Note: This article is the third in an Iowa Farm Bureau series about how milk is priced in the United States. For an overview of FMMOs and related terminology, please see visit this link. For an example of how milk is price in Iowa specifically, please visit this link. 

Federal hearings on potential updates to Federal Milk Marketing Orders (FMMO) started in August. Discussions for this hearing began last March when the first formula requests for hearings were submitted. Leading up to the hearing, many interested parties submitted proposals for updates to the current milk pricing system.

This article presents a summary of key topics being discussed at the FMMO hearings. The USDA grouped proposals accepted for discussion at the hearings into six categories:

  1. Milk Composition Baselines
  2. Surveyed Commodity Products
  3. Class III and Class IV Formula Factors
  4. Base Class I Skim Milk Price
  5. Class I and Class II Differentials
  6. USDA-AMS Proposal

The 6th category only includes the USDA proposal which essentially says it will make necessary changes to comply with any amendments to FMMOs that come from the hearings. Because this is not substantial, only the other five categories are discussed below.

1. Milk composition baselines

Proposals in this category seek to update the base percentages of milk components used in the milk pricing formula, specifically the nonfat components of milk. As mentioned above, processors must pay for the test value of butterfat in all classes and FMMOs. However, all Class I milk and all milk in skim-fat pricing...