The U.S. Department of Agriculture (USDA) regulates and assists 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, a Milk Donation Reimbursement Program, and various food purchase programs. Because of the COVID-19 pandemic, the Federal Government added measures to assist the dairy industry. A brief overview of some of the major government policies follows with links to sources of further information.
Federal 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. A classified pricing system and revenue pooling are two key elements of FMMOs. The FMMOs set minimum prices paid by milk processors for milk from dairy farmers. 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 beverages, as well as minimum prices for dairy farmers, differ according to a geographic price structure. Go to https://www.ams.usda.gov/rules-regulations/moa/dairy.
While most U.S. milk is marketed through FMMOs, some 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 protects 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. Go to https://www.fsa.usda.gov/programs-and-services/dairy-margin-coverage-program/index.
Dairy Revenue Protection
The Dairy Revenue Protection Program insures 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 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 the USDA Risk Management Agency. Go to 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, administered by the 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. Go to https://www.rma.usda.gov/Policy-and-Procedure/Insurance-Plans/Livestock-Insurance-Plans.
Dairy Grading and Standards
The USDA 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.
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. Go to 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 on fluid milk processors. Go to https://www.ams.usda.gov/rules-regulations/research-promotion/fluid-milk.
Dairy Indemnity Payment Program
The Dairy Indemnity Payment Program (DIPP) pays 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, nuclear radiation or fallout, or toxic substances and chemical residues other than pesticides. DIPP also pays manufacturers of dairy products only for products removed from the market because of pesticide contamination. Go to dairy_ind_pay_program.pdf (usda.gov).
Milk Donation Reimbursement Program
This Milk Donation Reimbursement Program, administered by the USDA Agriculture Marketing Service, allows eligible dairy organizations to partner with nonprofit organizations to distribute fluid milk to low-income individuals. These partnerships may apply for and receive limited reimbursements to cover the difference in the cost of milk for beverages versus the lowest-priced use class for qualified fluid milk product donations. Go to https://www.ams.usda.gov/services/milk-donation-reimbursement-program.
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 the USDA Agriculture Marketing Service.
USDA 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 the normal channels of trade and commerce or increasing their use by low-income groups. Dairy products have been purchased with Section 32 funds since passage of the Agricultural Act of 2014. Previously, they were purchased through the Dairy Product Price Support Program. Go to https://www.ams.usda.gov/selling-food/solicitations.
USDA increased food purchases through various programs in response to the COVID-19 pandemic. More information concerning this is provided in the section below.
Government Response to the COVID-19 Pandemic
The Federal Government assisted the dairy industry in many ways during the COVID-19 pandemic.
In April 2020, substantial quantities of milk from various parts of the country were not processed because of 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 the AMS Dairy Program (https://www.ams.usda.gov/about-ams/programs-offices/dairy-program).
In five rounds beginning in May 2020 and ending in May 2021, USDA purchased substantial quantities of food, including dairy products, through the Farmers to Families Food Box Program. Go to https://www.ams.usda.gov/selling-food-to-usda/farmers-to-families-food-box. Additional food purchases, including dairy products, were 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. Go to https://www.ams.usda.gov/selling-food/solicitations.
USDA paid farmers directly through the Coronavirus Food Assistance Program (CFAP). Go to https://www.farmers.gov/cfap.
Some dairy farmers and processors 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. Go to https://www.sba.gov/.
The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020. Go to 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 pay for milk to be processed into dairy products and donated to nonprofits.
- Authorization for recourse loans for dairy processors, packagers, or merchandisers affected by COVID-19.
On March 11, 2021, President Biden signed the American Rescue Plan Act into law. Agriculture-specific parts of the Act include provisions to provide nutritional assistance, strengthen the food supply chain, ensure equity for farmers of color, and invest in Rural America. Go to American Rescue Plan | USDA.
On June 15, 2021, Agriculture Secretary Vilsack announced additional aid to agricultural producers and businesses as part of the USDA Pandemic Assistance for Producers initiative. For more information, see USDA Announces Additional Aid to Ag Producers and Businesses in Pandemic Assistance for Producers Initiative | USDA. Specific support for dairy farmers and processors to begin within 60 days of the announcement includes:
- $400 million for the new Dairy Donation Program to address food insecurity and mitigate food waste and loss.
- Additional pandemic payments targeted to dairy farmers who have demonstrated losses not covered by previous pandemic assistance.
- Approximately $580 million for the Supplemental Dairy Margin Coverage for small and medium farms.