Who Chooses the Price of Milk?
Milk pricing might seem like a mystery, but it actually follows a structured system that ensures fairness for both farmers and processors. In New York and across the country, milk prices are guided by a mix of federal rules, regional adjustments, and processor-level premiums. So while it might feel like prices just fluctuate at random, there's a method to it all.
At the center of the system are Federal Milk Marketing Orders (FMMOs). These are rules set by the USDA that define how milk is priced based on how it’s used, because milk has different values depending on what it becomes. Each month, the USDA announces the minimum prices for four classes of milk:
Class I: Milk for drinking
Class II: Milk for soft products like yogurt and ice cream
Class III: Milk used to make cheese
Class IV: Milk used for butter and milk powder
These minimum prices are based on the national market value of things like butterfat and protein—two of the most important milk price factors. The system is designed to keep pricing fair and predictable, even as supply and demand shift throughout the year. Prices can also shift from month to month depending on changes in commodity markets, like butter, cheese, and dry milk, which the USDA tracks closely when setting new rates.
Here in New York, most of the state operates under the Northeast Federal Order (Order No. 1), which follows the USDA’s rules but also accounts for regional costs like how far milk needs to travel or what it takes to process it locally. In Western New York, some counties follow a separate state-level marketing order, which uses similar pricing formulas and ensures that milk producers receive a consistent rate across the region.
But even with all these rules in place, milk prices aren’t set in stone. The USDA provides a baseline, but individual farmers often receive more than the minimum thanks to bonuses, seasonal adjustments, or premiums for quality. Cooperatives can also negotiate contracts with processors that bump up the final price paid to farms. That’s why two farmers in the same county might receive different payments for similar milk.
In 2025, updates to the federal pricing system brought several changes aimed at better reflecting current market conditions. These reforms updated how protein and nonfat solids are factored into prices and adjusted the formulas used for fluid milk. For New York producers, the goal is the same as it’s always been: to build a system that rewards consistency, quality, and sustainability.
So, who chooses the price of milk? It’s a team effort. The USDA sets the foundation, regional orders shape the local details, and processors and cooperatives make adjustments based on demand, contracts, and quality. It’s not always simple, but for New York’s dairy farmers, it’s a system that helps ensure they’re paid fairly for the hard work they do every day.