As the California Department of Food and Agriculture (CDFA) announced it had granted a temporary six-month price adjustment for all classes of milk, Secretary Karen Ross admitted to the industry that the current, “antiquated” system is unsustainable in a letter to the industry’s stakeholders.
“We must work together to create a new system to allow producers to improve margins by being responsive to market signals, to provide incentives for the construction of additional processing capacity, and to encourage the production and marketing of new innovative products that add value to milk,” Ross wrote.
Ross also noted that while she believes the price adjustment is appropriated based on the uncertainty of the 2013 corn crop and question about the stability of the market recovery, the industry “failed to provide economic data to justify the industry’s positions.”
The price adjustment will be effective from July 1 through the end of the year and have a net effect of 12.5 cents per hundredweight. A report from The Record shows that this is just a quarter of what dairy farmers originally sought and half of what cheese makers supported.
Many of the state’s dairy farmers are frustrated and disappointed by the announcement.
"It's not a very good decision for farmers for sure," Michael Marsh, chief executive of Western United Dairymen, said.
Terry McHale, a spokesman for the Coalition of California Dairies, echoed Marsh’s disappointment.
“Even the processors who were there, they did at least agree they could live with the status quo, the 25 cents," he told The Record. “So we did find it a bit inexplicable that the secretary would cut it to 12.5 cents."
In January, Ross announced a temporary milk price increase, with milk prices rising between 5 cents to 30 cents per hundredweight, depending on the milk class. Farmers mocked the price hike, saying it was not nearly enough.
California's dairy industry has endured multiple setbacks over the last few years. Thanks to high feed costs, not enough time to recover from the disastrous year of 2009, and the state’s milk-pricing system, it is believed that about 100 of the state's dairies closed down last year. Read more here.
In November 2012, the CDFA denied a petition from three dairy cooperatives for an emergency hearing on changes to the state’s Class 4b milk-pricing formula. However, California’s cheese-makers contend that increasing this price could push cheese production out of the state.