The USDA’s June 1, 2025 Federal Milk Marketing Order (FMMO) reforms will radically reshape dairy economics, reversing a flawed 2018 policy that cost farmers $725 million during the pandemic. While restoring the “higher-of” formula benefits some, controversial processor-friendly make allowances could strip $56,000 annually from 100-cow operations. Regional disparities will create clear winners (Northeast) and losers (Midwest, California), with urgent adaptation required as competitors already pivot strategies. The clock is ticking—81 days remain to restructure contracts, risk management, and production plans.

Key Points

1. The “Higher-of” Formula Restoration

• Reverses the 2018 Farm Bill’s flawed “average + $0.74” formula that transferred $725M from farmers to processors during COVID-19.

• Class I milk pricing returns to the “higher of” Class III/IV values, correcting pandemic-era losses.

2. Processor Victory: Make Allowance Surges

• 25–42% increases in manufacturing cost margins (e.g., cheese: +25.8%, butter: +32.5%, nonfat dry milk: +42.6%).

• Could reduce Class III prices by 90¢/cwt and Class IV by 85¢/cwt if applied retroactively (2019–2023).

3. Regional Warfare

• Northeast Wins: High Class I utilization and new processing plants (e.g., New York’s $650M Fairlife facility) create growth opportunities.

• Midwest/California Lose: Upper Midwest faces $177M pool value loss; California risks $94M reduction due to Class III/IV reliance.

4. Component Changes Delayed Until December 2025

• True protein (3.1% → 3.3%) and other solids (5.9% → 6.0%) updates incentivize component production but exclude butterfat adjustments.

• Six-month delay could cost farmers $100M+ in lost revenue.

5. Hedging Overhaul Required

• Removal of 500-lb barrel cheese from pricing calculations increases butterfat risk.

• Recalibrate strategies with risk management specialists immediately.

Critical Quotes

• Douglas: “The return to the ‘higher-of’ formula isn’t a gift—it’s returning what was stolen in 2018.”

• Zippy Duvall (Farm Bureau): “USDA’s voluntary processor survey skews make allowances against farmers.”

• Mark Stephenson (Dairy Economist): “Co-ops must renegotiate premiums to offset processor gains.”

Timeline

• June 1, 2025: FMMO reforms take effect (81 days from recording).

• December 1, 2025: Component factor updates (protein/solids) begin.

Resources

• USDA Final Rule (Jan 17, 2025)

• Farm Bureau Analysis

• Full Article on The Bullvine

Call to Action

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“Your competitors aren’t waiting—adapt now or perish later.” – Douglas Miller

https://www.thebullvine.com/dairy-markets/dairys-81-day-reckoning-3-states-that-win-5-facing-financial-bloodbath/