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, donation programs, 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 for 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. 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 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.
Although 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). 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. For more information, see Dairy Margin Coverage Program.
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 the USDA Risk Management Agency. For more information, see 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. For more information, see 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. For more information, see National Dairy Promotion and Research Board.
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. For more information, see Fluid Milk Processors Promotion Board.
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 dairy product manufacturers for products removed from the market because of pesticide contamination. For more information, see Dairy Indemnity Payment Program.
Milk Donation Reimbursement Program
This Milk Donation Reimbursement Program (MDRP), administered by the USDA Agriculture Marketing Service, allows eligible dairy organizations to partner with nonprofit organizations to distribute fluid milk to those in need of food assistance. 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. Funding for the program was $9 million for fiscal year 2019 and is $5 million per fiscal year thereafter. Eligible dairy organizations (EDOs) under this program are also eligible under the Dairy Donation Program (see below). For more information, see Milk Donation Reimbursement Program.
Dairy Donation Program
In the 2021 Consolidated Appropriations Act, Congress directed USDA to develop a $400 million Dairy Donation Program (DDP) to facilitate dairy product donations and reduce food waste. The program became effective September 2, 2021, and will expire in September 2023, unless extended by notification in the Federal Register. Under the program, EDOs that account to a FMMO and incur a qualified expense related to certain dairy product donations may apply for and receive reimbursements for those donations. This program reimburses EDOs at a higher rate than under the MDRP. Therefore, a supplemental reimbursement will be made to EDOs receiving reimbursement under MDRP. New applicants to the DDP that donate fluid milk products will be automatically enrolled in MDRP. For more information, see Dairy Donation 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 those in need of food assistance. 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. For more information, see Purchase Programs: Solicitations & Awards.
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 has 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).
Beginning in May 2020 and ending in May 2021, USDA purchased five rounds of substantial quantities of food, including dairy products, through the Farmers to Families Food Box Program. For more information, see USDA Farmers to Families Food Box Program. Additional food purchases, including dairy products, have been made through funding and authorities provided in the Coronavirus Aid, Relief, and Economic Security Act; the Families First Coronavirus Response Act; the American Rescue Plan, and other existing USDA sources. For more information, see Purchase Programs: Solicitations & Awards.
USDA paid farmers directly through the Coronavirus Food Assistance Program (CFAP). For more information, see Coronavirus Food Assistance Program.
Some dairy farmers and processors received assistance through programs administered by the Small Business Administration (SBA). These include the Economic Injury Disaster Loan (EIDL) program, the EIDL Advance program, and the Paycheck Protection Program. For more information, see the SBA website.
The Consolidated Appropriations Act of 2021 was signed 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.
- The Dairy Donation Program (as described above) to pay for milk to be processed into dairy products and donated to nonprofit organizations.
- 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. For more information, see the American Rescue Plan.
On August 19, 2021, USDA released information concerning the Pandemic Market Volatility Assistance Program. The program will provide:
- Up to $350 million in payments to dairy farmers impacted by market volatility and disruptions as a result of the COVID-19 pandemic and ensuing Federal policies.
- Payments by USDA to dairy farmers through their handlers and cooperatives based on fluid milk sales from July through December 2020.
- Education to dairy farmers on Federal dairy programs and policies provided by individual handlers and cooperatives.
For more information, see Pandemic Market Volatility Assistance Program.