agreements will pay farmers the contract price instead of the FMMO calculated minimum blend price. However, handlers must continue to account to the Federal Order revenue pool for all milk they receive at the respective order's minimum class prices. For more information, see Dairy Forward Contracting.

Dairy Margin Coverage

The Dairy Margin Coverage program (DMC) was established by the Agriculture Improvement Act of 2018 and replaced the Margin Protection Program for Dairy Producers (MPP-Dairy). DMC is a voluntary program that protects dairy producers when the difference between the U.S. all-milk price and a national average feed cost (as calculated by a formula) falls below a certain dollar amount selected by the dairy farmer. This program is administrated by USDA, Farm Services Agency (FSA). 

As of February 28, 2024, USDA, FSA revised the regulations for DMC, allowing operations to make a one-time adjustment to established production history. For more information, see Dairy Margin Coverage Program.

Dairy Indemnity Payment

The program provides payments to dairy producers when a public regulatory agency directs them to remove their raw milk from the commercial market because it has been contaminated by pesticides and other residues. This program is administrated by USDA, Farm Services Agency (FSA). For more information, see: Dairy Programs.

Livestock Gross Margin for Dairy Cattle

The Livestock Gross Margin for Dairy Cattle program, administered by USDA, Risk Management Agency, enables dairy farmers to purchase premium-subsidized margin insurance coverage based on futures prices for Class III milk, corn, and soybean meal. The program provides flexibility on pounds covered, as well as on the quantities of corn and soybean meal per hundredweight of milk production. Participating farmers receive indemnities based on changes in their insured margins during the coverage period. Federal subsidies are based on the deductible chosen by the dairy farmer. For more information, see Livestock Insurance Plans.

Dairy Revenue Protection

The Dairy Revenue Protection program insures against unexpected declines in each participating operation’s quarterly revenue from milk sales relative to a guaranteed coverage level. The expected revenue is based on futures prices for milk or dairy products (depending upon an option chosen by the dairy producer) and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the State or region where the dairy producer is located. The program is administered by USDA, Risk Management Agency. For more information, see Livestock Insurance Plans.

Dairy Promotion and Research

The USDA’s Agricultural Marketing Service oversees the Dairy Research and Promotion program and the National Fluid Milk Processor Promotion program.

The Dairy Research and Promotion program, also known as the Dairy Checkoff Program, is a national producer-funded and importer-funded program for dairy product promotion, research, and nutrition education. To fund the program, U.S. dairy farmers pay a 15-cents-per-hundredweight assessment on their milk and importers pay 7.5 cents per hundredweight on dairy products imported into the United States. For more information, see National Dairy Promotion and Research Board.

The National Fluid Milk Processor Promotion program, or Fluid Milk Checkoff program, conducts business as the Milk Processor Education Program (MilkPEP). The program develops and finances generic advertising designed to maintain and expand markets and uses for fluid milk products produced in the U.S. Processors marketing more than 3 million pounds of fluid milk per month pay a 20-cents-per-hundredweight assessment on fluid milk processed and marketed in consumer type packages in the United States. For more information, see Fluid Milk Processors Promotion Board.

Milk Donation Reimbursement Program

This program was established by the Agriculture Improvement Act of 2018. Under this program, eligible dairy farmers, cooperative associations, or processors partner with nonprofit organizations that distribute food to low-income individuals. Those partnerships may apply for and receive limited reimbursements to cover expenses related to certain fluid milk product donations. This program is administrated by USDA, AMS. For more information see, Milk Donation Reimbursement Program.

Dairy Grading and Standards

The USDA's Agricultural Marketing Service helps the industry market U.S. dairy products domestically and internationally through export certification services, impartial evaluations of dairy equipment and product quality, and standards used in the dairy grading appraisal process.

Food Purchase Programs

USDA purchases dairy products to be delivered to schools, food banks, and nonprofit organizations through various USDA nutrition and distribution programs. These purchases are administered by USDA, Agriculture Marketing Service.

USDA also buys a variety of foods under the authority of Section 32 of the Agricultural Act of August 24, 1935. These purchases encourage the consumption of domestically produced foods by diverting them from normal channels of trade and commerce and increasing their use by those in need of food assistance. Dairy products have been purchased periodically with Section 32 funds since passage of the Agricultural Act of 2014. For more information, see Purchase Programs: Solicitations & Awards.