The U.S. Department of Agriculture (USDA) regulates, assists, and promotes 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 Coronavirus (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 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 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's 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’s Agricultural Marketing Service oversees the Dairy Research and Promotion Program and the National Fluid Milk Processor Promotion Program.
The Dairy Research and Promotion Program, also known as the Dairy Checkoff Program, is a national producer and importer program for dairy product promotion, research, and nutrition education. To fund the program, U.S. dairy farmers pay a 15-cents- per hundred-weight assessment on their milk and importers pay 7.5 cents per hundred-weight on dairy products imported into the U.S. For more information, see National Dairy Promotion and Research Board.
The National Fluid Milk Processor Promotion Program, or Fluid Milk Checkoff Program, conducts business as the Milk Processor Education Program (MilkPEP). The program develops and finances generic advertising programs designed to maintain and expand markets and uses for fluid milk products produced in the U.S. Processors marketing more than 3 million pounds of fluid milk per month pay a 20 cent per hundred-weight assessment on fluid milk processed and marketed in consumer-type packages in the U.S. For more information, see Fluid Milk Processors Promotion Board.
Dairy Donation Program
In the 2021 Consolidated Appropriations Act, Congress directed USDA to develop a $400-million Dairy Donation Program to facilitate dairy product donations and reduce food waste. Under this new program, eligible dairy organizations partner with nonprofit feeding organizations that distribute food to individuals and families. Those partnerships may apply for and receive reimbursements to cover some expenses related to eligible dairy product donations. 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 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.
Pandemic Market Volatility Assistance Program
USDA will provide more than $350 million in COVID-19 pandemic assistance payments to dairy farmers who received a lower value due to market abnormalities caused by the pandemic and ensuing Federal policies. For more information, see Pandemic Market Volatility Assistance Program.