If you sell milk into a federal order, the pricing formula under it changes on June 1, and it has been a long time coming — this is the first update to the manufacturing cost allowances built into that formula since 2000. We've had enough members write in this month asking what actually shifts that it seemed worth walking through it plainly, instead of leaving everyone to reverse-engineer it from a smaller check.
The mechanism is not complicated once you see it, even if the effects are uneven. The "make allowance" is the deduction built into the pricing formula to cover a processor's cost of turning raw milk into cheese, butter, nonfat dry milk, or dry whey. It has not moved in twenty-five years, while processing costs plainly have. Raising it means processors are assumed to keep more of the value per pound of finished product, which in turn means less of that value flows back into the component prices producers get paid on. At the same time, the Class III formula drops the lower-priced barrel cheddar quote from its cheese-price calculation and prices off block cheddar alone, which should modestly firm up the protein value on the other side of the ledger. And Class I, the fluid-milk class, moves back to a "higher-of" method — pricing off whichever of Class III or IV is higher that month, plus an adjuster — rather than an average of the two.
Net effect depends on what you sell
None of that nets out the same way for every member, which is the part worth sitting with before you assume the rule is good or bad news. A cooperative pooling mostly Class I fluid sales in a region with strengthened differentials may see a modest lift. A plant running heavy on Class III cheese production absorbs the larger make-allowance deduction directly, and that's before anyone gets to the separate question of whether wholesale cheese prices hold through the summer. If your milk moves through more than one class depending on the month, expect the effect to show up as noise rather than a clean number, at least for the first quarter or two.
One detail worth flagging for anyone doing their own math ahead of time: advance pricing under the new rule for June releases on May 21, but final pricing for the month doesn't post until July 2. That gap matters if you're trying to true up a producer settlement or explain a check to a partner before the number is locked. Don't commit to a number you can't yet defend.
We're not able to tell you your farm's specific number — that depends on your order, your utilization mix, and your co-op's pooling decisions, none of which we have visibility into from here — but we can point you to your marketing area's advance and final price bulletins once they post, and we're glad to walk through the mechanics with anyone who wants a second set of eyes.
What we'd actually do with the next thirty days
If margin has been tight this year — and for a fair number of our smaller and mid-sized farmstead members, it has, between feed costs and everything else that's stacked up this cycle — this is a reasonable moment to sit down with your milk buyer or your co-op's field rep and ask specifically how the new make allowance and the Class III formula change will land on your particular contract, rather than waiting for it to show up as a surprise on the June settlement. Bring your last twelve months of utilization by class if you have it; that's the number that determines whether this rule change is closer to a rounding error or a real shift in your revenue.
For members whose milk goes straight into their own cheese production rather than out to a pooled market, none of this touches you directly — but it's worth understanding anyway, since it will move the wholesale prices you're competing against and, eventually, what your milk supplier pays for the raw milk you buy.
We'll follow up once June's final pricing posts with a plainer look at what actually happened versus what was projected. In the meantime, the Membership & Outreach Committee is a good first stop if you want help finding your order's specific bulletins.
The International Cheese Federation (ICF) and More Cheese are entirely fictional. This post is demonstration content created for MemberJunction. All people, organizations, events, courses, certifications, figures, and quotations in it are invented, and nothing here represents a real association, a real business, a real person, or real professional advice.