California Department of Ag Rejects Request for Dairy Quota ‘Cease and Desist’ Order
California’s Secretary of Agriculture Karen Ross last week rejected a request to “cease and desist” from collecting money under the state’s dairy quota program.
AJ Bos and STOP QIP had sent a letter to the California Department of Agriculture (CDFA) at the end of October, requesting the agency to stop quota deductions and collections claiming the program was “merely voluntary and without the force of law.”
They worried that money collected under the program would be difficult if not impossible to recover should the dairy quota program end.
Ross did not address those concerns. In her letter back, she stated:
“As you know, I have always believed in and supported the California dairy industry’s right of self-determination in all matters impacting their industry, including the implementation of a stand-alone quota program. To do what you ask now, without a clear message from the industry [that] this is what they want, goes against my commitment to them that they will decide their fate. Therefore, I respectfully reject your request.”
The STOP QIP organization will now be forced to file suit, says Craig Cordon, a dairy farmer and member of the group. "We have to file. We cannot afford to wait and see a cost of $433,000 dollars a day," he says. "We have already been taxed an additional $108 million by agreeing to participate in the Co-op sponsored Quota Solution meetings these past 9 months."
Gordon adds that he is reassured that Sec. Ross will allow farmers to decide the issue. "I would assume that means she will let us have our referendum on the QIP tax," he says.
In the meantime, California dairy farmers continue to mull over what to do with the quota program. Various options are currently being discussed. Some include a 10-year sunset of the program, or some variation, to allow quota owners time to adjust to the new business model.
Meetings in December and January could set the direction of the quota program’s future. Quota opponents also say they have enough votes to terminate the program—if a reasonable transition period cannot be agreed upon.
Currently, non-quota-owning dairy farmers are paying something more than 30₵/cwt each month to support the program, which adds up to thousands of dollars deducted from their milk check each month. Quota holders, in turn, receive about $1.50/cwt for the quotas they hold—again adding thousands of dollars to their milk checks.
Uncertainty over the future of quotas has pushed quota value down. The lower quota equity value for quota owners is decreasing their business solvency (debt-to-asset ratios).
Loss of quota income could be catastrophic for some quota holders. Quick termination of quota would create a shock to a quota owner’s asset value and solvency metrics. That could affect how much revolving credit a lender is willing to offer and a farm’s ability to carry long-term debt. Some might be forced from the business.
In a worst-case scenario where quota were terminated suddenly, California milk production could decline as much as 4.2%, according to analysis by Marin Bozic, a University of Minnesota dairy economist and Matt Gould, a private dairy analyst. Both have been contracted to study the impact of quota transition and termination.
Northern and southern California dairy regions, which hold the most quota, would be impacted the most. California’s central valley—Fresno, Kings and Tulare counties—could actually see milk production increases.