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Milk Co-ops Plead For Relief One More Time

On election’s eve California’s strapped dairy operators are back at CDFA’s ag secretary’s front door pleading for a change in the milk pricing formula in California that might offer them ”emergency” relief.

Informed sources insist that after being rebuffed several times, the latest petition just might bear fruit.

This latest request for a public hearing, the third this summer,was filed November 2 and penned by the state’s three big dairy co-ops,California Dairies, Dairy Farmers Of America and Land O Lakes. They ask for the so-called 4b price formula to be adjusted higher for a 12 month period. Ross has yet to respond but has announced that she would take a good look.

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

The petition lays out how feed cost have gone up about 55% since 2010 and the cost of feed makes up 70% of the cost of making milk. Impacted severely by the Midwest drought this year the letter concludes that while there is merit in forging a “strong foundation and a viable dairy industry … our members need to survive in the short term first.”

A closed door meeting a few weeks ago with ag secretary Karen Ross,a representative of the governor and producer leaders may have set the stage for this latest attempt,the third in a matter of months, to adjust the milk formula for cheese,that accounts for about half the milk produced in California.

Ross has a tough balancing act in considering the price paid by cheese makers to California’s milk producers. The state wants to offer incentives to the state’s big cheese industry to accept the higher cost of doing business here offset with a slightly lower cost of milk than they can get elsewhere.

California‘s dairymen are the nation’s low cost producers but the drought this year has rejiggered the economics such that an estimated 100 dairies have called it quits this year alone, many solid multi-generation operations held in high regard. Big dairy counties like Kings are reporting about 10% less milk being produced and San Bernardino is down 11% in September vs a year earlier.

In recent months the scale of the suffering has been overwhelming  and Ross may now be ready to compromise rather than just say no once again.

California’s newly formed 28-member Dairy Future Task Force — composed of dairy producers, processors and cooperatives — held its first meeting late last month to address immediate and long-term challenges facing the state’s dairy industry last month in a meeting attended by Ross. Ross announced the panel’s creation earlier this summer, after hearing a petition by producer groups to adjust the state’s whey factor in Class 4b minimum milk pricing formula. The action came in the face of skyrocketing drought-related feed costs, forcing many producers into bankruptcy.

Secretary Ross issued a statement following the task force’s meeting: “The Dairy Future Task Force is made up of dairy producers, processors and cooperatives asked to come together to find common ground upon which they can build a new, more stable and contemporary path for the dairy industry. The first session, held October 23-24, provided an opportunity to agree on a common fact base and develop a sense of what the group wants to accomplish in the coming months. The task force achieved alignment around a shared vision for the future of the California dairy industry, which is a significant accomplishment and a key step toward long-term success. ”

Expedited Review
“Based on the discussion of concepts for potential short-term solutions, CDFA anticipates receiving a petition shortly and will evaluate it on an expedited basis. I very much look forward to working with the talented and passionate producers and processors who are willing to provide leadership to this very important sector of the agricultural community,” added Ross.
Ross also faces a lawsuit from some producers (not the petitioners) and has seen several noisy rallies held on her front steps in Sacramento in the past few months where the rhetoric got pretty rough.

The good news- milk commodity prices are rising.

One of the groups who has sued CDFA, California Milk Producers, say that the latest October figures show cheese makers paid $19.43 per hundredweight -” a vast improvement over the recent prices (in fact, it’s the highest Class 4b price reported since 2007), but a steep discount that cheese makers in Federal Milk Marketing Orders paid last month –  $21.02 per hundredweight, a whopping $1.59 per hundredweight above the California Class 4b price. Using a
conservative estimate of 1.3 billion pounds of milk equates to more than $20,000,000”  difference the group says.

California cheese makers are a huge engine for the state’s economy  but you can not make cheese if you don’t… Got Milk.

If this does not work, the state’s dairy co-ops may be ready to try a federal marketing order the co-ops announced this week while another group plans to work on legislation.

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