One of the most fascinating facts about milk, I think, is that the price is fixed by a quasi‐government organization known as the milk marketing board. In the 1930s, the USDA set up milk market orders to ensure that everyone could afford milk. Up until the late 1960s, there were over 500 localized market orders. A market order is the price which a farmer is paid for his milk, based on“hundred‐count,” or 100 lbs of milk. The price is set by a board of producers, buyers, and those selling the inputs (grains, etc). The goal is that farmers can get a price that pays the bills. With over 500 market orders, the price was very localized and reflective of the local production costs.
Today, there are under 20 market orders. And because these market orders are so large, they tend to favor large, conventional dairies. Here’s how. The price for Class I (fluid milk) is set at say $13 per hundred‐count. The conventional guy might only be able to sell his for $11 per hundred‐count to the handler. The organic guy, such as Snowville, might be able to get $17 per hundred count. Because the FMMO philosophy is that all milk is the same, Snowville pays into a pool for selling their milk too high…they pay $4. The conventional guy gets $2 so that he makes the same amount on his milk.