Federal Milk Order Changes to Impact Dairy Prices in 2025

By Blake Jackson

A new policy brief from the University of Missouri’s Rural and Farm Finance Policy Analysis Center (RaFF) outlines significant changes to the Federal Milk Marketing Orders (FMMOs).

These updates, effective as of June 1 and scheduled for full implementation by December 1, 2025, mark the first revision to the system since 2018.

“These changes aim to modernize how minimum milk prices are calculated and better align them with current processing costs and market dynamics,” said Adauto Rocha Jr., MU Extension agricultural business and policy specialist.

The Federal Milk Marketing Order program, managed by the USDA Agricultural Marketing Service, plays a key role in regulating the dairy market.

It sets the minimum prices that processors must pay dairy farmers and ensures a consistent milk supply for consumers. RaFF regularly releases briefs like this to help inform dairy producers, industry stakeholders, policymakers, and the public.

The policy brief highlights six main amendments to the FMMOs:

• Make allowances for dairy products are being increased. While this could result in slightly lower minimum payments to farmers, it will help processors better manage their production costs.
• Skim milk composition factors for protein, nonfat solids, and other components are increasing, which may partially offset the lower minimum prices caused by the make allowance changes.
• The 500-pound barrel cheddar cheese price is being removed from the Dairy Product Mandatory Reporting Program survey and pricing formulas, which could lead to a modest increase in component prices.
• The “higher of” formula is returning for the Base Class I Skim Milk price, which may improve the connection between Class I pricing and current market trends.
• Location differentials are being updated, leading to increased Class I milk prices in several areas.
• Extended Shelf Life (ESL) milk pricing is being introduced, providing clearer rules for this growing market segment.

“These amendments are likely to impact minimum milk prices across FMMO regions,” said Rocha. “Our simulations suggest that while some areas may see slightly lower uniform prices, others especially where utilization is more weighted toward Class I, such as in the Southeast Order, which covers parts of southern Missouri could benefit.”

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