The CDI proposal is one of three the department has agreed to consider in a public hearing on April 4. The original hearing request actually came from Wallaby Yogurt Co. in Napa County, a region that's currently not eligible to receive the transportation allowance. The organic yogurt processor is asking CDFA to include Napa County in the allowance program, since it competes for milk with other plants in the North Bay that do qualify for the allowances.
Marsh said the program historically has been "widely supported by producers" even though it reduces the pool prices they receive, because producers want their milk to go to higher uses, which ultimately bring in more revenue to the pool.
"They also want to make sure it's California milk going to those plants versus milk from Arizona or Nevada," he said.
Rob Vandenheuvel, general manager of the Milk Producers Council in Ontario, said while dairy farmers support the concept of the program, they also want to ensure the closest milk ends up moving into those urban areas first.
"When you set these rates and mileage brackets, it's always possible that you've now created an incentive where perhaps it makes more sense for milk to come from farther away," he said.
He also said he believes processors should share in the cost of funding the transportation allowance. The council had submitted its own proposal to CDFA to include such a concept, but CDFA declined the proposal.
The last time the department held a hearing on the transportation allowance was in 2008 to address surging fuel costs. It later approved a 20 percent across-the-board increase to all rates.
"We might not like the system we have—and I'll be the first to admit that it's not working the way it was originally conceived," Erba said. "It's getting to be much more expensive, but that's because when it was originally conceived, I don't think anybody projected that we'd be moving milk as far as we are right now—or that the cost of fuel would be close to where it is now."
Attracting enough milk to supply fluid plants was also less of a concern in the late 1960s and early 1970s, when use of Class 1 milk hovered near 65 percent of California's total milk production, according to CDFA. Today, Class 1 utilization is about 15 percent, while almost three-quarters of the state's production is used in cheese, butter and dry milk products.
Erba, Marsh and Vandenheuvel all agree it is highly unlikely for any of the Southern California plants to move closer to where the milk source is, as they are multi-million dollar investments that are already working assets. Trying to get a permit anywhere in California to build a new plant is a difficult and lengthy process, Marsh added.