Glossary Index

Use the links below to navigate to a page listed in alphabetical order.


Terms A-F

Terms G-L

Terms M-R

Terms S-Z

M - N - O - P - Q - R


Mandatory Class 2 (product)*

Any Class 2 product which must be made from market (grade A) milk. All Class 1 products must be made from market milk.

Manfacturing Cost Allowance

(also called make allowance) Used to describe factors used in establishing California Class 4a and 4b prices and federal Class III and IV prices. In the pricing formulas, a manufacturing cost allowance is subtracted from the wholesale value of butter and nonfat dry milk or the value of Cheddar cheese to determine the Class 4a or 4b price. As of April, 2000 the manufacturing cost allowances in California are:
  • 9.7¢ per pound of butter
  • 14.0¢ per pound of nonfat dry milk
  • 16.9¢ per pound of cheese

As of April, 2000 the manufacturing cost allowances in federal orders are:

  • 11.4¢ per pound of butter
  • 13.7¢ per pound of nonfat dry milk
  • 17.2¢ per pound of cheese

Manufactured Products

Includes basically all dairy products except fluid milks: all cheeses, butter, evaporated whole milk, condensed whole milk, condensed skim milk, whole milk powder, nonfat dry milk, ice cream, ice cream mix, frozen desserts, creams, and whey products.

Manufacturing Cooperative

Association of milk producers who own and operate milk manufacturing and processing facilities and market the dairy products for its members. A manufacturing cooperative typically also sell portions of its milk supply to other handlers.

Manufacturing Grade Milk*

See Grade B Milk.

Manufacturing Margins

The difference resulting after subtracting the price plants pay for milk from the calculated wholesale value of dairy products produced by milk manufacturing plants. This margin is influenced by competitive marketing conditions at both the wholesale and farm level markets.

Market Administrator

Official designated by the federal and/or state agriculture department to make sure the terms of a marketing order are carried out.

Market Milk*

Same as grade A milk; this terminology is only used in California.

Market Service Deductions

In federal orders, these are charges against non–cooperative producers for services provided by the market administrator (market service deductions). Cooperative payments are another method used for a similar purpose; they are payments made from the order pool to cooperatives and federations which qualify by meeting certain performance requirements.

Marketing Agency–In–Common (MAC)

A grouping or combination of marketing cooperatives that market products under a common agreement. Member cooperatives maintain their operational independence while capitalizing on the inherent economies of size and market power of a larger organization.

Marketing Area

Area specified in a marketing order and intended to include all of a geographic area where the same milk handlers compete with each other for sales. Because markets have become less localized, marketing areas have become increasingly larger. The Stabilization Plans for Market Milk clearly specify the marketing area under which handlers are regulated.

Marketing Order

Set of regulations governing the pricing of the milk for a specific marketing area. The regulations are created under the authority of the federal or state law, or both jointly but are issued only at the request of dairy farmers. A marketing order regulates milk handlers; it does not regulate farmers. A marketing order sets minimum prices to be paid for milk and establishes rules to determine which handlers are regulated and whose milk is priced and in what way. It does not set resale prices for dairy products.


The lacteal secretion from one or more cows (or goats), including the milk fat, milk solids–not–fat, and fluid carrier portions, each to be computed and accounted for separately.

Milk Equivalent, milkfat basis

Pounds of milk containing a specified percentage of milkfat (usually 3.67 percent) needed to provide the milkfat contained in a given amount of a dairy product. It is the traditional and most commonly used m.e. measure.

Milk Equivalent, total solids basis (m.e., t.s.)

Like the milk equivalent milkfat basis except a formula is used to determine the total solids (milkfat and nonfat solids) contained in a given dairy product and the amount of standard test milk necessary to provide that amount of total solids.

