California milk jug bottle cap.
September 17, 2018

New Federal Order Will Change California Milk Checks Nov. 1

 |  By: Jim Dickrell

Come Nov. 1, California dairy farmers’ milk checks will look different—and many dairy farmers are hoping, will also be a bit fatter.

 

Part of the difference will simply be the way Federal Milk Marketing Orders (FMMO) calculate pay prices, says Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs for California’s Milk Producer Council. California’s Federal Order will calculate payments based on butterfat, protein and other solids. California’s state order calculates payment based on butterfat and solids nonfat (combining protein and other solids). The difference could be significant.

 

To begin with, Federal Orders use true protein in the calculation rather than crude protein. True protein is about two-tenths of a point lower than the crude protein that California dairy farmers are used to seeing. The good news for California dairy farmers is that true protein carries a much higher value than other solids.

 

“California standardized milk containing 8.7 pounds of SNF could be priced at 59¢ per pound of SNF,” explains Vanden Heuvel. “Standardized milk in the FMMO pricing system would include 2.9915 pounds of true protein priced at $1.71 per pound and 5.7 pounds of other solids priced at 8¢ per pound. Not only does this system yield more price per hundredweight of standardized milk, but every tenth of a point of additional protein adds substantially more money (17¢ in this example) to the price than did an additional tenth of a point of SNF in the California system (6¢).”

 

Come November, farmers will also only get two checks: An advance check about the 1st of the month for the first half of the previous month, and then a settlement check by the 19th of the following month. Under the old system, farmers received three checks.

 

For the first time, California farmers will also see how much their quota system is costing—and benefitting--them. The quota system will continue to be administered by the California Department of Food and Agriculture. All California dairy farmers will continue to contribute to the quota program. To pay quota holders, deductions will be taken from the Federal Order price and noted on milk checks. In the past, the quota deduction and payments were blended into the final payment.

 

For more detail, click here.

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