Policy

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 dairy products through food purchase programs. USDA also administers the Milk Donation Reimbursement Program, which provides limited reimbursement to eligible organizations for milk donations to nonprofit organizations. Due to the COVID-19 pandemic, the 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 since then, 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 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 to MPP-Dairy, DMC expands the margin protection options that dairy farmers may purchase, lowers cost 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 the 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. It 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.

  • Section 32 of the Act of August 24, 1935, enables USDA to support the farm sector through purchases of surplus food. 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, USDA purchases agricultural commodities, including dairy products, through the Food Purchase and Distribution Program. These purchases help to mitigate the effect on farmers caused by trade retaliation of 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 provide 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:

On May 4, 2020, USDA announced details for additional Section 32 food purchases. For more information, see https://www.ams.usda.gov/press-release/usda-announces-additional-food-purchase-plans.

Some dairy farmers and processors have received assistance through programs administered by the Small Business Administration, including the Economic Injury Disaster Loan (EIDL) program, the EIDL Advance program, and the Paycheck Protection Program. For more information, see https://www.sba.gov/.

Last updated: Monday, August 03, 2020

For more information, contact: Jerry Cessna