Organic Dairy Farmers Sue U.S. Over $60M 'Taking' in Federal Program

WASHINGTON, DC – April 28, 2026 – The nation's leading organic dairy producers have launched a multi-front legal assault against the federal government, alleging that a Depression-era pricing program is unconstitutionally forcing them to subsidize the conventional milk industry. The lawsuits, filed in federal court, claim that over $60 million has been systematically siphoned from organic farmers over the past six years.

The Coalition for Organic Dairy Exemption (CODE)—a group representing major brands like Organic Valley, Horizon Organic, and Aurora Organic Dairy—is seeking both an exemption from the U.S. Department of Agriculture's (USDA) Federal Milk Marketing Order (FMMO) program and financial compensation for what they describe as a "government taking."

This legal battle pits a rapidly growing, modern agricultural sector against a nearly century-old regulatory system, raising fundamental questions about fair competition and the future of food policy in an era of increasing consumer demand for specialized, transparently sourced products.

A System Built for Another Era

At the heart of the dispute is the Federal Milk Marketing Order, a complex pricing and pooling system created by Congress in the 1930s to stabilize a volatile conventional dairy market. The program was designed long before organic dairy existed as a distinct commercial category. It operates by establishing minimum prices that milk processors must pay farmers and then "pooling" the revenue from all milk sales—regardless of its final form—to pay farmers a uniform, or "blend," price.

The system categorizes milk into four classes based on end use, with Class I fluid milk commanding the highest price. This structure was intended to ensure a stable supply of fresh milk and provide price equity for farmers whose milk might be used for lower-value products like butter or powder. However, CODE argues this model fundamentally breaks down when applied to the organic market.

"The federal government has locked in an updated dairy pricing regulation that actively harms organic dairy farmers. It systematically siphons revenue generated from organic dairy sales and redistributes it to non-organic dairy producers and their partners," said Elvin Ranck, an organic dairy farmer plaintiff from Pennsylvania and an owner-member of the CROPP Cooperative. "This is effectively a government taking. CROPP Cooperative... pays millions of dollars each year into the Federal Milk Marketing Order pools, yet those dollars never return to organic farmers like me, and under the current system, they never will."

The core of the problem, according to the plaintiffs, is that the FMMO treats organic and conventional milk as interchangeable for pricing purposes, even though USDA's own organic standards legally forbid them from being intermingled. Organic milk operates on a completely separate supply chain, with higher costs for feed, land management, and processing segregation. Yet, the premium price consumers pay for organic milk is effectively diluted in the FMMO pool, with the excess value being redistributed across the entire conventional market.

The Economics of a Divided Market

The financial stakes are substantial. The organic dairy sector has seen explosive growth, expanding from just 1.9 percent of all fluid milk sales in 2006 to 7.0 percent in 2025. Today, organic milk accounts for 3 percent of total U.S. milk production. This growth is fueled by consumer demand for products free from synthetic hormones and antibiotics, produced with higher animal welfare standards.

This demand supports a significant price premium. In April 2026, the average retail price for a half-gallon of organic milk was $4.63, compared to just $1.82 for its conventional counterpart. While organic farmers face much higher production costs, the lawsuit alleges the FMMO prevents them from fully realizing the market value of their product. Instead, a portion of that premium is funneled away to support the very system they compete against.

A class-action takings claim filed alongside the constitutional challenges seeks to recover more than $60 million in payments made into the FMMO pools over the last six years. The plaintiffs argue this money was wrongfully collected from a segment of the industry that receives no corresponding benefit from the pooling system.

The coalition contends that this financial drain stifles growth and investment in the organic sector, directly undermining the consumer demand the market is trying to meet. Resources that could be used to expand organic production, support family farms, and innovate are instead being used to prop up a different industry.

A Decade of Dead Ends

The decision to litigate comes after more than a decade of failed attempts to find an administrative solution. According to CODE, the organic industry has repeatedly tried to work within the USDA's framework to address the inequity.

These efforts include:
* 2015: The industry submitted proposals for an alternative mechanism for organic handlers, which the USDA refused to advance.
* 2023: During a national FMMO hearing, organic-specific proposals were presented, but the USDA again refused to consider them.
* 2024: Objections raised in post-hearing briefs went unaddressed in the USDA's final rule on FMMO modernization.
* 2025: Administrative challenges filed by the industry were actively opposed by the department.

"USDA, under both Republican and Democratic administrations, has spent more than a decade protecting a Depression-era pricing system that forces organic dairy to subsidize conventional products, while refusing every administrative avenue that might have resolved the dispute without litigation," CODE members stated in their announcement.

This history of refusal has led the coalition to believe that the courts are their only remaining path to a fair hearing. They stress that their goal is not to dismantle the FMMO program, which remains a critical tool for the conventional dairy market. Instead, the lawsuits narrowly ask the USDA to grant an exemption for organic milk, thereby aligning the pricing program with the legal and market reality that organic is a distinct product.

Shaping the Future of Food

The outcome of this legal fight could have implications that extend far beyond the dairy aisle. It represents a critical test of whether legacy agricultural policies can adapt to a 21st-century food system defined by consumer choice, product differentiation, and demand for transparency.

The lawsuit highlights a central contradiction: the USDA certifies and regulates organic as a separate, premium standard, yet its pricing mechanism treats it as an identical commodity. For a growing number of consumers who trust the USDA Organic seal, this regulatory conflict could undermine confidence in the very systems meant to support their choices.

As the legal proceedings begin, the case will be closely watched by other specialized agricultural sectors that operate outside the traditional commodity framework. A victory for organic dairy could set a powerful precedent, potentially paving the way for other niche producers to seek exemptions from one-size-fits-all regulations. The fight is not just about milk pricing; it's about whether federal policy will support or stifle the diverse and evolving landscape of American agriculture.