Even though processors got the larger built-in make allowances the second half of the year

EAST EARL, Pa. — USDA’s 2025 milk pricing averages showed lower producer milk income nationwide compared with 2024, but the bigger story may be what the numbers reveal about where milk value is and is not flowing in today’s Federal Milk Marketing Order (FMMO) system.

Nationally, the weighted average FMMO statistical uniform (blend) price standardized at 3.5% butterfat averaged $19.11 per hundredweight (cwt) in 2025, down $1.19 from 2024. The 12-month average Producer Price Differential (PPD) across the 11 FMMOs was positive for the year but ranged from 36 to 82 cents smaller than the 2024 average PPD.

The only exception was the Upper Midwest, which has the smallest PPD in the nation but saw a 2 cents per cwt gain in the annual average year-on-year (YoY).

The Orders with the largest PPD losses, by a substantial margin, were the Northeast (down 82 cents), Pacific Northwest (down 86 cents), and California (down 75 cents).

FMMO average component values reflected the year’s changing product mix in response to the consumer protein demand. Butterfat averaged $2.44/lb, down 85 cents YoY, while protein added 55 cents at $2.45/lb.

USDA’s NASS-reported national all-milk price average for 2025 was $21.18/cwt, down $1.38 YoY, and the NASS-reported national average butterfat test was 4.32%, up 0.08% from 2024.

Meanwhile, the national AMS-reported mailbox price averaged $20.41 in 2025, down $1.39 from 2024, showing a 77-cents per cwt gap between all-milk and mailbox last year, although it varied widely by region (See chart). We also know that the gap was $1.00 for the second half of the year after implementation of Federal Order changes.

Why does the gap matter? Because the all-milk price, not the mailbox price, forms the milk revenue side of the Dairy Margin Coverage (DMC) program.

With all-milk and mailbox prices declining nationally by more than FMMO blend prices, it’s also clear the additional 93 cents to $1 per cwt in processor relief embedded through higher make allowances in the second half of 2025 did not broadly restore premiums or soften line item deductions to producers as previously indicated in hearing testimony.

That pattern points toward selective value retention and selective value return. Some of the value created by lowering FMMO minimum prices appears to have stayed within processor and manufacturing economics or flowed unevenly through regional premiums, proprietary pay programs, strategic depooling, and plant-specific arrangements.

This could account for the smaller level of decline in 2025 price averages in the Upper Midwest vs. national trends. The Upper Midwest Order averaged an $18.40 blend price, down just 39 cents from 2024, along with a 2-cent average gain in PPD. According to AMS, the average 2025 Wisconsin mailbox price at $20.80 was down 42 cents YoY, while Minnesota at $20.77 was down 47 cents. According to NASS, Wisconsin’s all-milk price averaged $20.90, down 85 cents, while Minnesota averaged $21.30, down $1.10 YoY.

Looking at regional data, the Northeast Order averaged a $19.74 FMMO blend price, down $1.70 per cwt from 2024 and the second largest blend price decline behind Arizona. (Please see a related chart on page 17.)

Despite Pennsylvania’s state-mandated over-order premium, the Keystone State was the low-performer in the region with the 2025 average all-milk price reported at $21.44, down $1.86 YoY, and mailbox price at $20.92, down $1.38. The average mailbox price in Pennsylvania trailed neighbors New York and Ohio by 31 and 84 cents, respectively. The Pennsylvania all-milk price trailed neighboring New York by 38 cents and Ohio by $1.20.

In the three southeastern fluid milk orders, pool volumes were down and so were FMMO blend, all-milk, and mailbox prices, despite the average Class I advance price beating year ago by $1.00 per cwt. Florida’s statistical uniform price averaged $23.65, down $1.18 YoY, while the Southeast averaged $22.61, down 81 cents. The Appalachian Order averaged $22.18, down 72 cents YoY.

This occurred despite the advance Class I price for 2025 averaging as much as $1.19/cwt higher YoY across the southeastern region. Following suit, all-milk and mailbox prices declined roughly $1.20 to $1.50 per cwt, with Georgia’s all-milk price reported by NASS at $25.27, the highest in the nation, but the mailbox price reported by AMS dragged a nearly $2.00 gap at $23.43.

Class I utilization averaged 80% in Florida with pool volume down 0.5% for the year. In the Southeast, despite 1.8% smaller pool volume, Class I utilization fell to 74%. Class I utilization in the Appalachian Order increased at 72% of the Order’s 4% smaller pool volume YoY.

National trends and pooling shift

Class IV prices outperformed Class III for much of the year, reshaping pooling decisions. National pooled milk utilization averaged 27% Class I, 14% Class II, 39% Class III, and 20% Class IV compared with 28%, 11%, 51%, and 10%, respectively, a year ago.

Pooled volume across the 11 FMMOs increased 11.5%, but manufacturing-oriented regions, tied more heavily to cheese and whey production, generally saw pool volume decline. Upper Midwest pooled volume fell 12.3%, while the Central and Mideast Orders each declined 4.4%, and the Pacific Northwest fell 6.5%.

California moved in the opposite direction as pooled volume surged 14.9% YoY, the largest increase nationally. As the nation’s largest milk producing state, this accounted for some of the national increase in pool volume.

California’s statistical uniform price averaged $18.27, down $1.38 YoY. Utilization swings month-to-month reflected pooling strategies as handlers shifted between Class III and Class IV depending on which allowed more value to bypass the regulated pool and flow through manufacturing returns instead. California’s all-milk price averaged $20.53, down 87 cents YoY, while the mailbox price averaged $20.07, down $1.62.

Regions with rapidly expanding plant capacity, particularly the Upper Midwest, Central, and Southwest Orders, all showed evidence of strategic pooling behavior, suggesting value is increasingly separated from the regulated blend price

The Pacific Northwest saw the steepest declines across all pricing categories, starting with the FMMO blend price that averaged $18.28, down $1.66 YoY. All-milk prices for the region averaged $21.55, down about $2.50 from 2024, while mailbox prices lagged the all-milk price by a whopping $2.40 per cwt and even trailed the FMMO blend minimum by 18 cents.

These data, overall, suggest an emerging two-tier milk pricing environment: producers with access to competitive and expanding manufacturing plants or outside-the-pool value streams versus producers still dependent on regulated blend prices and cooperative-wide averaging structures where balancing costs and deductions continue eroding realized milk checks.