The term refers to the equalizing or blending procedure in milk marketing orders whereby processors pay for milk according to use but farmers are guaranteed a minimum price equal to the average market-wide value of all uses. This minimum price is sometimes referred to as the “statistical uniform price” or the "blend price." Milk buyers (handlers) for whom the value of milk purchased (often referred to as their "obligation") exceeds the market-wide average per hundredweight make a payment to the market administrator. Handlers whose value of milk purchased is less than the market-wide average per hundredweight receive a payment from the market administrator. These payments to and from the market pool allow each processor to equalize the payment to farmers even though the processors pay for milk on the basis of use (i.e., class prices). Equalization payments to a processor are sometimes called the “pool draw.” Although equalization payments allow the average milk value across classes in a marketing order to be paid to farmers, actual pay prices are not exactly equal for all farmers pooled in a given market order due to differences in milk quality, volume, and other factors.
Mark Stephenson, Cornell Program on Dairy Markets and Policy
