Assembly panel considers bill on milk pricing

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Editor's note: The following article was written by Ching Lee, assistant editor of Ag Alert. Ag Alert is the California Farm Bureau Federation's weekly newsletter.

click image to zoomCaliforniaCheryl Graham A bill that would have established a formula for determining the whey value in the California milk pricing system to bring prices closer to those paid under the federal milk marketing order has been amended, to allow California dairy farmers and processors to work on an agreement.

The Assembly Agriculture Committee voted unanimously last week to keep Assembly Bill 31 moving, so the parties could continue to work on agreed-upon language before the end of the month, the deadline for moving a bill out of its house of origin.

Nearly 100 supporters of the bill attended the hearing to urge passage of AB 31 in its original form, but committee members expressed concern about moving the bill forward without a resolution from producers and processors.

"This has been an incredibly complicated issue for everybody," said Committee Chair Susan Talamantes Eggman, D-Stockton, noting the committee had been working with stakeholders on the bill up until the last minute, with each side offering its own version. But no agreement could be reached prior to the hearing.

"That's why we're coming back to you to say, 'Don't ask us to write the policy,'" Eggman said, adding that she did not see AB 31 as it was written to be the "final version" and that she will "stand in the way of anything trying to leave the house that is not complete."

Eggman said she and Committee Vice Chair Kristin Olsen, R-Modesto, also sent a letter to California Department of Food and Agriculture Secretary Karen Ross, asking her to hold a hearing to find a short-term solution in the meantime. Ross has scheduled the hearing for May 20 to consider temporary changes to the state milk pricing formula for all classes of milk.

AB 31, sponsored by Western United Dairymen and introduced in December by Assembly Member Richard Pan, D-Sacramento, is meant to address what producers say is a price disparity in the state pricing formula for Class 4b milk—used to manufacture cheese—and what's being paid to producers in other states under the federal milk marketing order. The bill would have directed CDFA to set a value for dry whey in the 4b price no less than 80 percent of the whey value used in the federal order.

California cheesemakers say the bill would force many of them out of business or to other states.

Testifying at the Assembly hearing, Sacramento County dairy farmer Antoinette Duarte recounted the difficult times for California producers in recent years, with "all-time high" feed costs for two years straight and now a gloomy forecast for this year's corn production, as farmers in the nation's Corn Belt deal with flooding and delayed planting (see story).

"The dairy producers of California are in crisis," she said, noting that more than 360 dairies have closed in recent years and another hundred are threatened with closure this year. "We, the families that have been in the dairy business for many generations, no longer talk about growth; we talk about survival."

Naming the various dairy and agriculture groups that support AB 31, she said, "I believe this is the first time that we all agree on a critical solution for the survival of our California dairy farms."

Giving a history of whey pricing, Eric Erba, senior vice president and chief strategy officer of California Dairies Inc., the state's largest dairy cooperative, pointed to the $1.95 per hundredweight difference in the last two years between the state whey value factor for the 4b price and the whey value in the federal orders.

He told committee members that the original contents of AB 31 "were on target to fix the inequity."

"It didn't ask for everything that's outside of California in terms of how it's priced," he said. "It asked for a high percentage, and the high percentage would be satisfactory enough to get us on the right track."

Joe Lang, testifying for the Dairy Institute of California, which represents processors, noted that whey was once considered a waste product but is now a valuable commodity.

"That effort, however, didn't come without a price, and the price was very substantial in terms of the amount of investment that was required to address and change the problem," he said.

The question now is, "How do we fairly assess the value of that new commodity and how do we make sure that collectively, as an industry, dairymen can stay in business?" Lang added.

Assembly Member Mariko Yamada, D-Davis, said while she recognizes the "very critical problem" facing the state's dairy farmers, she could not support the original legislation but encouraged the parties to work together to address the issues dairy farmers face.

Assembly Member Bill Quirk, D-Hayward, also expressed reservations about passing AB 31 in its original form, saying that if legislators set a milk pricing formula using the federal whey price as an anchor, "we really don't know what that's going to be in the future."

"It could be way up, way down," he said. "And so, I do prefer that there be some executive discretion here."

Assembly Member Brian Dahle, R-Bieber, said he's "not a fan of gutting bills and starting over," but that "some good policy" could come out of current efforts to rework the bill.

Michael Marsh, CEO of Western United Dairymen, said he is "not optimistic that cheesemakers will suddenly have an epiphany and come our direction."

But he said his organization will, "in good faith," do what the committee has asked and sit down with cheesemakers to "see if we can resolve differences that we've got in approach and come to some common ground."

He said he also anticipates producers will come out in force at the CDFA hearing later this month and "demand awdditional revenues from Class 4b."

Following a similar hearing last December, CDFA adjusted milk prices on all five classes of milk, raising producers' monthly pool price about 25 cents per cwt. for four months, ending May 31.


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