California ‘whey factor’ bill has ‘intent’, not policy

By DairyBusiness Staff

 

The California Assembly Ag Committee approved an amended AB 31 on a 6-0 vote, May 1. However, the form of the bill that left room 126 of the Capitol contained “intent” rather than policy. And, whether the vote is judged as a decision akin to Solomon, or just the proverbial “kicking the can down the road” could play out over the next three weeks.

Removed was the original language, introduced last December by Assemblyman Dr. Richard Pan (D-Sacramento), that would have set the California Class 4b “dry whey factor” at no less than 80% of the federal order Class III "dry whey factor." Also removed was a whey factor exemption on the first 3 million lbs. of milk  purchased by cheese plants per month, designed to protect small cheese processors – unable to capture revenues from whey – from higher milk procurement/processing costs.

In its place, committee chair Susan Eggman (D-Stockton) inserted language intended to get dairy producers, processors, the state's Dairy Future’s Task Force and the California Department of Food & Agriculture (CDFA) to come up with new policy to address the Class 4b dry whey factor and processor exemption.

Eggman stated the language approved on May 1 is not the final version of a bill that will ultimately be approved by the full Assembly.

“We’ve got something that can move forward, but it is not the finished product,” said Eggeman, who defended the changes, saying she will “stand in the way of anything leaving the house that is not complete.” 

Language approved in the amended AB 31 recognized the “numerous challenges” faced by the state's dairy producers and processors, including escalating feed prices, environmental and regulatory costs and water availability, as well as capital investment and transportation costs. It also provided CDFA the temporary authority to consider emergency milk price adjustments, and urged CDFA Secretary Karen Ross to actively engage the “Dairy Future’s Task Force to assist in developing proposals intended to best position both producers and processors to achieve the goals of long term success and sustainability.”

The vote followed testimony from about 50 dairy producers and industry representatives in support of the original language, as well as a handful of dairy processors opposed to it. According to a hearing summary, about 36 organizations or individuals registered in support of the original bill; 18 registered in opposition.

For further information and analysis, visit http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml and type AB 31 in the "Search” window.

In conjunction with the Assembly Ag Committee hearing, Eggman and ag committee vice-chair Kristen Olson (R-Modesto) sent letters to Ross, urging CDFA consideration of "emergency price relief." While CDFA generally calls for hearings based on industry petitions, Ross scheduled a hearing to consider emergency adjustments to minimum prices for all five classes of milk under California’s state milk marketing order.

The CDFA hearing will be held May 20, 8 a.m. in the CDFA Auditorium, Sacramento. Calif. The hearing notice and information regarding how to submit testimony can be found on CDFA’s Dairy Matrix (www.cdfa.ca.gov/dairy/dairy_hearings_matrix.html). CDFA's entire hearing exhibit will be available for public inspection at the Dairy Marketing Branch office on May 13. 

A similar hearing was held Dec. 21, at which time Ross ordered temporary adjustments to all five milk classes for the months of February through May 2013. The adjustments increased the Class 4a/4b price by 30¢/cwt., with a net result of about 25¢/cwt. on the “overbase” price paid to dairy producers during the period. That temporary adjustment expires at the end of May.

Dairy producers have argued the 30¢/cwt. Class 4b adjustment fell far short of the California order Class 4b/federal order Class III price differential, which has averaged $1.47/cwt., during the February-May 2013 period. (April 4b/III prices announced on May 2 revealed a 67¢/cwt. gap, the smallest differential dating back to June 2011. Since June 2011, the gap had grown to as much as $3/cwt., and has averaged about $1.75/cwt. per month since 2010.

Beyond the hearing and any temporary measures taken by CDFA, quick action will be necessary from a policy perspective: The last day for fiscal committees to hear and report bills introduced in the Assembly is May 24. 

For producers, change can’t come soon enough, and may be too late.

“Whatever arguments are made today, there is one fact that is absolutely indisputable: There are only 1,500 dairies remaining in California,” said dairy woman Antoinette Duarte. “More than 360 dairies have closed in recent years, and another 100 are threatened to close in 2013. Families in the dairy industry no longer talk about growth, we talk about survival.”

Processors contend a higher whey factor would hamper their competitive ability to process and move cheese to markets, and that capital investment costs to process whey are prohibitive. It's estimated about 20% of California's cheese makers have whey-processing capabilities, with only a couple producing dry whey.