What Are Class 3 Milk Products? An Overview

January 5, 2026 •

4 min read

The United States dairy industry operates under a highly structured system where milk is categorized into different classes based on its end use. This classification significantly influences how milk is priced, with the Federal Milk Marketing Order (FMMO) system defining Class 3 milk as that used for hard cheeses and dry whey, among other items. This system creates a uniform pricing mechanism for farmers within specific regions.

Quick Summary

Class 3 milk products, regulated under the Federal Milk Marketing Order, are primarily associated with the production of hard cheeses and dried whey. The pricing for this milk class is tied to the market values of these commodities, distinguishing it from milk used for fluid consumption or softer dairy items.

Key Points

End-Use Classification: Under the Federal Milk Marketing Order (FMMO), milk is categorized into four classes based on its final product use to regulate minimum prices for handlers.
Cheese and Whey: Class 3 milk is primarily used for the manufacturing of hard cheeses, such as cheddar and mozzarella, and the byproduct dry whey.
Commodity-Based Pricing: The minimum price for Class 3 milk is determined monthly by a formula tied directly to the wholesale commodity prices of cheddar cheese and dry whey.
Regional Variations: While the FMMO system is widespread, some regions like California have their own classification systems, where Class 3 can include different products like ice cream.
Market Risk Management: Due to the commodity-based pricing, Class 3 milk handlers and producers often use futures contracts to manage financial risks associated with market price fluctuations.
Distinction from Other Classes: Class 3 differs from Class 1 (fluid milk), Class 2 (soft products), and Class 4 (butter, powder) in its end products and pricing structure.

Understanding the Federal Milk Marketing Order (FMMO) System

The Federal Milk Marketing Order (FMMO) system is a regulatory framework established by the U.S. Department of Agriculture (USDA) to stabilize dairy markets and ensure a consistent milk supply. The system uses classified pricing, where milk handlers pay a minimum price for milk depending on its final use. These prices are pooled and distributed among all dairy farmers in the region, creating a uniform or 'blend' price. The four main classes are:

Class I: Fluid milk for beverage products.
Class II: 'Soft' manufactured products like yogurt, ice cream, and cottage cheese.
Class III: Hard cheeses and whey products.
Class IV: Butter and milk powder.

Some states, like California, operate under their own systems that may have different classifications, though the federal model is widespread.

What Defines Class 3 Milk?

Within the FMMO framework, Class 3 milk is specifically defined by its use in manufacturing hard, ripened cheeses. This process involves milk being coagulated, with the resulting curd being separated from the liquid whey. The value of Class 3 milk is largely driven by the wholesale market prices for the resulting cheese and whey commodities. This contrasts sharply with fluid milk, which has a higher regulated price, or Class 2 products, which are softer and more perishable. The economic health of the cheesemaking industry and the demand for whey directly impacts the price farmers receive for Class 3 milk.

Examples of Class 3 Milk Products

The list of products derived from Class 3 milk is extensive and central to the manufactured dairy market. The most prominent examples include:

Hard Cheeses: This category includes well-known varieties such as cheddar, mozzarella, provolone, and swiss. These cheeses require a significant volume of milk for their production.
Whey Products: As a byproduct of cheesemaking, whey is separated from the curds and is a valuable commodity in its own right. Whey can be further processed into various products, including dry whey powder, whey protein concentrates, and whey protein isolates, which are widely used in the food and beverage industry.
Cream Cheese: The FMMO also includes cream cheese and certain other cheese products in the Class 3 category.

How Class 3 Milk Is Priced

The price of Class 3 milk is not fixed but is calculated using a component-based formula tied to market prices for cheese and dry whey. The USDA Agricultural Marketing Service regularly publishes these prices, which include separate values for butterfat, protein, and other solids. Specifically:

The price for the protein component is based on the monthly wholesale price of 40-pound block cheddar cheese.
The price for other solids is based on the dry whey market price.
The price for butterfat is calculated from the monthly average butter price, shared with the Class IV formula.

This pricing mechanism ties the farmer's pay directly to the market value of the end products, making it a critical aspect of risk management for producers through futures contracts.

Class 3 vs. Other Milk Classes: A Comparison

To better understand Class 3 milk, comparing it with the other classes defined by the FMMO is helpful. The differences lie in the product's form, processing, shelf life, and, most importantly, its market value and price formula.


Feature	Class 1 (Fluid)	Class 2 (Soft)	Class 3 (Cheese & Whey)	Class 4 (Butter & Powder)
Products	Liquid milk (whole, skim, flavored)	Yogurt, ice cream, sour cream, cottage cheese	Hard cheeses, cream cheese, whey products	Butter, nonfat dry milk, dry milk products
Perishability	Most perishable	Moderately perishable	Shelf-stable or requires refrigeration	Long shelf life, storable
Processing	Minimal processing	Significant processing, often soft	Coagulation, separation, aging	Churning, drying
Pricing Factor	Class I price (higher) plus a regional differential	Varies, adds value over Class III and IV	Cheese and dry whey commodity prices	Butter and nonfat dry milk commodity prices

Importance of Class 3 in the Dairy Market

Class 3 milk holds a pivotal position in the dairy economy, especially in regions with a high concentration of cheese production, like Wisconsin. The market for Class 3 products serves as an important outlet for surplus milk that is not consumed as fluid milk. The stability of the cheese and dry whey markets is therefore crucial for dairy farmers and manufacturers. Fluctuations in commodity prices can introduce significant risk for farmers, leading to the use of futures contracts to hedge against price declines. The FMMO system's adjustments to Class 3 formulas, such as the removal of barrel cheese pricing in favor of block cheddar, reflect ongoing efforts to ensure the pricing accurately represents the market.

Conclusion

Class 3 milk products are a foundational component of the dairy industry, centered around the production of hard cheeses and valuable whey commodities. Governed by the Federal Milk Marketing Order system, the pricing for this milk class is directly tied to the volatile commodity markets for cheese and whey, distinguishing it from the fluid and soft products of other classes. Understanding the nuances of Class 3 milk, its production, and its pricing mechanisms is key to appreciating the complexities of the modern dairy market. For more information on dairy pricing and market reports, visit the official site of the Central Federal Milk Market Administrator.

Frequently Asked Questions

Class 3 milk is a classification of Grade A milk under the Federal Milk Marketing Order (FMMO) system that is used for producing hard cheeses and dry whey.

Primary examples of Class 3 products include hard cheeses like cheddar, mozzarella, and swiss, as well as whey protein concentrate and dry whey, which are byproducts of cheesemaking.

The price for Class 3 milk is calculated using a formula based on the wholesale prices of cheddar cheese and dry whey, as reported in the National Dairy Products Sales Report.

In the Federal Milk Marketing Order system, ice cream is typically a Class 2 product, not Class 3. However, specific regional systems like California's may classify ice cream and frozen desserts under their own versions of Class 3.

The main difference is the end use. Class 1 milk is for fluid consumption (like drinking milk), while Class 3 is for manufacturing hard cheeses and whey.

Milk is classified to ensure a stable and orderly market, guarantee a sufficient supply of fresh fluid milk (Class 1), and establish fair minimum prices for dairy producers based on the product's final use.

Yes, because all milk is pooled and dairy farmers receive a blended price. The market conditions for Class 3 products (cheese, whey) can influence the overall blend price, especially in regions with high cheese production.