Price discovery effects of Federal Milk Marketing Order modernization: Evidence from cheese survey and class I mover revisions.

Federal Milk Marketing Orders translate surveyed wholesale dairy commodity prices into minimum class prices and a pooled uniform price from which farm milk prices are constructed. Following a 2023-2024 hearing, the USDA's 2025 final rule introduced 5 categories of change to milk pricing. We focus on 2 changes with implications for price behavior and incentives: the cheese price survey eliminated 500-lb Cheddar barrels, using only 40-lb blocks, and the class I skim mover reverted to the higher-of the advanced class III or IV skim (with an extended shelf life adjuster). We find evidence that removing barrels, in isolation, is likely to modestly increase the price level in the cheese survey and derived protein series relative to combined blocks and barrels. We also conclude that returning to higher-of is likely to increase the average class I skim milk price mover relative to average-plus price rule. Collectively, the changes sharpen price signals for farm milk while supporting conditions associated with orderly marketing.