Federal order class prices

Definition

Federal Milk Marketing Orders (FMMOs) set monthly minimum prices that regulated handlers (processors) must pay for Grade A milk. The minimum depends on how the milk is used, and each use is a class:

Class I: fluid beverage milk.
Class II: soft products such as cream, ice cream, yogurt, cottage cheese and sour cream.
Class III: cheese (hard cheese and cream cheese), plus the whey it produces.
Class IV: butter and dry milk products such as nonfat dry milk (NFDM).

No one negotiates these prices. USDA AMS formulates them from wholesale prices of four products surveyed in the National Dairy Products Sales Report (NDPSR): cheddar cheese, butter, dry whey and NFDM. For each product, AMS subtracts a make allowance (the plant’s cost to make the product, in $/lb). It then multiplies the remaining margin by a yield factor (lb of product per lb of milk component). The results are the component prices (butterfat, protein, other solids and nonfat solids), and the class prices are built up from them.

Class III and IV prices are announced after the month ends, on or before the 5th of the following month. Class I prices and the Class II skim price use advanced pricing factors (the weighted average of the two most recent weekly NDPSR prices announced before the 24th), and are announced on or before the 23rd of the prior month, so they are known before the month starts (7 CFR 1000.50 and 1000.53).

Class I mover

The Class I price at any location is the Class I base price (the “mover”) plus a location differential for that county or zone. The rule for the mover’s skim portion has changed over time:

“Higher-of” (2000 to April 2019): the higher of the advanced Class III and Class IV skim prices.
“Average-of” plus $0.74/cwt (from May 2019, under the 2018 Farm Bill): the average of the advanced Class III and IV skim prices, plus a fixed adjuster.
2025 FMMO reform (final rule, 90 FR 6600, January 17, 2025; effective June 1, 2025): the mover is again the higher of the advanced Class III and IV skim prices. Extended shelf life (ESL) Class I products get a monthly Class I ESL adjustment (7 CFR 1000.50(r)), which brings them back to roughly average-of plus a rolling adjuster: the average gap between higher-of and average-of over the preceding 13 to 36 months. The rule kept the $1.60 base differential but reset the county Class I differentials.

Class III–IV spread

The Class III–IV spread is Class IV minus Class III for the same month:

spread ($/cwt) = Class IV price − Class III price

S_{IV-III} = P_{IV} - P_{III}

The spread shows cheese prices against butter and powder prices. It is not a premium paid to anyone. It matters because:

It drives the Class I mover. Under “higher-of”, whichever class is higher sets the mover. Under “average-of”, a wide spread costs Class I value.
It drives the PPD and depooling in component orders. When Class III rises far above Class IV, the pool’s value per cwt can fall below Class III (see PPD).
Whether a wide spread helps or hurts a herd depends on which class its pay follows.

Formula

Component prices come from NDPSR product prices (all $/lb). The factors below are the current 7 CFR 1000.50 values (as of November 2026). Make allowances, the 91% butterfat recovery in the protein price and block-only cheese took effect June 1, 2025; the skim composition factors (3.30, 6.00, 9.30) took effect December 1, 2025.

Butterfat price      = (AA butter − 0.2272) × 1.211
Nonfat solids price  = (NFDM − 0.2393) × 0.99
Other solids price   = (dry whey − 0.2668) × 1.03
Protein price        = (40-lb block cheese − 0.2519) × 1.383
                       + [ (block cheese − 0.2519) × 1.589 − butterfat price × 0.91 ] × 1.17

Class III skim ($/cwt) = protein price × 3.30 + other solids price × 6.00
Class IV skim ($/cwt)  = nonfat solids price × 9.30
Class price ($/cwt)    = skim price × 0.965 + butterfat price × 3.5

Class II skim = advanced Class IV skim + 0.70
Class II butterfat price = butterfat price + 0.007 ($/lb)
Class I skim  = higher of advanced Class III and IV skim + adjusted Class I differential

\begin{aligned}
P_{bf} &= (P_{butter} - 0.2272) \times 1.211 \\
P_{nfs} &= (P_{NFDM} - 0.2393) \times 0.99 \\
P_{os} &= (P_{whey} - 0.2668) \times 1.03 \\
P_{pro} &= (P_{cheese} - 0.2519) \times 1.383 + \big[(P_{cheese} - 0.2519) \times 1.589 - 0.91\,P_{bf}\big] \times 1.17 \\
S_{III} &= 3.30\,P_{pro} + 6.00\,P_{os} \\
S_{IV} &= 9.30\,P_{nfs} \\
P_{class} &= 0.965\,S + 3.5\,P_{bf}
\end{aligned}

The 0.965 and 3.5 weights price 100 lb of milk at 3.5% butterfat: 96.5 lb of skim plus 3.5 lb of fat.

Before June 2025 the make allowances were lower (set in 2008), the protein price used 1.572 and 0.9 in place of 1.589 and 0.91, and the cheese price averaged 40-lb blocks with 500-lb barrels. Before December 2025 the skim factors were 3.1 protein, 5.9 other solids and 9.0 nonfat solids.

How to pull it in DC305

Not applicable. DC305 holds cow records, not milk prices or class announcements.

Source: the USDA AMS federal order price announcements (monthly class and component prices, plus the advanced prices), each order’s market administrator website, and the NDPSR for the weekly product prices that go into the formulas.

Typical range

Herd context: US federal order milk; values vary by order and month. Class prices are national, and Class I adds a location differential.

Price	Order of magnitude	Recent swings
Class III	$15–$22/cwt in most months	about $12/cwt (2020 low) to about $25/cwt (2022 high)
Class IV	$14–$22/cwt in most months	about $11/cwt to about $25/cwt
Class III–IV spread	within ±$2/cwt in most months	about −$9 to +$5/cwt at the extremes
Class I location differential	$1.70 to $7.40/cwt by county (since June 2025)	set by rule; changes only through rulemaking

The Class I differential range is from the county table in the 2025 final rule (90 FR 6600), as corrected by 91 FR 59047 (September 2026).

Class III and IV commonly move $1–$3/cwt from one month to the next. Moves of $5+/cwt happen in volatile periods.

Common mistakes

Treating class prices as what the farm is paid. They are minimums for handlers. A farm is paid a pooled price (a uniform price, or component prices plus a PPD), plus or minus premiums and deductions.
Mixing the NDPSR week with the class-price month. Weekly NDPSR prices are survey data and can be revised. The class price uses an average of specific weeks, so one week’s cheese price is not that month’s Class III.
Calling the Class III–IV spread a premium. It is the difference between two minimum prices.
Using an old formula. The 2025 reform changed the make allowances, the protein-price butterfat factors, the skim composition factors and the mover. Back-calculations or forecasts built on the pre-2025 factors will be wrong.
Comparing Class I prices across orders without the location differential. The base is national, but the differential is local.
Quoting a class price at the wrong test. Class prices assume 3.5% butterfat. Milk at a different test is worth a different amount per cwt.