FOR THE FARMERS:

Inside the federal order:

Contracting principles: If your processor pools your milk in the federal order, some contracting principles, like timely payments, are already in place. Edge's priorities would add extra protections such as written contracts, required contract termination notice and transparent pricing formulas. 

FMMO Flexibility: For most geographies, Edge's flexibility provisions, known as uniform benefits, would not make sense, which is why this new approach would still need to go through a regional federal order hearing before implementation. Still, areas like the Upper Midwest could benefit from the elimination of PPDs, replaced by a “protein pool premium.” In this system, each handler would be required to pay their patrons at least the market-wide commodity value of their product mix, plus the PPP.

Outside the federal order:

FMMO Flexibility: If you are outside the order, this would not affect you.

FOR THE PROCESSORS:

Inside the federal order:

Contracting principles: If you pool milk in the federal order, you are already subject to several contracting principles, like timely payments. Edge's priorities would require extra protections such as written contracts, required contract termination notice and transparent pricing formulas. 

FMMO Flexibility: If the federal order you pool milk on implements a “uniform benefits” approach after vetting it through the hearing process, cash flow from the pool to each dairy manufacturer is always positive and equal per pound of protein pooled. You would be required to pay your patrons at least the market-wide commodity value of your product mix, plus that “protein pool premium” you receive from the pool. There would not be a uniform price among processors; rather, it would disincentivize depooling and encourage processors to continuously monitor and adjust their product mix as needed to pay competitive milk prices.

Outside the federal order:

FMMO Flexibility: If you are outside the order, this would not affect you.

Edge shares milk pricing reform updates with I-29 Moo University

Edge unveils federal milk pricing reform priorities

Edge and other dairy farmer groups
propose Class III Plus for better milk pricing

Understanding the Class III Plus milk pricing proposal

Need to Know: FMMOs, PPDs and impact

The Federal Milk Marketing Orders (FMMOs) play a huge role in the milk checks that dairy farmers receive. Yet not a lot of us have a full understanding of the mechanisms by which they operate. Interest has been piqued in the FMMOs and producer price differentials (PPDs) due to negative values farmers have been seeing on their milk checks since last year. Edge is providing this webpage as a resource for our members.

	The facts about the Federal Milk Marketing Orders Federal Milk Marketing Orders (FMMOs) establish certain provisions under which dairy processors purchase fresh milk from dairy farmers supplying a marketing area. The Orders were established by the 1937 Agriculture Adjustment Act as a response to milk strikes, low dairy prices and lack of cooperation between market participants. Read more here.
	The ins and outs of producer price differentials Edge asked Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, to explain producer price differentials (PPDs) and the negative values that farmers have been seeing on their milk checks. Read more here.
	Breaking down negative PPDs, depooling, transparency With the intense focus on the Federal Milk Marketing Orders and producer price differentials during the past year, Edge connected with Dr. Marin Bozic, one of the nation’s top dairy economists, who dove into the issue of negative PPDs, the mechanics and impact of depooling, and calls for new pricing formulas. Bozic is an assistant professor at the University of Minnesota. Read more here.

Additional resources

USDA website on FMMOs Brochure: USDA: FMMO overview Brochure: Understanding the FMMO and amendment process Analysis of Producer Price Differentials for March 2021 Marin Bozic and Christopher Wolf, April 2021 Negative Producer Price Differentials in Federal Milk Marketing Orders: Explanations, Implications and Policy Options. Marin Bozic and Christopher A. Wolf, April 2021 Price formulas Edge:Pushes back against artificial inflation of class 1 price Edge: Debate over co-op bloc voting in FMMO reform emerges

Educational webinars with Dr. Marin Bozic

Hosted by Dairy Business Association, Edge Dairy Farmer Cooperative, Iowa State Dairy Association, Minnesota Milk Producers Association, Nebraska State Dairy Association and South Dakota Dairy Producers

FMMO education and reform impacts

Class I pricing formula and ideas for reform

Make allowances: The problems and potential solutions