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1 1 (February 24, 2025)

handle is hein.crs/govesoi0001 and id is 1 raw text is: Congressional Research Service Informing the legislative debate rnnce 1914 0 February 24, 2025 Pricing Amendments to the Federal Milk Marketing Orders The F al ilk ti (FMMO) system was authorized in the Agricultural Marketing Agreement Act of 1937 (50 Stat. 246). FMMOs are geographically defined fluid-milk demand areas. Under FMMO law and regulations, the U.S. Department of Agriculture (USDA) establishes a minimum milk price, and milk handlers (processors) are required to pay milk producers a minimum price for fluid milk, referred to as the uniform pricing formula. The FMMO system is designed to ensure orderly marketing conditions for milk-meaning milk producers are fairly treated in the marketplace and consumers are assured an adequate supply of fluid milk. In general, Congress has not made legislative changes to the FMMO system other than conducting oversight. One example of legislative action is when in the 1996 farm bill (P.L. 104-127, §143), Congress required USDA to consolidate and reform the FMMO system (e.g., reducing the system to 11 orders; Figure 1). The 1996 farm bill also amended the pricing method. These actions led to new that took effect in 2000. In the 2018 farm bill, Congress directed changes to the system that amended the uniform pricing formula. As part of a potential farm bill reauthorization, the 119th Congress may consider whether or not to amend portions of the FMMO system or address specific issues (e.g., concerns raised during the hearing process that led to 2025 FMMO amendments). This In Focus discusses the FMMO system, order amendments, and potential issues for Congress. The FMMO system is separate from the I , which provides revenue support when monthly margins (i.e., the difference between the milk price and a calculated feed cost) fall below producer-selected levels. Figure I. Federal Milk Marketing Orders, 2025 Nonkwet FO. 1W R t F. n i Source: USDA, Agricultural Marketing Service (AMS), , _ Notes: F.O. = federal order. Blank areas of the map are regulated by state orders or are unregulated. Alaska and Hawaii are not included in federal orders. A Western Order terminated in 2004, and California joined the FMMO system in 2018. FM MO System and Amendments Under the FMMO system, milk is classified by four uses: Class I, fluid milk; Class II, soft products (e.g., cottage cheese and sour cream); Class III, cheese; and Class IV, butter and nonfat dry milk (NDM). The component values (butterfat, protein, nonfat solids, and other solids) used to determine each class price are based on wholesale prices of cheese, butter, NDM, and whey. USDA's Agricultural Marketing Service (AMS) may establish and amend FMMOs through a formal public hearing process that allows interested parties to present evidence regarding marketing and economic conditions. Dairy stakeholders operating in an order (e.g., Upper Midwest or California) may submit petitions to USDA to amend their order. On January 17, 2025, USDA finalized amendments to FMMO uniform pricing provisions as requested by the dairy industry and after an amendment hearing process that started in May 2023 with letters initiating the amendment process. This section covers a recent national hearing process and the amendments in the approved final decision. Hearing Process Beginning on August 23, 2023, USDA hosted a 49-day hearing to evaluate changes proposed by the U.S. dairy industry to the uniform pricing formulas applicable to all 11 FMMOs. During the hearing process, the dairy industry submitted proposals and evidence to support their amendments to the FMMOs. The hearing focused on five topics: (1) milk composition factors that represent the protein, nonfat solids, other solids contained in skim milk; (2) commodity products included in the Dairy Product Mandatory Reporting Program survey; (3) Class III and IV formula factors that represent the costs to manufacture a dairy product (i.e., make-allowances) and the amount of butterfat in raw milk that can be recovered during the cheesemaking process (i.e., butterfat recovery factor); (4) the Class I skim milk price formula, which is the method for calculating the Class I milk price; and (5) , which reflect the costs for transporting milk from surplus milk production regions to deficit regions. USDA heard testimony and evidence on 21 proposals. Post-hearing Procedures USDA published its recommendation on July 15, 2024 (89 Federal Rit 5 ). According to US1, 128 public comments were submitted and, based on these comments,

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