Over-order premiums
Definition
Section titled “Definition”An over-order premium is any amount a handler pays for milk above the federal order minimum class price. Federal orders set floors, not ceilings, so buyers can pay more when they need milk or a specific quality or service.
Common kinds:
- Class I premiums: negotiated, often by co-ops or groups of co-ops, on milk sold to fluid plants. These are the classic over-order premium.
- Manufacturing premiums: paid by cheese or butter/powder plants to keep or attract supply.
- Service charges: payment for balancing, scheduled delivery, or standby supply.
- Producer-level premiums: quality (SCC, bacteria), component, volume, or market premiums that a buyer or co-op passes to individual farms.
Who keeps them
Section titled “Who keeps them”Over-order premiums are not pooled. The federal order pool redistributes only minimum class values. A premium stays with whichever handler or co-op earned it, and that handler decides how much reaches producers and how:
- passed through as a line on the milk check,
- folded into a co-op’s blend or quota plan,
- or kept to cover hauling, balancing or other costs.
Premiums can also be negative: some buyers deduct “market adjustments” or balancing charges when milk is long.
How to pull it in DC305
Section titled “How to pull it in DC305”Not applicable. DC305 holds cow records, not premiums or pay.
Source: the co-op or buyer milk check and statement for producer-level premiums. Market-level Class I premium levels are sometimes reported in USDA AMS or university surveys.
Typical range
Section titled “Typical range”Herd context: US federal order milk; values vary by order, region, season and buyer.
- Class I over-order premiums: on the order of $1–$3/cwt in many markets.
- Producer-level premiums (quality, volume, market): from cents to a few dollars per cwt; some markets run near zero or negative when milk is long.
Common mistakes
Section titled “Common mistakes”- Assuming premiums flow through the pool. They don’t; the pool shares only minimum class values.
- Treating a co-op blend above the uniform price as all premium. It may include plan adjustments, hauling credits or other items.
- Comparing premiums without deductions. A high premium with high hauling or balancing charges can net less than a smaller premium.
- Counting quality premiums as market premiums. Quality premiums depend on the herd’s own SCC and bacteria, not the market.