California co-ops file emergency Class 4b petition

California Dairies, Inc. (CDI), Dairy Farmers of America Western Area (DFA) and Land O’Lakes, Inc. (LOL) have submitted a petition to the California Department of Food and Agriculture (CDFA) requesting an emergency public hearing to consider a change to the Class 4b pricing formula. Signing the petition were CDI chair Andrei Mikhalevsky, DFA chief operating officer Dennis Rodenbaugh, and LOL chief administrative officer Pete Janzen.

The petition specifically requests a temporary modification to the sliding scale that translates market prices for dry whey into higher monetary contributions to the California Class 4b price. This change to the Class 4b milk pricing formula would remain in place for 12 months and would represent the full value of whey as contained in the federal order Class III pricing formula.

“California dairy families have been and continue to be under a great deal of financial stress,” according to the petition. “Some of the financial pressure being experienced in California can be attributed to the drought in the most significant feed growing regions of the U.S., leading to escalated feed costs. The Department’s own data shows that total feed costs are up by 55% since 2010. The costs of milk cow hay ad of milk cow grain mix, principal ingredients for California airy farms, have soared during that same time period.

“The major factor in the question of California dairy farm survivability is achieving a sustainable margin,” the petition continued. “Feed price is a component of margin, making up nearly 70% of the cost of producing milk. The other main component to margin is milk price, and at issue in California is the method by which whey is considered as part of the milk price. The question of how to value whey appropriately has been a galvanizing force among California dairy farmers, leading to unprecedented cooperation and agreement among the producer cooperatives and trade associations. As we have argued in the recent past, the sliding scale for the contribution of the value of whey to the Class 4b formula does not come close to matching the value placed on whey in federal milk marketing orders, especially at current market prices for dry whey. Quite simply, the additional value of dry whey that is being captured by the federal order Class III pricing formula is not, for the most part, being captured by the California Class 4b pricing formula. This phenomenon is a function of pricing formula construct and can be remedied easily by adopting the suggested changes included in this petition.”

CDI, in coordination with DFA and LOL, requested an amendment to the sliding scale for whey value as used in the Class 4b formula. To see the scale, click here.

CDI commended CDFA Secretary Karen Ross’ efforts to identify long-term solutions to forge a foundation for a strong and viable dairy industry in the future, and understands the obligation to be engaged with the rest of the dairy industry. 

“However, dairy producers need to survive in the short-term first,” CDI said. “The petition provides a reasonable method to bridge the current short-term economic situation of dairy producers to Secretary Ross’ long-term solution for the industry.

Ross has 15 days to respond to the petition’s hearing request. If a hearing is granted, it could be held as early as Dec. 1.

The petition is the latest in a tumultuous six months regarding the Class 4b price formula, beginning when a CDFA panel denied a previous petition following a May 31-June 1 public hearing.

For more on the petition and prior hearing, visit http://www.cdfa.ca.gov/dairy/uploader/postings/petitions/

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