What is the practice called that distributes milk payments among producers within a specific Federal Milk Marketing Order?

The practice that distributes milk payments among producers within a specific Federal Milk Marketing Order is known as pooling pricing. Pooling allows the operators of a Federal Milk Marketing Order to combine the revenues from all the milk sold within that order and share them with the individual producers based on their contributions.

The rationale behind pooling pricing is to ensure all producers have a stable income despite fluctuations in milk prices. By balancing the payments, producers benefit from collective sales, which can be more favorable than what they might receive if they sold their milk independently. This practice is essential in maintaining fair pricing and stability in the dairy market, especially for small to mid-sized producers who might otherwise struggle with direct market competition.

Understanding pooling pricing is crucial for those involved in the dairy industry, as it affects how income from milk sales is allocated and helps uphold the overall economic viability of dairy farming in certain regions.