FMMO hearing
April 4, 2016

California Producers Seek New Milk Price Policies

 |  By: Catherine Merlo

While California’s dairy industry awaits USDA’s decision on whether to recommend a federal milk marketing order (FMMO), another effort is underway in the Golden State to consider increasing milk prices.

The California Department of Food and Agriculture (CDFA), which currently oversees the state’s dairy pricing programs, called a public hearing to consider amendments to the Class 4b pricing formula. Producers hope CDFA modifi es it so they can capture more value from whey. The hearing would mark the second time in less than a year that CDFA has publicly addressed amending the 4b formula. After a hearing in June 2015, CDFA implemented temporary modifications set to expire July 31, 2016.

“Given today’s low dry-whey market prices, we’ve unfortunately seen very little actual impact on producers as a result of the modifi ed calculation,” says Rob Vandenheuvel, general manager of the Milk Producers Council. “California’s 4b price still lags Class III by 70¢ to 80¢ per cwt.”

Producer groups hope the April hearing leads CDFA to extend the temporary 4b status. “We also hope to make the case to enhance that relief” by further modifying the formula so the 4b price rises closer to its federal Class III counterpart, Vandenheuvel adds. Processors have yet to weigh in on CDFA’s upcoming hearing. “April seems a little early to us, when the temporary modifi cations don’t expire until July 31,” says Bill Schiek, economist for the Dairy Insitute of California (DIC), which represents the state’s milk processors. “What will conditions look like then?” 

Path to Progress. The state’s hearing and decision should take days, a far cry from the FMMO proposal under consideration by USDA. California’s dairy industry held a 40-day hearing this past fall on the possibilities of a statewide FMMO. Later this spring, USDA will develop and issue its recommendation. After a public comment and review period, the agency will issue its fi nal decision. If it recommends a federal order, California’s dairy producers will have to vote in a referendum to approve the policy. It could be summer 2017 before the process is complete, with implementation likely in January 2018.

DIC doesn’t agree with petitioners that state market conditions warrant a federal order. Still, DIC did submit an FMMO proposal to USDA. It’s significantly different than the co-ops’ proposal, namely on pooling, minimum pricing and quota retention. “They’re trying to make the federal order system fi t California,” says Schiek of DIC. “We’re trying to make California fi t the FMMO system.”

If established, the FMMO would change California’s decades-old milk-handling system, transferring milk-handling and pricing to federal regulators. Proponents of the FMMO say it could boost milk prices for California dairy farmers by about $1/cwt.