California Dairy Group Files Whey-Value Petition with State’s Ag Department

Western United Dairymen wants the department to amend the state’s Class 4b formula to “accurately capture whey value.”

Source: Western United Dairymen Weekly Update

For the second time in three months, Western United Dairymen (WUD) has filed a petition with the California Department of Food and Agriculture (CDFA) asking the department to amend the Class 4b formula to “accurately capture whey value.”

In a letter to Candace Gates of the CDFA Dairy Marketing Branch, WUD’s CEO Michael Marsh wrote, “California dairy families are suffering financially under the current Formula. The Department must amend the Formula to accurately capture whey value. We ask that the Department promptly call a hearing to find a more fair method of doing so.”

WUD is seeking modification of the whey value portion of the Class 4b formula. Acknowledging that CDFA modified the formula after the June 30, 2011 hearing, Marsh noted that, “We believe the modification does not provide a fair or legally sufficient means of determining the whey value as part of the Formula. Our members are concerned about and are suffering significant financial losses as a result of the large discrepancy between the whey value contribution in the Formula and Federal Orders’ Class III.”

WUD said that since the new formula was implemented on Sept. 1, 2011, “It is already abundantly clear that it does not track the Federal Orders’ whey value in a reasonable and sound manner. In fact, since the new sliding scale was implemented, the California whey value averaged $1.93/cwt. lower than in federal orders.”

WUD said the adjustments it was seeking “would result in a Class 4b whey value that more closely tracks the market direction of the Class III whey value, thus bringing California and national pricing into the reasonable and sound relationship required under the Code.”

WUD proposes modifying the current sliding scale in the Class 4b formula to allow the whey factor to more closely reflect the whey value generated by the current Class III formula. The dairy price recovery seen over the summer of 2011 was short lived. Producer margins are pressured by both extremely high feed prices and significantly lower milk prices, and the outlook for the first half of 2012 remains bleak.

CDFA has 15 days to respond to the petition.

The membership of WUD, a trade and lobbying association, represents the majority of the milk produced in California.