California's temporary milk price hike to expire June 30

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California milk marketing order minimum milk pricing formula adjustments in place the past year are set to expire June 30, meaning the state's dairy farmers will see a slight decline in milk prices.

In June 2013, California Department of Food & Agriculture (CDFA) Secretary Karen Ross announced the temporary adjustments, resulting in an estimated 12¢/cwt. increase in the milk price paid to the state's dairy farmers for the period July 1-Dec. 31, 2013. Following a contentious period between the state’s dairy farmer organizations and processors in the fall of 2013, CDFA extended the adjusted formulas through June 30, 2014.

The price adjustments were initially put in place to address financial hardships faced by California dairy farmers due to skyrocketing feed costs. The adjustments set to expire on June 30 followed temporary formula adjustments that had raised the minimum milk price about 25¢/cwt. for the period February-May 2013.

According to Rob Vandenheuvel, general manager of the California Milk Producers Council (MPC),  adjustments set to expire July 1 include:

• a 3¢/cwt. Class 1 price increase

• a 5¢/cwt. Class 2 & 3 price increase

• a 15¢/cwt. Class 4a & 4b price increase

As a result, California dairy farmers will see a drop of about 12¢/cwt. in the overbase price beginning in July.

“Temporary” has been the situation for California dairy pricing formulas for some time, prompting  Ross to announce creation of a California Dairy Futures Task Force in late 2012.  The task force was asked to seek solutions and common ground between the state's dairy farmers and processors. In creating the task force, Ross said the state's “antiquated state pricing system demands structural reform.”

In a May 14, 2014 letter, Ross provided an update to California dairy industry stakeholders, indicating farmer and processor groups represented on the task force were making progress.

Much of the friction in the past two years has centered around the price formula for Class 4b milk (used for cheese production), and disparity between California's Class 4b price and prices paid for Class III milk under the federal milk marketing order system. Both classes of milk are used in cheese production.

According to Vandenheuvel, the May 2014 California Class 4b price was $19.34/cwt., $3.03/cwt. less than the comparable Class III price. For the period of 2010 through May 2014, the Class 4b has averaged $15.90/cwt., while the federal order /Class III price averaged $17.61/cwt., a difference of$1.71/cwt.

In early fall of 2013, after working with state legislators, several dairy farmer groups – including California Dairies, Inc., the Milk Producers Council, California Dairy Campaign and Western United Dairymen – thought they had an agreement with processors to modify the sliding scale used to determine the dry whey factor in the Class 4b formula. That change would have raised the whey factor, resulting in an increase of approximately 46¢/cwt. in the minimum Class 4b price.

However, in her announcement to extend the temporary price formula adjustments through June 30, 2014, Ross said no apparent producer-processor agreement had been reached.



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