Hot topic: understanding milk pricing 'basics'

The Federal Milk Marketing Order (FMMO) system goes back to the 1930s Ag Marketing Law. In 2000, changes were made to use end-product pricing formulas for four base commodities – Cheese (block and barrel Cheddar average), Butter, Nonfat dry milk (NDFM) and Dry Whey. The CME spot market sets the pace for actual sales reported weekly to USDA by around 100 processors. From these weekly-reported prices, a weighted average for each of the four commodities is calculated by USDA and are used in formulas that account for yield and “make allowances" to then calculate Component prices and then Class prices. Read more