Beginning with January 1995, Dairy Programs of the Agricultural Marketing Service, through its Federal milk order market administrator offices, began collecting and publishing "mailbox milk prices".

The "mailbox price" is defined as the net price received by dairy farmers for milk, including all payments received for milk sold and deducting costs associated with marketing the milk.  All payments for milk sold include, where applicable: over-order premiums; quality, component, breed, and volume premiums; payouts from state-run over-order pricing pools; payments from superpool organizations or marketing agencies in common; payouts from programs offering seasonal production bonuses; and, monthly distributions of cooperative earnings.  All payments are shown for the month in which received.  Annual distributions of cooperative profits / earnings -- 13th checks -- are not included. Also, equity repayments are not included.

Costs associated with marketing milk include, where applicable:  hauling charges, cooperative dues, assessments, equity deductions / capital retains, and reblends; the Federal milk order deduction for marketing services; Federally-mandated assessments such as the National Promotion Program and budget deficit reduction; and advertising / promotion assessments above the national program level.  Other deductions, such as loan, insurance or feed mill assignments are not included.

The information reported is intended to be representative of the entire market by including data for the major cooperatives and handlers with nonmember supplies operating in the market.  For some markets for which the milk supply area covers a wide geographic region, the pay prices reported may be limited to those areas from which the majority of pooled milk is received.  This was done because the pay prices in the outlying areas may be aligned more closely with another order's pay prices.  For all markets, the mailbox price is reported at the market average butterfat test; there is no adjustment to 3.5% butterfat.

In January 2001, Dairy Programs began providing mailbox price information based on reporting areas that are smaller than federal-milk-order-wide prices.  It is believed this price information would be more meaningful and useful.   Federal-milk-order-wide prices were discontinued.

The picture to the right depicts a simplistic overview of how the mailbox prices are built.  Dairy Programs collects and publishes the mailbox prices periodically through the Dairy Market News weekly reports and annual summaries.