click image to zoomCalifornia State Capitol building A bill put forward by California Department of Food and Agriculture (CDFA) Secretary Karen Ross would index California minimum prices for Class 4 milk closer to federal order counterparts – while transitioning away from minimum pricing formulas toward “self-regulating marketing practices.”
The legislation—Assembly Bill 2730—comes after days of negotiation last week between producer and processor representatives, who were working from a draft proposal Ross had distributed to the parties earlier this month. But time is running short to get the bill through the agriculture and appropriations committees of the Senate and Assembly and then passed by both chambers of the Legislature before Aug. 31, when lawmakers recess.
"It's got to really move," said Michael Marsh, CEO of Western United Dairymen (WUD).
Marsh described the final language of the bill as "a mixed bag." WUD’s board of directors voted last week to support the legislation if it is amended "to enhance the protection of producers' interests in the bill," he said.
What's attractive to dairy farmers, he said, is that the legislation would allow the state's Class 4a and 4b prices to be indexed, over three years, closer to federal order prices. Dairy farmers have long contended that the state 4b price, which applies to milk used to make cheese, is too low compared to what dairy farmers in states under the federal order are paid.
Specifically, the change would be phased in beginning July 2015 by indexing the state 4b price the same as the federal order equivalent Class III price, minus $1 per hundredweight, and the 4a price the same as the federal Class IV price, minus 35 cents per cwt.
In July 2016, the 4b price would be indexed equal to the federal Class III price, minus 50 cents per cwt., and the Class 4a price would be indexed no greater than the federal Class IV, minus 50 cents per cwt.
After January 2017, Class 4a and 4b prices may be adjusted, through a hearing process, to no more than minus 50 cents of the federal Class III and Class IV prices.
The price differential between California Class 4b and FMMO Class III milk – both used for cheese production – has been a major point of contention between producers and processors in recent years. For example, the July 2014 Class 4b price was $2.91/cwt. less than the comparable FMMO Class III milk price. Year-to-date, the 2014 average Class 4b price was $2.17/cwt. less than the Class III average.