To aid in the orderly marketing of milk, many jurisdictions in the United States, starting in the 1930s, established price regulation systems that set prices for milk purchased from dairies based upon how the buyer (a processor) utilizes the milk. Currently in the United States, over 85% of all milk sold by dairy farms is subject to federal or state price regulation that uses classified pricing. Classified pricing systems have been adopted in a number of other western countries as well. Such systems help prevent situations in which producers are pitted against each other by processors to undercut prices, which can lead to a chaotic marketplace in which the supply and sanitary condition of milk becomes imperiled. Montana’s milk classification system is similar to federal (USDA) milk classification. The Class I utilization comprises of fluid milk products, including buttermilk and eggnog. Class II utilization includes fluid cream products, ice cream type products, cottage cheese, sour cream, and yogurt. Class III utilization included cheese and cream cheese. Class IV utilization includes butter and dried milk. Montana law allows the Board of Milk Control to combine milk classes, and Montana Class III utilization combines the federal Class III and Class IV utilizations. In Montana, Class III utilization also includes bulk milk inventory, dumped milk, and up to 2% shrinkage, with any shrinkage in excess of 2% of pool receipts being allocated to Class I utilization. Shrinkage is a term that describes milk received that is not accounted for by utilization or inventory. Shrinkage is unavoidable and typically is caused by processing losses and incidental waste.

The Milk Control Act requires that the Board of Milk Control establishes formulas to calculate minimum prices to be paid for milk based upon classified utilization.

Montana’s Class I milk price formula adds, as of 6/01/2025, a $2.85/cwt differential to the USDA Federal Order Base Class I price published in the USDA Agricultural Marketing Service’s Announcement of Advanced Prices and Pricing Factors. The Montana Class I butterfat price is the Federal Order Advanced Butterfat Pricing Factor (from the same USDA price announcement) plus $0.0285/lb. The USDA Federal Milk Marketing Administration announces these prices in advance of the month of production. The federal announcement is generally made on the Wednesday following the first two full weeks of the month. The following table illustrates the application of the Montana Class I price formulas for June 2025.