The U.S. Government has an active role in regulating and assisting the U.S dairy industry. Federal Milk Marketing Orders aim to provide an orderly system of classified pricing and 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 Livestock Gross Margin for Dairy Cattle program and the Dairy Revenue Protection program. USDA oversees two dairy research and promotion programs, commonly known as dairy checkoff programs. 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 for the benefit of both 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 each month with changes in prices of major dairy commodities. Minimum prices of milk used for fluid beverage purposes 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), established by the Agriculture Improvement Act of 2018 (2018 Farm Act), replaces 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.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-implications/dairy-livestock/.

Livestock Gross Margin for Dairy Cattle

The Livestock Gross Margin for Dairy Cattle Program (LGM-Dairy) enables dairy farmers to purchase a premium-subsidized margin insurance based on futures prices for Class III milk, corn, and soybean meal. It is administered by USDA Risk Management Agency (RMA).  The program provides flexibility on the scale of 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/en/Fact-Sheets/National-Fact-Sheets/Livestock-Gross-Margin-Insurance-Dairy-Cattle).

Dairy Revenue Protection

The Dairy Revenue Protection Program (Dairy-RP), another program administered by RMA, 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. For more information, see https://www.rma.usda.gov/en/Fact-Sheets/National-Fact-Sheets/Dairy-Revenue-Protection.

Dairy Promotion and Research

USDA Agricultural Marketing Service oversees two dairy research and promotion programs, commonly known as dairy checkoff programs.  The Dairy Research and Promotion Program is a program 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.

Last updated: Tuesday, November 12, 2019

For more information contact: Jerry Cessna