Over-order charges for the most part reimburse cooperatives for services performed for fluid milk processors. Cooperatives have been taking on more of the milk marketing functions that previously were performed by processors. For example, cooperatives have been assuming functions in assembly and disposition of raw milk supplies, and maintaining producer payrolls. Cooperatives have to cover the costs of these services by either charging processors over-order prices or by paying their producer-members prices that are lower than order blend (uniform) minimums.
The services that cooperatives provide focus on dairy farmers, on milk processors, or on the overall performance of the market. Services performed by cooperatives that benefit producer-members include such things as checking weights and tests, providing field service that results in milk quality improvement, guaranteeing a market and payment, providing market information via member magazines, purchasing feed, equipment, and supplies in bulk to lower input costs, and offering low cost financing and insurance. Those services that benefit milk processors include providing milk in a given quantity, at specified milk component contents, at a specified time and location, preparing and mailing producer payments, and providing field service and quality control. Services which benefit the entire market include weekend and seasonal balancing of milk supplies, sales promotion, preparing testimony for legislative and regulatory hearings, and conducting informational, educational, and research activities.
To a lesser extent, over-order charges can result from market power, generally attained through marketing agencies in common, which can be used to obtain additional revenue not associated with services.