How the California Dairy Industry is Faring Under its New FMMO

Key Points

• California adopted USDA’s Federal Milk Marketing Order (FMMO) system of pricing and pooling milk on Nov. 1, 2018, resolving price disparities between California and the rest of the U.S.
• From 2010 until the FMMO implementation, California’s equivalent to federal class III averaged $1.33 per cwt below the FMMO.
• The FMMO has not changed the underlying market forces that determine milk’s value, but pushed the regulated price higher with safeguards in place if supply exceeds demand.
• The transportation allowance system was eliminated with the FMMO, and along with it went strong incentives to move milk to certain markets.
• California’s quota system under the California Department of Food and Agriculture (CDFA) remains relatively intact, but faces uncertainty as some non-quota holders would like to see it go away.
• Many California dairy processors will pay more for milk under the FMMO which may change premium structures, and incentivize them to increase their sales price, and/or try to lower their cost of production.

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