WUD to take legislative lane toward Class 4b fix

If the California Department of Food & Agriculture (CDFA) won't do it, maybe the California state Legislature will.

The Western United Dairymen (WUD) board of directors voted, Oct. 19, to advance a bill that would more closely align the whey value in the California 4b minimum milk pricing formula with the federally regulated minimum price for whey found in surrounding states. 

The efforts is the latest stemming from a July recommendation by a CDFA panel denying changes in the 4b formula. In issuing its ruling, the panel stated the “current Class 4b pricing formula maintains a sound economic relationship between the state’s milk production and marketing conditions for manufactured dairy products.” 

CDFA subsequently denied another petition, filed Aug. 6, by WUD, seeking an emergency hearing on the Class 4b formula, as well as a six-month, 50¢/cwt. increase in the minimum price for all classes of milk.

“Too many of our dairy families have fallen victim to a milk pricing formula that has failed to capture adequate revenues for producers in the face of extraordinary feed costs,” said WUD President Tom Barcellos. “We have repeatedly petitioned the CDFA for relief to little avail. California dairy families are very concerned about their future and have been voicing those concerns. We’re all agreed on the need for action as soon as possible. The WUD board of directors is committed to finding a solution that works for all of the industry. We find that our avenues to a better cheese price are blocked leading us to a single lane. That single lane leads us to the California legislature.” 

WUD staff was directed to immediately craft legislation language and organize bipartisan support. WUD said five state lawmakers pledged their desire to help WUD advance the measure, designed to provide price relief for struggling California dairy families. 


Rally held last week

WUD’s decision came one day after more than 100 dairy producers and supporters rallied at the California State Capitol, Oct. 18, appealing to CDFA for changes in the Class 4b formula. 

While dairy farmers rallied, CDFA added a new feature on its website, “How Milk Pricing Works,” (www.cdfa.ca.gov/dairy/Milk_Pricing_Works.html) and issued a “Statement on Milk Pricing” (www.cdfa.ca.gov/dairy/MilkPricingStatement.html).

The first is essentially a primer on the California milk marketing order system; the second notes the dire straights facing California dairy farmers related to drought-impacted feed costs, but said Class 1 and Class 4b milk prices are rising. The statement defends recent CDFA denials of petitions related to the Class 4b whey factor, contending the state’s 4b prices are lower than federal order Class III prices (both used for cheese production) due to multiple factors, including a surplus of milk and a shortage of plant capacity in California compared to states in the federal system; and California’s distance from the highest-consumption cheese markets in the Northeast, resulting in a lower price because of transportation costs. The statement said any increase in milk prices must also consider potential negative impacts on consumption.

The statement concludes by saying the situation “points to the urgent need for the Dairy Future Task Force, which is being asked to assess challenges and make recommendations for changes to the regulated pricing structure for milk, so that there is long-term stability in the industry.”

California Milk Producers Council’s (MPC) general manager Rob Vandenheuvel called CDFA’s statement “extremely disappointing” and misleading. In an Oct. 18 press release, Vandenheuvel questioned why the statement addressed California Class 1 milk prices, which are not being challenged by either the dairy farmers or bottlers.

He noted the difference in the California Class 4b and federal Class III price hit $2/cwt. in 2011, and is averaging more than $1.75/cwt. in 2012. 

“Instead of sending out a statement explaining her inaction, dairy families need (state Ag) Secretary (Karen) Ross to announce a hearing immediately and change California’s 4b monthly price to more closely follow the prices paid for comparable milk around the country,” Vandenheuvel said. He concluded by calling on CDFA to use its legal responsibility to maintain prices in California that are in a “reasonable and sound economic relationship” with what comparable milk is sold for around the country.


Legal action filed

Led by MPC, four dairy organizations filed legal action, Aug. 31, stating CDFA failed to follow the law in refusing to bring California’s Class 4b price into better alignment with the prices being paid by cheese manufacturers around the country. The “Writ of Mandamus” was filed in the Superior Court of California (San Bernardino County), on behalf of MPC, Dairy Farmers of America (DFA), Security Milk Producers Association (SMPA) and California Dairy Campaign (CDC).

The documents filed with the court, submitted by Paul Hastings LLP on behalf of the dairy producer groups, are available at www.
. MPC has also established a legal defense fund, and is seeking contributions. For information, contact Vandenheuvel at rob@milkproducers.org.


Task force meeting

When the CDFA panel issued its Class 4b whey factor decision in late July, Ross pledged to create a California Dairy Future Task Force to develop long-term solutions to the state's dairy challenges. On Sept. 4, she announced she had extended invitations to 32 dairy farmers, cooperative and processing industry representatives to form that task force. 

Names were not released, and although no timetable was given, Ross said it was imperative that task force members begin work as soon as possible, developing recommendations by the end of the year. In addition, Ross gave prospective task force members an assignment: Read a 2006 report by global management consultant McKinsey and Company, which was commissioned by the California Milk Advisory Board, providing concepts for long-term sustainability and industry growth over a 20-year period. 

News reports said Sen. Anthony Cannella (R-Ceres), chair of the California Senate Committee on Agriculture, told the audience a meeting of a newly created task force would be held Oct. 24. (As of Oct. 19, DairyBusiness Communications was unable to confirm who was on the task force, or where a meeting would be held.) 


Other activities

WUD hosted a program to educate California producers about the federal milk marketing order system, Sept. 20, featuring Bill Wise, market administrator of the Arizona and Pacific Northwest orders.

Videos of the informational meeting have been posted to the WUD website (wud.telefeed.com/#Ray_Souza).