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USDA asks whether the 150,000-pound exempt milk plant limit still fits; comments due Nov. 23

A request for information from the Agricultural Marketing Service reopens the size line that keeps the smallest fluid milk bottlers out of federal order pooling. The limit has stood since 1999, and USDA proposes no new number.

By Commodity Hill Staff6 min read

“Has the dairy market changed in such a way that the 150,000 pound per month route disposition limit may no longer be appropriate?” That is the second of five questions the Agricultural Marketing Service (AMS) put to the dairy industry in a request for information published Oct. 23[1]. The answer matters most to small bottlers, on-farm processors and the dairy farmers who ship to them, since the limit decides which plants stay outside federal order pooling. Comments are due Nov. 23, 2026[1].

The notice, Doc. No. AMS-DA-26-0298, proposes no rule and no new threshold[1]. It asks what has changed since 1999.

The details: one paragraph in 7 CFR 1000.8

Every Federal milk marketing order (FMMO) shares a definition of a nonpool plant in 7 CFR 1000.8[1]. Paragraph (e) defines an exempt plant, and paragraph (e)(4) sets the de minimis exemption by size[1]. The language came out of the Order Reform final rule published Sept. 1, 1999 (64 FR 47898), and AMS says the nonpool plant definition “has not been amended since”[1].

The number itself was borrowed. During Order Reform, AMS reviewed the route sales limits in every order that already had a small-plant exemption and took the highest one, 150,000 pounds or less of monthly route disposition, so that no plant then exempt for its size would pick up a pool obligation[1]. USDA’s 2010 decision on producer-handlers described the result: the exempt plant definition took effect in January 2000, is uniform across all orders and turns only on Class I sales volume, not on whether the plant also milks its own cows[2].

The request lists five questions[1]:

  1. What market conditions or other factors AMS should weigh in evaluating the limit.
  2. Whether the market has changed so that 150,000 pounds a month may no longer be appropriate, and how.
  3. What plant data or other data AMS should consider.
  4. What a change would do to producers, handlers and consumers, including higher or lower costs for each.
  5. What effect the limit has on small businesses. AMS notes that the Small Business Administration counts a fluid milk processor as small if it has 1,150 or fewer employees, counted across all of a company’s plants[1].

AMS says it wants input both on the market effects for handlers operating exempt plants and on how the limit affects regulated handlers who are not exempt[1]. The notice was signed by AMS Administrator Erin Morris; Erin Taylor of the Dairy Programs Order Formulation and Enforcement Division is the contact[1].

In the field: who sits on each side of the line

Below the limit, a plant is not fully regulated. It does not account to the pool at minimum class prices or pay into the order’s producer-settlement fund the difference between the value of its milk and the order’s blend price, which regulated handlers do[2]. It still files occasional reports with the market administrator to show it qualifies[2].

Above the limit, a bottler pays the announced Class I price for fluid use and shares that value with every producer pooled on the order[2]. That is why cooperatives and larger processors watch the line closely. In the 2009 national hearing, a dairy farmer group’s witness testified that exempt handlers keep the difference between the Class I price and the uniform price, which reduces the blend price to producers, though the same witness did not oppose the exempt plant provision itself[2].

The farmers shipping to exempt plants carry their own exposure. USDA wrote in 2010 that those producers do not get the orders’ minimum price protection, verification of tests and weights, or audits of the handlers who buy their milk[2]. The agency called them the “smallest” of the small dairy farm operations[2].

For an on-farm creamery bottling its own herd’s milk, the exempt plant line sits far below the second exemption in the orders. Since 2010, producer-handlers, dairy farmers who process milk from their own farms and market it themselves, can stay out of pooling up to 3 million pounds of monthly route sales[2, 5, 6]. Producer-handlers face strict limits on buying outside milk, and some orders allow none[2]. An exempt plant can draw its milk from any source, including buying all of it from dairy farmers, but only up to 150,000 pounds of monthly route disposition[2].

The notice does not include a count of exempt plants, their locations or their volumes. Question 3 asks commenters to point AMS to that data[1].

On the Hill and at USDA: the 2010 and 2021 rounds

This is the third time in two decades the number has come up for review.

The 2009 hearing. The International Dairy Foods Association (IDFA) and the National Milk Producers Federation (NMPF) jointly petitioned USDA to eliminate the producer-handler exemption and, in the same package, to raise the exempt plant limit to 450,000 pounds a month[2, 6]. IDFA’s account of the filing said the petitions sought “a modest expansion of the exemption for small handlers,” on the grounds that “some plants are too small to cause market disruption”[6]. An IDFA witness testified that the average fluid bottling plant run by a commercial processor had roughly doubled in volume, from 93.9 million pounds a year in 1990 to 189.8 million pounds in 2007[2]. NMPF pointed to a three-fold increase in farm-level milk production since the original limit was set[2].

Other witnesses wanted more room or less. A witness for Snowville, a small processor, said a fluid plant with only 450,000 pounds of monthly Class I distribution would not be feasible and suggested 1 million pounds; a family-run glass-bottle operation in the Order 5 area made the same 1-million-pound case[2]. Select Milk Producers and Continental Dairy Products opposed any exempt plant limit above 450,000 pounds, arguing that the limit is tied to Class I distribution rather than farm size and rests at least in part on administrative convenience[2]. Organic producer groups backed 450,000 pounds as a hard cap for both producer-handlers and exempt plants[2].

USDA kept the 150,000-pound limit. Its final decision found the record “lacks evidence” to raise the limit once the producer-handler definition was being kept, with a cap, rather than eliminated, and noted that IDFA and NMPF had offered the increase only as a companion to eliminating producer-handlers[2]. The agency added that tripling the limit “may increase the number of producers who may be harmed” by falling outside the orders’ protections[2]. The same decision set the 3-million-pound cap on producer-handlers, subject to a producer referendum[2].

The 2021 petition. Lamers Dairy, Inc. of Appleton, Wis., petitioned in July 2021 to raise the exempt plant limit to 3 million pounds a month, matching the producer-handler cap, and asked USDA to do it through notice-and-comment rulemaking instead of a formal hearing[3]. Progressive Dairy reported that several other small milk handlers backed the request[5].

USDA turned it down on procedural grounds. In an Aug. 18, 2021 letter, Dana Coale, deputy administrator of AMS Dairy Programs, explained that under section 608c(17)(E) of the Agricultural Marketing Agreement Act of 1937, USDA can use informal rulemaking only when an order change does not directly affect the uniform or blend price[3]. Her Nov. 23, 2021 follow-up reported a preliminary analysis that moved every regulated handler with 150,000 to 3 million pounds of route disposition out of the pools and re-ran them[4]. The result, the letter said, “could impact milk prices received by dairy farmers,” so the act barred the Secretary from granting the request informally[4].

What to watch: Nov. 23 and the question of process

The comment window closes Nov. 23, 2026[1]. Submissions go through regulations.gov referencing the document number, date and page of the notice, or by mail to USDA/AMS/Dairy Programs, Stop 0225, Room 2530, in Washington[1]. AMS says all comments, including the identity of those who send them, will be public[1].

The notice says AMS “will review and consider all information submitted”[1]. It does not say whether a proposed rule, a hearing or neither would come next. Under the reasoning in the 2021 letters, a change large enough to move blend prices could not be made through informal rulemaking alone[3, 4]. The 2021 analysis tested one figure, 3 million pounds, and found that it crossed that line[4].