House bill gives California flexibility in FMMO quest

U.S. Rep. David Valadao (R-Calif.) introduced H.R. 1396, the “California Federal Milk Marketing Order Act,” which would provide California dairy producers with additional options as they consider joining the Federal Milk Marketing Order (FMMO) system.

While a summary of the bill was not yet available on congressional websites, the bill would recognize California’s “quota program,” according to Rob Vandenheuvel, general manager of California’s Milk Producers Council (MPC).

“While California dairy farmers currently have the opportunity to petition USDA for the establishment of a California order in the federal order system, current law does not allow USDA to account for the ‘quota program’ that California has operated for more than 40 years,” Vandenheuvel wrote in MPC’s weekly newsletter. “This has been a sticking point in our previous discussions about joining the FMMO system. H.R. 1396 would specifically address that issue, allowing USDA to craft a California FMMO that recognizes the state-run quota program.

Specifically, the bill states, “the order covering California shall have the right to reblend and distribute order receipts to recognize quota value.”

California has maintained its own state marketing order for many decades. However, recent controversy surrounding the whey value factor in the state’s Class 4b milk pricing formula has increased interest in the state's producers joining the federal order system.

In addition, Vandenheuvel wrote, one of the things that doesn’t get as much attention is the ability of the FMMO system to capture value from out-of-state milk that is hauled into California, either as packaged or bulk milk, replacing California-produced milk. 

Vandenheuvel noted that three major cooperatives with members in California (California Dairies, Inc., Dairy Farmers of America and Land O’Lakes) hosted a World Ag Expo panel discussion on California entering the federal order system, finding strong support for the concept. Last fall, those co-ops contracted with Dr. Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison’s College of Agricultural and Life Sciences, and Dr. Chuck Nicholson, clinical associate professor of supply chain management at Penn State University, to perform the five-month study and assess what can be expected by replacing the state milk marketing order with a federal counterpart. The results of that study are expected soon.

The process of petitioning USDA with a proposal to create a California order within the federal orders system, scheduling and conducting hearings and, ultimately, putting it to a producer vote (which would require a two-thirds majority for implementation) is a lengthy process, with many opportunities for input from dairy farmers and their representatives. Some estimate the process at 14 months or more.

“H.R. 1396 wouldn’t change that process, but would give us the option to include in our petition a recognition of the state’s quota program and the ability to continue operating it, while participating in the FMMO system,” Vandenheuvel wrote. “That’s the value of H.R. 1396: it provides us with additional options, while still maintaining our full control over whether or not to ultimately choose to accept the move to the FMMO system.”

“Ultimately, even with this legislation, California dairymen will have the final say regarding their own pricing system,” said Valadao, who represents Kings County and portions of Fresno, Tulare and Kern counties, four of California’s top six milk-producing counties.

A majority of the California dairy organizations and cooperatives, as well as National Milk Producers Federation, have already stepped up and supported H.R. 1396, according to Vandenheuvel. Those organizations include: California Dairies, Inc.; California Dairy Campaign; California Farmers Union; Dairy Farmers of America; Land O’Lakes; and MPC.

In addition to Rep. Valadao, other members of the California congressional delegation have already agreed to support the bill, including Democrats Jim Costa, Sam Farr, John Garamendi and Gloria Negrete-McLeod and Republicans Jeff Denham, Doug LaMalfa, Kevin McCarthy and Devin Nunes (R-Visalia). Nunes, McCarthy, Costa, LaMalfa and Denham are original cosponsors.

The legislation has been referred to the House Ag Committee.

“This is a critically important time for our industry, as we debate and discuss the best long-term path forward,” Vandenheuvel wrote. “Dairy families and their organizations throughout California have made it clear that they want a California FMMO on the table, and H.R. 1396 would help give our industry more flexibility in seriously moving forward with that option.”