Grade B Milk?

Yes, there actually IS a Grade B milk... but you will not find on the grocer's shelves in fluid form. Nevertheless, Grade B milk is consumed daily; most of it in the form of cheese.

Did you know that Grade A milk actually is further graded into classes? 

* Grade A Class I milk is used for all beverage milks. 

* Grade A Class II milk is used in fluid cream products, yogurts, ice cream, cottage cheese and other perishable manufactured products.

* Grade A Class III milk is used to produce cream cheese and hard manufactured cheese.
* Grade A Class IV milk is used to produce butter and any milk in dry form.

Grade B milk is also called 'Manufacturing grade' and it is milk not meeting the fluid Grade A standards. The USDA says "less stringent standards" may apply. Some examples are: how often the facilities are inspected for cleanliness of the facility and of the cows, suitability of the milking parlor and sanitary handling (and cooling) of the milk, and the allowable bacterial count in the milk. Grade A farms are inspected every six months, while Grade B farms are inspected every two years. The bacterial plate or loop count of Grade A milk may not exceed 100,000 per mL, while Grade B milk may not exceed 300,000 per mL.

Grade B milk can be used only for manufacturing selected dairy products, such as cheese, butter, or reduced fluid-content like condensed milk, evaporated milk and dried milk. Some manufactured dairy products, such as ice cream and drinkable milk beverages, can only be made from Grade A milk. 

It gets a little complicated, though, for us as consumers. When Grade B milk is made into another product, the new grade assigned is not based on the grade of the original milk. Instead, the new product is graded after it is manufactured, on the standards set for that 'new' product. So, you could have butter or cheese that is Grade A by the standards for butter/cheese even if it started out as lesser quality Grade B milk.

Not all manufactured products are made from Grade B milk. Since milk is perishable, sometimes Grade A milk nearing its expiration date may be quickly used (rather than losing it to spoilage) for a manufactured product that will keep longer in cold storage. 

By the way, from the get-go, farmers are paid far less for Grade B milk than even the pitiful amount BigAg pays for Grade A milk. So following the money, my assumption is that all of the dry powdered milk and less expensive cheese or butter (esp. store brands) probably started out as Grade B milk by design, simply because the profit is higher for the manufacturer.

There is another category of milk, although we seldom see it in stores. Certified milk is produced under exceedingly high sanitary standards and is sold at a higher price than Grade A milk. Certified specialty milks include Golden Guernsey milk, which is produced by purebred Guernsey cows, and All-Jersey milk, which is produced by registered Jersey cows. Both command a premium price because of their higher milk fat content and creamier taste.

Source: USDA: Milk Pricing in the United States/AIB-761.