No agreement: CDFA extends existing price adjustmePrint
In a decision certain to disappoint or anger many California dairy producers, California Department of Food & Agriculture (CDFA) Secretary Karen Ross extended the current temporary price relief across all classes of milk, but did not increase the adjustment requested in a petition from dairy producers and the subject of a public hearing on Sept. 12.
The overall price increase, estimated at about 12.5¢/cwt. for the period July 1-Dec. 31, 2013, is extended through June 30, 2014.
On July 22, CDFA received a petition from a group of producer organizations (California Dairies, Inc., Milk Producers Council, California Dairy Campaign and Western United Dairymen) proposing a modification to the sliding scale that determines the dry whey factor in the Class 4b formula, and to replace a temporary price adjustment currently in place with another. Producers believed they had an agreement with processors that would ask CDFA for an increase of 46¢/cwt. in the Class 4b milk price, and raise the whey factor to $1 (from its existing cap of 75¢. WUD estimated the 4b increase would add $110 million to the producer pool.
In her letter announcing the decision, Ross said the extension was warranted, but said she remained convinced that continued adjustments to the minimum price are inadequate to address the ongoing difficulties in the state’s dairy industry, and that the state’s “ antiquated state pricing system demands structural reform.”
“I understand there will be disappointment with this decision in light of the publicity surrounding the perceived agreement between producers and processors during the legislative session,” Ross wrote. “However, the Department was not jointly petitioned by producers and processors – only some producers – and when questioned by the hearing panel, processors responded that there was no agreement.”
Ross said hearing testimony failed to provide justification for the petitioners’ position that price relief be based solely on the whey factor and the 4b formula.
“In fact, the testimony supports the Department's position that the manufactured milk pricing formulas need to be changed to equitably return value to producers and recognize that only a few processors are realizing the full value of whey,” Ross said.
“California’s 1960’s system of regulated milk pricing is outdated and impairs the ability of the dairy industry to meet 21st century challenges and opportunities in national and international markets,” she continued. “These markets have changed dramatically, as have product distribution, costs, and feed and production patterns.
Previously, Ross created a California Dairy Future Task Force to restructure California’s pricing system. CDFA contracted with Daniel Sumner, Ph.D., a University of California at Davis professor of Agricultural & Resource Economics and a former USDA chief economist, to analyze the effects of different pricing scenarios on California’s dairy industry.
Ross directed staff to develop comprehensive pricing proposals – in cooperation with stakeholders, industry experts and the Legislature – by Dec. 15, 2013.
Hearing documents and CDFA’s decision have been posted on the Dairy Marketing Branch website: http://cdfa.ca.gov/dairy/uploader/postings/hearings/