California bottle cap.
January 14, 2020

California Quota Program Likely Boils Down to Three Options

 |  By: Jim Dickrell

After another round of meetings in early January, the California Quota Implementation Plan (QIP) likely boils down to three options: Continuation of the program indefinitely, sunsetting the program or buying out the program.

Continuing the program indefinitely would “re-legitimize” it by again tying it directly to the amount of Federal Order Class I dollars collected in the state, explains Geoff Vanden Heuvel, director of Regulatory and Economic Affairs for California Milk Producers Council. The program was de-coupled from fluid sales years ago to entice those farmers with local fluid milk contracts to participate in the program. Click here for more details. Under this proposal, however, the quota would be adjusted every year based on Class I sales, which have been declining about 2% annually.

The second option would be to sunset the program, terminating in 3 to 7 years. “The quota payments between now and that termination date would represent ‘compensation’ quota holders would receive for their quota,” says Vanden Heuvel.

The third proposal would be a buyout of quota using a bond or loan to pay off quota owners quickly, with the assessment continuing until the bond or loan is satisfied. In both the sunset proposal and the buyout proposal, a start date of March 1, 2020 has been proposed with the buyout completed by Jan. 1, 2021. Any QIP payments received after March 1 would count as compensation to whatever value the quota holders agree to accept in exchange for terminating the program, explains Vanden Heuvel. Read details on all the proposals here.

Marin Bozic, a University of Minnesota dairy economist and Matt Gould, a private economist, have been facilitating Quota Implementation Plan discussions and providing analysis on these options. You can read their summary, “Choosing a Path Forward for California Dairy Quota” here.

In a nutshell, here is what California dairy producers are facing, write Bozic and Gould: “In our opinion, the QIP no longer effectuates the purpose of providing a stable and adequate fluid milk supply. That purpose is fully accomplished by the Federal Milk Marketing Order. As such, we believe the QIP in its current form does not indefinitely justify the use of police powers of the state to compel participation from all Grade A shippers.”

Bozic and Gould will be finalizing their report in early February and more meeting to resolve the issue will be scheduled soon after.

Already, however, rumors—some of them vicious--have been circulating throughout the state about what will happen with California’s quota program. In its January 9 newsletter, Western United Dairymen officials called for calm. “These rumors--when not backed up with physical documents validating these claims, have been hyper exaggerated, misconstrued, and most recently appear to be a distortion of the truth in order to achieve pressure. Pressure is a fine thing, but the industry’s decision should be one where each dairy family can have an unabridged version of the truth as to how the future of quota will impact them, so they can cast their own individual vote to decide for their future.  Voter suppression, hyperbolic half-truths, and brow-beating with fabrications is not a respectable way to earn the industry’s vote.”