The U.S. Government actively regulates and assists the U.S dairy industry. Federal Milk Marketing Orders aim to provide an orderly system of classified pricing and revenue pooling of milk from the farm. Under the Agricultural Improvement Act of 2018, the Dairy Margin Coverage program replaced the Margin Protection Program for Dairy Producers. Other dairy risk management programs administered by USDA include the Dairy Revenue Protection program and the Livestock Gross Margin for Dairy Cattle. USDA oversees two dairy research and promotion programs, commonly known as “dairy checkoff” programs. USDA purchases U.S. dairy products through food purchase programs. USDA also administers the Milk Donation Reimbursement Program, which provides limited reimbursement to eligible organizations that donate fluid milk to nonprofit organizations. Due to the COVID-19 pandemic, the Federal Government has implemented various additional measures to assist the dairy industry. Although this page lists and discusses some of the major Government policies in place, the list is not exhaustive.
Milk Marketing Orders
The Agricultural Marketing Agreement Act of 1937 authorized Federal Milk Marketing Orders (FMMOs), which have been modified many times, to help establish orderly marketing conditions to benefit dairy farmers and dairy product consumers. The program is administered by USDA, Agricultural Marketing Service (AMS). A classified pricing system and revenue pooling are two key elements of FMMOs. The FMMOs set minimum prices paid by milk processors for milk used for fluid beverage purposes and for manufactured dairy products. These minimum milk prices are set by formulas and change monthly as wholesale prices of major dairy commodities change. Minimum prices of milk used for fluid beverage purposes, as well as minimum prices for dairy farmers, differ according to a geographic price structure. For more information, see https://www.ams.usda.gov/rules-regulations/moa/dairy.
While most U.S. milk is marketed through FMMOs, some milk is marketed through similar State programs. Some milk is not included in either the Federal or a State program.
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). Like MPP-Dairy, DMC is a voluntary program that offers protection to dairy producers when the difference between the U.S. all-milk price and the national average feed cost (as calculated by a formula) falls below a certain dollar amount selected by the dairy farmer. Compared with MPP-Dairy, DMC expands the margin protection options that dairy farmers may purchase, lowers the cost of coverage for the first 5 million pounds of covered milk production per year, and includes several other provisions to support dairy farmers. For more information, see https://www.fsa.usda.gov/programs-and-services/dairy-margin-coverage-program/index.
Dairy Revenue Protection
The Dairy Revenue Protection Program (Dairy-RP) is designed to insure against unexpected declines in quarterly revenue from milk sales relative to a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities, 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 the USDA Risk Management Agency (RMA). For more information, see https://www.rma.usda.gov/Policy-and-Procedure/Insurance-Plans/Livestock-Insurance-Plans.
Livestock Gross Margin for Dairy Cattle
The Livestock Gross Margin for Dairy Cattle Program (LGM-Dairy), another program administered by RMA, 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 https://www.rma.usda.gov/Policy-and-Procedure/Insurance-Plans/Livestock-Insurance-Plans.
Dairy Promotion and Research
The USDA Agricultural Marketing Service oversees two dairy research and promotion programs, commonly known as dairy checkoff programs.
The Dairy Research and Promotion Program was established by the Dairy Production Stabilization Act of 1983 to promote dairy consumption, research, and nutrition education. The program is funded by assessments of dairy farmers and importers. For more information, see https://www.ams.usda.gov/rules-regulations/research-promotion/dairy.
The Fluid Milk Processor Promotion Program develops and finances generic advertising programs designed to maintain and expand markets and uses for fluid beverage milk products produced in the United States. The program was established by the Fluid Milk Promotion Act of 1990 and is funded by assessments of fluid milk processors. For more information, see https://www.ams.usda.gov/rules-regulations/research-promotion/fluid-milk.
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 AMS.
- Under authority of Section 32 of the Act of August 24, 1935, USDA buys a variety of foods. These purchases encourage the consumption of domestically produced foods by diverting them from the normal channels of trade and commerce. Dairy products have been purchased with Section 32 funds subsequent to the Agricultural Act of 2014. Previously, dairy products were purchased through the Dairy Product Price Support Program. For more information, see https://www.ams.usda.gov/selling-food/solicitations.
- As part of the USDA trade mitigation efforts in 2019 and 2020, USDA purchased agricultural commodities, including dairy products, through the Food Purchase and Distribution Program. These purchases helped mitigate the effects on farmers of trade retaliation by foreign nations. For more information, see https://www.ams.usda.gov/selling-food-to-usda/trade-mitigation-programs.
Milk Donation Reimbursement Program
This Milk Donation Reimbursement Program, administered by AMS, allows eligible dairy organizations to partner with nonprofit organizations to distribute fluid milk to low-income individuals. Those partnerships may apply for and receive limited reimbursements to cover the difference in the cost of milk for beverage use versus the lowest-priced use class for qualified fluid milk product donations. For more information, see https://www.ams.usda.gov/services/milk-donation-reimbursement-program.
Government Response to the COVID-19 Pandemic
The Federal Government has taken many steps to assist the dairy industry during the COVID-19 pandemic.
In April 2020, substantial quantities of milk from various parts of the country were not processed due to low demand for dairy products and logistical problems arising from the pandemic. Such milk is often spread on fields or added to manure lagoons. FMMOs provided flexibilities to handlers regulated by the FMMO Program to account for farm milk dumping in the market-wide pooling process. For more information, contact AMS Dairy Program, https://www.ams.usda.gov/about-ams/programs-offices/dairy-program.
As part of the Coronavirus Food Assistance Program (CFAP):
- USDA has provided direct payments to farmers. For more information, see https://www.farmers.gov/cfap.
- USDA has been purchasing food, including dairy products, through the Farmers to Families Food Box Program. For more information, see https://www.ams.usda.gov/selling-food-to-usda/farmers-to-families-food-box.
- Additional food purchases, including dairy products, have been provided through funding and authorities provided in the Coronavirus Aid, Relief, and Economic Security Act; the Families First Coronavirus Response Act; and other existing USDA sources. For more information, see https://www.ams.usda.gov/selling-food/solicitations.
Some dairy farmers and processors have received assistance through programs administered by the Small Business Administration. These include the Economic Injury Disaster Loan (EIDL) program, the EIDL Advance program, and the Paycheck Protection Program. For more information, see https://www.sba.gov/.
On December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021, and President Trump signed it into law on December 27, 2020. For more information, see https://www.congress.gov. For the dairy industry specifically, the law includes:
- Supplemental Dairy Margin Coverage payments based on the difference between each participant’s actual milk production in 2019 and the operation’s historical production base previously established through the program.
- A dairy donation program to provide $400 million to pay for milk to be processed into dairy products and donated to non-profit entities.
- Authorization for recourse loans for dairy processors, packagers, or merchandisers impacted by COVID-19.