Milk chug bottle cap floating in glass of milk
May 27, 2016

The California Discount: Fact or Fiction?

 |  By: Jim Dickrell

The Dairy Institute of California upped the ante this week in its dispute over milk pricing with an “open letter” it sent to media outlets.

At issue is state pricing regulations and a proposal for California to join the Federal Milk Marketing Order System. In a proposal offered by the state’s three largest dairy cooperatives owned by dairy farmers, all cheese processors would be required to pool milk under the California Federal Order and pay Class III minimum prices.

USDA’s is currently sifting through thousands of pages of testimony and exhibits presented at a 40-day hearing held last fall to establish a Federal Order in California. USDA is expected to release a preliminary decision later this year on whether a Federal Order in California is warranted, and what shape it should take.

The DIC open letter, released May 26, reads in part:  

“Today, and for the past five years, dairy farmers in California have refused to compromise on regulated pricing reform because their ‘leaders’ have told them that only Federal Order Class III prices are acceptable. But wait.

“No cheesemaker in the U.S. is required to pay the Federal Order Class III price unless it chooses to do so by pooling its milk under the federal milk regulatory system. Cheesemakers outside California choose to pay whatever prices they must to obtain milk supply and keep their products competitive in the market….

“Until leaders in the California dairy farm community own up to the fact that the Federal Order system has never guaranteed the Class III price be paid by processors to dairy farmers, there appears to be no hope of working toward a better California dairy industry…. The California Discount is the myth that keeps on giving false expectations and missed opportunities.”

In response, Rob Vandenheuvel, general manager of the Milk Producers Council, says:

“The Dairy Institute of California continues to try out different talking points to defend a California system that has resulted in hundreds of dairies closing in the past several years….

“It’s not surprising to see processors defend policies that result in lower input costs for their plants, that’s human nature. But it takes some arrogance to want everyone else to agree with that policy, especially the dairymen who are drowning red ink as they are paid less for their milk than virtually all of their competition around the country.”