UPDATE: Producers petition CDFA to implement ‘dairy crisis’ deal

Updated with additional information


California dairy producers filed a petition with California Department of Food and Agriculture Secretary (CDFA) Karen Ross, asking for a hearing to implement a milk pricing deal negotiated and agreed to last week by dairy farmers, cheesemakers and the California Legislature. The petition – posted on CDFA’s website – was filed by Western United Dairymen, California Dairies, Inc., Milk Producers Council and California Dairy Campaign.

The dairy producers and processors agreed on a short-term fix of $110 million in new money that cheese processors will pay into a milk pool to be shared by producers. The $110 million will come from increasing the price of 4b milk up to 46¢, and by expanding the whey scale from its existing cap of 75¢/cwt. of milk to $1/cwt.

The deal will bring relief to the state’s struggling dairy families by narrowing the price between what California dairy producers receive for milk going into cheese production and the price paid by processors for the same milk in surrounding states. The petition notes there continues to be a wide gap between California’s Class 4b price and the federal order Class III price. Since a May 2012 hearing on the Class 4b formula, the gap between the federal order Class III and California Class 4b prices has averaged $1.66/cwt., reaching $2.36/cwt. in December 2012 and rising back above the $2/cwt. level ($2.11/cwt.) in June 2013

“Negotiating this deal for the dairy industry was a heavy lift for the California Legislature,” said Western United Dairymen board president Tom Barcellos. “We are very happy that the members were forceful in getting stakeholders to an agreement.”

Assembly member Richard Pan (D-Sacramento) was instrumental in negotiating the deal, recognizing that dairy is not only vital to human nutrition, but vital to the state’s economic engine, as well.  Dairy is the No. 1 agriculture commodity in California and is responsible for more than a half-million jobs in the state.

As part of the agreement, Pan authored AB 1038, which would charge a California Dairy Future Task Force – whose members are dairy producers, processors and co-ops – with providing economic research materials and proposed structural changes to the California dairy industry’s milk pooling and milk pricing programs. The ultimate goal is the long-term sustainability of our family dairy farms.

Senate Agriculture Committee chair Cathleen Galgiani (D-Stockton) was joined by her Republican colleagues on the committee – Tom Berryhill (R-Modesto) and Anthony Cannella (R-Ceres) – to unanimously pass AB 1038 out of the committee last Thursday, July 18.

California’s dairy producers has suffered more than $2 billion in losses in the past five years, forcing nearly 400 dairy farms in California out of business, according to WUD. The remaining 1,500 dairies are fighting for survival.

Using data from CDFA, the difference between the California “statewide blend” milk price and the quarterly cost of production since January 2012 has averaged -$2.22/cwt. The most current data available indicates that the cost of producing milk exceeded the statewide blend milk price by $1.45/cwt. during the first quarter of 2013.