A recent analysis of some of the proposed changes to the Federal Milk Marketing Order (FMMO) system was conducted to quantitatively assess what these changes would mean to U.S. milk prices. At the time it was conducted, the analysis assumed the FMMO changes would begin in 2023, but with the FMMO hearing still ongoing, any final changes will not occur until sometime in 2024.
The following scenarios were run based on proposed FMMO changes by the National Milk Producers Federation:
- Increase the make allowances in the component price formulas for butter to $0.21 per pound, for nonfat dry milk to $0.21 per pound, for cheese to $0.24 per pound, and for dry whey to $0.23 per pound;
- Discontinue the use of barrel cheese in the protein component price formula;
- Return to the "higher-of" Class I skim milk price mover;
- Update the milk component factors for protein, other solids, and nonfat solids in the Class III and Class IV skim milk price formulas;
- Update the Class I differential pricing surface throughout the United States, and
- All five options listed above together.
The results show that there are only small effects in producer milk prices given the changes in federal order formulas assumed relative to current federal order provisions. In some cases, changes offset one another.