Milk Pooling Branch

Created in 1969 by the passage of the Gonsalves Milk Pooling Act, the main tasks of the Milk Pooling Branch are regular plant audits and redistributing revenues from milk sales to California dairy producers. Plant audits ensure that plants are paying according to the minimum prices announced by the Dairy Marketing Branch. Pool prices are calculated using announced minimum prices and milk utilization data.

Milk Pooling Plan

The document that describes the adminstrative details of the workings of the Milk Pooling Branch, including transfer of quota, allocation of new quota, producer–handler options, regional quota adjusters, transportation allowances, payments to producers and duties of a pool manager.

Milk Producer Security Trust Fund

The Milk Producers Security Trust Fund (Fund) was created by California state law in 1987 to protect producers from handler payment defaults. It is administered by a seven–member board of industry representatives appointed by the Secretary. The Fund contains a sufficient amount of money to cover 110% of one month’s milk purchases by the milk handler with the largest monthly producer payment obligation. As of April 2000, the Fund contains approximately $24 million.


Area wherein the producers are located who supply the plants regulated under a given marketing order. May also refer to the area in which competing plants draw their milk supply. The term can also apply to the milk supply of a single plant.

Minimum Prices

Milk price regulation in California applies to the farm level, that is, the transaction between dairy producers and dairy processors. The Department of Food and Agriculture announces minimum prices for five different classes of market milk. By law, dairy processors are required to pay producers the announced minimum prices for market milk components sold or used.

Minnesota–Wisconsin Price

Average price for manufacturing grade milk, F.O.B., paid by a sample of plants in Minnesota and Wisconsin. The price was published by NASS each month, until the price series was replaced in January 2000. Previously in federal orders, the class prices were based on the Minnesota–Wisconsin price, which was called the basic formula price.

Return to TOP



See National Agricultural Statistics Service.

National Agricultural Statistics Service

An agency within the U.S. Department of Agriculture. NASS is responsible for generating statistical estimates of agricultural prices, crop production, etc.

National Dairy Board

A shortened term that refers to the National Dairy Promotion and Research Board. The organization which was authorized by the Dairy Production Stabilization and Tobacco Act of 1983 and implemented by the Dairy Promotion and Research Order issued in March of 1984. This organization undertakes generic advertising, nutrition education and research, product research and development, evaluation, and other supporting activities pertaining to milk and manufactured dairy products at the national level. The Board consists of 36 dairy farmers from throughout the U.S. who are appointed by the U.S. Secretary of Agriculture to three–year terms. The board's activities are funded by the promotional check–off that is assessed, with few exceptions, on all milk marketed for commercial use in the U.S.


See National Dairy Board.


See nonfat dry milk.

Net Removals

It is equal to purchases of dairy products by the CCC under the DPSP less unrestricted sales from the CCC. "Net removals" may apply to quantities of specific individual products on the milk equivalent of all products. Traditionally, milk equivalents have been expressed on a milkfat basis; however, in the Food, Agriculture, Conservation and Trade Act of 1990, Congress instructed USDA to begin calculating and reporting net removals on a total solids basis as well.

Non–Pool Milk

Milk received at non-pool plants. In California, if the milk is grade A, then it is still subject to price regulation even though it is not pooled. Under federal regulation, non–pool milk is not price regulated.

Non–Pool Plants

Plants receiving, processing or manufacturing dairy products but which do not participate in the milk pooling program.

Nonfat Dry Milk (NDM or NFDM)

Product obtained by removing water from pasteurized skim milk. It usually contains 3 to 4 percent moisture and 1 percent milkfat. NFDM is called skimmed milk powder in international markets and is often called, simply, "powder" in the U.S.

Return to TOP


Other source milk*

Bulk market milk deriving from sources outside of California, including market milk from other countries.


One price of a two–tiered pricing system in California; quota is the other price. Essentially, overbase is the basic pool price and is calculated using milk sales and usage data. Originated with the inception of the milk pooling program in 1969.

Over Order Premium

A charge for milk sold over and above the regulated minimum price. Typically, over order premiums are associated with services provided, especially if the provider is a milk marketing cooperative.

