After years of calling for reform in how milk is priced in the USDA Federal Milk Marketing Order system, the dairy industry will finally see a long-overdue update.

The agency’s Agricultural Marketing Service on Thursday announced a final rule amending milk pricing formulas in all 11 FMMOs.

Among the changes are:

• A return to the previous formula to set the base price for most Class I milk (fluid consumption).

• An increase in Class I differentials (the costs to get milk to those markets).

• An update to milk composition factors (the level of protein and other solids in milk).

• An increase in “make allowances” (manufacturing costs, which are deducted from the price farmers receive for their milk).

• Removing 500-pound barrel cheddar cheese prices from the Dairy Product Mandatory Reporting Program survey.

Producer buy-in

Most changes will take effect on June 1. The update to milk composition factors will go into effect on Dec. 1.

The final rule follows a 49-day national hearing that took place between August 2023 and January 2024 in Carmel, Ind. During that time, AMS heard testimony and received evidence on 21 proposals.

A recommended decision was issued on July 1, 2024, followed by a 6-day comment period. AMS received 128 comments, and a final decision was issued on Dec. 2.

Producers in all 11 FMMOs approved the changes in a referendum vote in their own orders.

National Milk Producers Federation on Thursday thanked USDA and the dozens of farmers and cooperative leaders who steered FMMO modernization to a successful conclusion.

“Dairy farmers and cooperatives have done what they do best — lead their industry for the benefit of all,” Gregg Doud, NMPF president and CEO, said in a statement.

Fairer pricing

“This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive for years to come. We appreciate the monumental contributions across government and the dairy industry that made this happen,” he said.

An analysis by the American Farm Bureau Federation found the changes are less favorable to federal orders where the majority of milk is used to make cheese and milk powder.

The net benefit based on the last four years would range from an annual increase of $87.9 million in the Appalachian order to a decrease of $78.7 million in the California order.

National Milk will continue pushing for elements of its proposal that require congressional authorization, including mandatory reporting of dairy product manufacturing costs.