Other major California dairy organizations are supporting efforts leading to the potential creation of a federal milk marketing order (FMMO) in California. Three of the state’s largest dairy cooperatives – California Dairies Inc. (CDI), Dairy Farmers of America (DFA) and Land O’Lakes (LOL) – jointly submitted the proposal to USDA.
MPC: Long time in coming
Perhaps the most vocal in condemning existing California order pricing policies has been Rob Vandenheuvel, general manager of California's Milk Producers Council (MPC). For years, Vandenheuvel has documented the “California discount” – the difference between the federal order Class III and California Class 4b milk prices. Both Class III and 4b prices are minimums paid for milk used in the production of cheese.
In January 2015, the FMMO Class III price was $16.18/cwt.; the California Class 4b price averaged $13.75/cwt., a difference of -$2.43/cwt. Since 2010, the Class III price averaged $18.08/cwt; the 4b price averaged $16.24/cwt., a difference of -$1.84/cwt.
According to Vandenheuvel, the difference represented more than $450 million to California producers in 2014 alone, and more than $1.66 billion since January 2010.
The proposal for a California FMMO is a long time in coming, he said.
“This marks the first time in our history that California’s major cooperatives – who collectively represent more than 75% of our state’s milk production – have asked to initiate this process. This is significant, as the ultimate approval of a federal order in California is subject to a referendum vote of dairy farmers (2/3 majority support is needed for approval), and USDA allows cooperatives the option of bloc voting on behalf of their members. The cooperatives’ support for this process has been the key to getting to this point.”
Under the proposed FMMO language submitted by CDI, DFA and LOL:
• California would have the same pricing formulas/system as all the other federal orders for all classes of milk.
• The California quota program would continue as it is today, providing a monthly payment above the blend price to the owners of quota.
• The transportation and fortification subsidy programs – both currently part of the California system – would continue under the proposed California Federal Order.
• All California plants purchasing milk from California grade A dairy producers would be pool plants. Voluntary depooling of any class of milk will not be permitted.
• All dairy producers throughout California would receive the same blend price (notwithstanding the quota payments received by quota-holders), just as all California producers currently receive the same “overbase” price.
CDC: Now is the time
California Dairy Campaign (CDC) president Joe Augusto commended California’s three major dairy cooperatives for introducing the proposal to establish a FMMO.
“We commend CDI, DFA and LOL for working together to introduce a federal order proposal that will restore equity to dairy producer pricing in California,” said Augusto. “More than 500 dairies have gone out of business since 2007, amounting to a more than 25% drop in the number of California dairies. For far too long California dairy farmers have been underpaid compared to dairy farmers in the FMMO system, costing California dairy farm families more than $1.5 billion. Given the mounting losses that dairy producers continue to suffer due to the failure of our state system to pay a fair price, now is the time for California to join the federal milk marketing order system so our prices are brought in line with prices paid around the country.”
Since its founding as an organization, CDC has long championed a California federal milk marketing order, so that the state's dairy producer prices are in alignment with FMMO prices.
“California dairy producers deserve a better system than our state system which has cost the average sized dairy more than $1 million just since January 2011,” said CDC executive director Lynne McBride. “The federal order represents a far better pricing system that will restore producer price equity, maximize producer participation and enable dairy farmers to have a vote on the final California federal order proposal.” she concluded.
CDC is a member organization of California Farmers Union (CFU), comprised of more than 1,300 farmer and rancher members.
WUD supports discussion
“In the spirit of cooperation and the belief that we’re much more effective united, Western United Dairymen (WUD) is moving forward in support of thoughtful discussion to improve our milk pricing system,” said Tom Barcellos, WUD president. “It’s not an easy fix by any means, but our team is working closely with other industry partners to take the right steps while also continuing to work on state pricing in the meantime.”
WUD is a voluntary membership organization representing more than 60% of the milk produced in California.
• The proposal: http://www.ams.usda.gov/AMSv1.0/CAOrder.
• USDA Q&A document with answers to many of the questions about the process: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5106626.