Return to TOP


Packaged Milk

Class 1 or beverage fluid milk products as packaged in final form and distinct from bulk milk.


Under HTST (high temperature, short time) pasteurization, milk is heated to 160° – 175° F for 15 to 25 seconds to destroy pathogenic and other undesirable microorganisms that may be found in milk. Ultra high temperature (UHT) pasteurization occurs at 275° to 280° F for about 2 seconds.

Pool Milk

Milk which is received at pool plants. In California, market milk, both pooled and non–pooled, is subject to the pricing provisions of the Stabilization and Pooling Plans.

Pool Plant

Plants receiving, processing or manufacturing dairy products located in California from which Class 1 or mandatory Class 2 products are disposed of directly or indirectly in the pool area.


Method used in determining how funds in a market will be distributed among producers supplying the milk. While there are three methods of pooling returns to producers (individual handler pool, market–wide (statewide) pool and cooperative pool), only the statewide pool operates in California.

Pooling, Cooperative

Method of calculating prices received by members of a specific cooperative. If permitted by the bylaws, a cooperative may base the price it pays to members on the revenue obtained from sales less adjustments for operating expenses and reserves. As a result, the pooled price received by members of a cooperative may not necessarily correspond to federal or state marketing order announced pool prices. Government agencies do not interfere with the right of cooperatives to distribute returns to producers in accordance to membership contracts. In all other regards, cooperatives operating pool plants have the same obligations as proprietary handlers.

Pooling, Individual Handler

Method of pooling in which the price paid to producers is calculated for each handler based on how milk is used by the handler. In this type of pool, producers shipping to different handlers in the same market can receive different prices, depending upon the utilization of the milk by the individual buyers. This was widely used in California until the Mil Pooling Program was instituted in 1969.

Pooling, Marketwide

Method of calculating the blend price paid to producers on the basis of the usage of all the milk received by all handlers in the market. The announced California pool prices (quota and overbase) apply to all producers, independent of how the milk was used by the handler who received it.

Pooling Plan for Market Milk

The document that describes the administration of the milk pooling program in California, including the procedure for calculating pool prices (quota and overbase), allocation of quota, transfer of quota, producer–handlers, computation of handler obligations, and transportation adjustment.


Product obtained by removing water from pasteurized skim milk. It usually contains 3 to 4 percent moisture and 1 percent milkfat. Powder is also called skimmed milk powder in international markets. Powder is often abbreviated “NDM” or “NFDM”, which stands for nonfat dry milk.

Pricing Formula

Mathematical equations that use economic data to establish a minimum regulated price. In California, pricing formulas are changed periodically through a public hearing.


Any person that produces milk from five or more cows in conformity with the applicable health regulations of the place in which it is sold, and whose bulk market milk is received, acquired, or handled by any handler or any nonprofit association of producers. In California, a cooperative is considered a single producer.


(also Producer – Distributor) A dairy farmer who processes and sells milk from his or her own production. A P–H may also purchase milk from other dairy farmers for processing. A producer–handler is usually exempt from minimum pricing provisions on some of his or her milk but is required to make reports, maintain records and prove this status as a producer.

Producer Settlement Fund*

Sometimes called the "equalization fund" or "pool fund." A fund maintained by the Milk Pooling Branch to adjust the differences between the amounts owed for milk by various handlers under a marketwide pool. Handlers with higher than the market average utilization in Class 1 milk during any month will pay into the pool. Generally, handlers with a Class 1 utilization less than the market average will receive payments from the pool to adjust for producer payments which are in excess of the value of the milk computed on the minimum class price.

