The U.S. Department of Agriculture's Agricultural Marketing Service published a final rule on February 27, 2026, in the Federal Register, reauthorizing the Dairy Forward Pricing Program. This action, effective March 2, 2026, allows milk handlers to enter new forward contracts with producers or cooperative associations until September 30, 2026, with all contracts expiring by September 30, 2029. The reauthorization stems from the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, known as the Continuing Extensions Act. It enables handlers to pay negotiated prices for non-fluid milk classes instead of federal minimum blend prices, providing a tool to manage market volatility. This development is significant for the dairy industry, as it revives a program that lapsed briefly after September 30, 2025, responding to stakeholder needs for risk mitigation in an sector prone to price fluctuations.
Background of the Dairy Forward Pricing Program
The Dairy Forward Pricing Program, or DFPP, was first established by the Food, Conservation, and Energy Act of 2008, commonly called the 2008 Farm Bill (Public Law 110-234). Under the Agricultural Marketing Agreement Act of 1937 (7 U.S.C. 601-614), the program permits handlers regulated by Federal Milk Marketing Orders to negotiate prices for Class II, III, and IV milk—used in products like cheese, butter, and dry milk—rather than adhering to the minimum prices set by federal orders. Class I milk, which includes fluid milk, remains ineligible for forward contracting to preserve stability in the fluid market. The program's initial implementation came via a final rule published on October 31, 2008 (73 FR 64868), emphasizing voluntary participation and no interference with existing cooperative arrangements.
Key players include dairy producers, cooperative associations, milk handlers, and the USDA's Agricultural Marketing Service, which oversees Federal Milk Marketing Orders. The DFPP does not involve USDA in negotiating or enforcing contract terms but requires handlers to account for milk's classified use value in federal pools. This structure balances flexibility with regulatory oversight, drawing from precedents in agricultural policy that prioritize market stability, such as the broader Federal Milk Marketing Order system established under the 1937 Act.
History of Reauthorizations and Legislative Context
The DFPP has undergone multiple extensions due to its value in shielding participants from dairy price swings. After its initial expiration prevented new contracts post-September 30, 2012, the American Taxpayer Relief Act of 2012 (Public Law 112-240) extended it to September 30, 2013. Subsequent reauthorizations came via the Agricultural Act of 2014 (Public Law 113-79) to 2018, the Agriculture Improvement Act of 2018 (Public Law 115-334) to 2023, the Further Continuing Appropriations and Other Extensions Act of 2024 (Public Law 118-22) to 2024, and the Relief Act of 2025 (Public Law 118-158) to 2025. The latest extension, through the Continuing Extensions Act (Public Law 119-37), pushes the deadline for new contracts to September 30, 2026, with a firm expiration for all terms by September 30, 2029.
These extensions reflect ongoing political forces, including advocacy from dairy industry groups concerned about economic pressures like feed costs and global trade dynamics. For instance, the 2018 Farm Bill's reauthorization addressed volatility exacerbated by events like the 2014-2015 milk price collapse. Perspectives vary: proponents, including producer associations, view the DFPP as essential for financial planning, while some critics argue it could undermine uniform pricing under federal orders. Official statements, such as those in the Federal Register, underscore the program's role without endorsing changes to core regulations.
Program Requirements and Compliance
Handlers participating in the DFPP must submit contracts to the Market Administrator, including a disclosure statement informing producers of the program's nature and payment basis. Contracts lacking this are invalid, as noted in the rule. To apply for a given month, submissions must arrive by the prior month's end—for example, by December 31, 2025, for January 2026 effectiveness. Payments under contracts follow federal order timelines, detailed in 7 CFR 1145.2(e), ensuring alignment with regulations.
The rule confirms the program's voluntary nature: handlers cannot mandate producer participation, and it does not affect cooperative-member contracts. Regulated handlers remain subject to all other Federal Milk Marketing Order provisions, including pooling obligations. This framework draws from the 2008 final rule (73 FR 64868), which established these safeguards to protect small entities, as analyzed under the Regulatory Flexibility Act.
Implications for the Dairy Industry
Short-term implications include immediate access to forward contracting, allowing handlers and producers to hedge against price risks following the brief lapse after September 30, 2025. With dairy farms facing volatility—evidenced by 2024 data from the National Agricultural Statistics Service showing variable milk prices—this extension could stabilize cash flows for an estimated 92 percent of operations classified as small businesses under Small Business Administration standards (13 CFR 121.201).
Long-term effects may involve broader market dynamics, potentially influencing participation in Federal Milk Marketing Orders. Industry data from the 2022 Census of Agriculture indicates over 24,000 licensed dairy herds, with most qualifying as small. Perspectives differ: dairy cooperatives often support the program for its risk management benefits, while some policymakers question its impact on equitable pricing. The rule's economic analysis, aligned with Executive Orders 12866 and 13563, deems it not significant, highlighting minimal burden on participants.
In conclusion, this reauthorization maintains a proven tool for dairy stakeholders while upholding federal safeguards. Potential trajectories include further legislative extensions if volatility persists, or integration into comprehensive farm policy reforms. Ongoing debates may center on balancing innovation with regulatory equity, with stakeholders monitoring market conditions through 2029.
