A Primer on Federal Milk Marketing Orders in the United States

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This paper presented a basic review of Federal milk marketing orders in the U.S. level. Marketing orders have their roots in the 1930's, a time of unprecedented chaos for both the agricultural and general economy. During this period dairy markets across the country were in tremendous disorder with farmers facing highly unstable prices and virtually no bargaining control in marketing their milk. The Federal government responded to this by passing a series of legislation which eventually led to the authorization of Federal milk marketing orders in the Agricultural Marketing Agreement Act of 1937. Since 1937 producers have adopted Federal orders in virtually every major milk product market in the U.S. In short, milk marketing orders establish minimum prices to be paid to farmers for milk sold within a specific marketing area. These class prices are based on the handlers' utilization of raw milk with higher prices assigned to the higher valued fluid products and lower prices set for manufactured dairy products. All producers selling milk to handlers regulated by an order receive a uniform or blend price which is either based on a handler's utilization (individual handler pool) or the total market utilization (marketwide pool). The general purposes of marketing orders are to stabilize marketing conditions and assure an adequate supply of fluid milk to consumers in the market area. The dairy industry in the nation is an ever changing dynamic sector of our economy. The system of Federal orders have had to adjust to changes in the structure of dairy markets in the past and will face even farther-reaching challenges in the future. The success of orders in stabilizing the market and mitigating future problems will ultimately depend upon dairymen themselves since they have much of the control over adoption, termination, or changes in the orders. Therefore it is critical that farmers understand the nature and purposes of milk marketing orders and take an active role in shaping the direction of them to future structural changes in this important sector of the economy.
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A.E. Ext. 86-15
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Charles H. Dyson School of Applied Economics and Management, Cornell University
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