Promotional Check–off

Since 1984, a mandatory assessment on producers' milkchecks for all milk produced in the U.S. and marketed for commercial use. The monies generated by this assessment are used by the National Dairy Promotion and Research Board and by various state and regional dairy promotion organizations to fund generic dairy product advertising and promotion, nutrition education and research, product research and development, program evaluations, and other supporting activities. Producers are currently assessed at the rate of 15 cents per hundredweight, with a maximum credit of 10 cents per hundredweight for payments to qualified state or regional promotion programs (for example, the California Milk Advisory Board) and the remainder going to the NDPRB.

Protein Pricing

One variation of a component (or multiple component) pricing system that involves establishing a price for the protein portion of milk. A protein pricing formula will often assign a portion of the total value to the fat portion and to the other non–protein solids as well.

Purchase (Support) Prices

Prices at which the CCC will buy butter, nonfat dry milk, or cheese under the DPSP. Purchase prices are basically calculated as the support price plus a make allowance (in $/cwt. of milk) divided by the pounds of product obtained from one hundred pounds of average composition milk (4.48 for butter, 8.13 for nonfat dry milk and 10.1 for Cheddar cheese). As of January, 2000 the prices are $0.65 per pound of butter, $1.10 per pound of cheese and $1.01 per pound of NFDM.

Return to TOP



Part of a two–tiered pricing system in California. Essentially, quota is an entitlement that allows a producer to receive a price for milk that is $1.70 per hundredweight higher than the overbase price. Originated with the inception of the milk pooling program in 1969.

Return to TOP


Raw Milk

Farm milk that has not been treated in any way. Raw milk is not pasteurized, separated, standardized or homogenized.

Receiving Station

Facility at which milk is collected from farm bulk milk trucks, stored, then shipped, usually in tractor–trailer units, to another destination (see Assembly and Direct Delivery).

Recommended Decision

In California, it is the tentative proposal made by the hearing panel to the Secretary of Agriculture relating to a proposed change to the Stabilization Plans or Pooling Plan. In federal orders, it is the tentative proposal made by USDA to the industry relating to a proposed change in the administration of a marketing order.

Reconstituted Milk

Product resulting from the mixing together and rehydration of a dried product of milk with water. For example, nonfat dry milk and water yields reconstituted skim milk. Adding cream or butter oil yield reconstituted whole or lowfat milk. Adding vegetable oil yields filled milk.

Reduced Fat

A product that contains at least a 25% reduction in total fat per reference amount when compared to an appropriate reference food.


The submission of a change in how the marketing order or marketing area to the producers for approval. In California, referendums are only required by major amendments to the Plans. In federal milk market orders, producers are given the opportunity to vote for or against an amended order after issuance of a formal decision. A two–thirds majority is necessary for approval. Rejection applies to the amended order in its entirety, not just the amendments.

Regional Quota Adjusters*

Represent deductions that apply to quota payments to producers. They are determined by the location of the producer's dairy and apply to the hundredweight equivalent of quota milk produced.

Restricted Use Market Milk*

(degraded milk) Any milk produced at a market milk dairy which does not conform to or was not produced under the standards established for market milk.


Final link in the marketing chain; refers to the interface between consumers and vendors of products packaged in their final form.

Riding the Pool

Techniques by which a handler whose major concern is the production of manufactured products can arrange his business so as to legally participate in the pool. A handler (or a cooperative) "rides the pool" by disposing of just enough of his milk supply to Class 1 plants to qualify as a pool plant. In this way, the handler is able to return the generally higher pool price to producers than if the handler simply engaged in a routine manufacturing business. It has advantages because the handler can use the pool to pay more for the milk than what the manufacturing class prices would indicate.

RO (Reverse Osmosis)

A process whereby a liquid such as milk or whey is pumped through a semi–permeable membrane under high pressure. The size of the pores in the membrane allow separation to occur at the molecular level. The liquid that passes through the membrane is called permeate, and the remainder is called retentate. With RO, the permeate is primarily pure water. Commonly used to reduce the volume of milk or whey prior to drying or further processing (see also UF).


See Regional Quota Adjusters.

Return to TOP