Milk Processors & Producers Move Toward Deal On New Higher Formula
Milk industry stakeholders may be closer to ending a bitter battle over the prices dairymen are paid by cheese makers for their milk in the state. But they are not there yet- say the processors.
About 43% of California milk goes to make cheese.
Western United Dairymen(WUD) president Tom Barcellos says the two sides came together last Thursday at a Sacramento hearing proposing new legislation. The trade group represents dairy operators.
Friday WUD announced processors and dairymen had “agreed to a process that would ask the CDFA for an increase of 46 cents per hundredweight in the 4b milk price and expand the whey scale to $1 from its existing cap of 75 cents. It is expected that the 4b increase would generate an additional $110 million in the pool.”
Barcellos says the average 1000 cow dairy would see an extra $72,000 a year once the new law takes effect – hopefully by September 1, he says.
“This is a bridge for one year to stabilize the industry” adds Barcellos who has seen a number of his Valley dairy operators throw in the towel in the past year. According to the CDFA 105 California dairies closed in 2012 squeezed by high debt, low milk prices and sky high feed costs.
Not So Fast
But Rachel Kaldor who heads up the processors trade group The Dairy Institute, says WUD’s announcement may be” a bit premature.”
“We still are a way off”says Kaldor responding to questions about WUD’s announcement of a deal. Kaldor says if there is to be an agreement – it would be a few weeks off when the legislature returns to Sacramento.
A sticking point includes whether the CDFA secretary has some “discretion in making the department recommendation” or whether the legislative language on a price formula was the final word.”We would never agree to that”Kaldor maintains.
Kaldor says the state’s dairy economy “is in recovery and not in crisis” like it was 6 months ago and “we are grateful for that.”
“While California’s number have been bad with some 105 dairies closing last year – Wisconsin lost 500.” This was a nationwide situation, she says.
Citing evidence of a market improvement Kaldor says”We have seen seen an additional” $415 million in revenue return to the pool through the first 6 months of 2013 compared to the same period in 2012.”
Help is on the way says Kaldor with markedly lower feed prices in the offing with future prices of corn this fall dropping from around $8 in the past year for a bushel of corn to closer to $5. The Midwest drought stunted the corn crop last year.
Kaldor says they still hope to come to an agreement with producers “but we have to all remember we are in this together.”
“We are looking for long term sustainability of the entire industry.”
The Dairy Institute’s mantra has been that if prices paid the state‘s dairymen are too high – cheese makers will flee the state.
In fact, several smaller cheese plants have or will soon leave the state including a plant in Tulare County moving operations to Idaho where they claim costs are lower.
The Dairy Institute has said it would like to solve the dilemma faced by farmers, but not with market interventions that would lead to higher prices for consumers.
“We need dairy farmers, and they need us,”said Rachel Kaldor, executive director of the Sacramento-based group has said.
Pressure On Ross
The sometimes bitter battle has been going on for several years and has embroiled CDFA Ag Secretary Karen Ross who has been the target of angry dairy operators and even a trade group lawsuit. Some have called for Ross’s resignation arguing CDFA has not – to date -seemed to listen to their pleas. Now Barcellos thinks they may have the ear of the Brown administration on the issue.
The dairy operator’s trade group Western United Dairymen said in release that the potential compromise surfaced “last week as the Senate Agriculture Committee held a special hearing on AB 1038, authored by Assemblyman Dr. Richard Pan (D-Sacramento). The recently introduced bill declares the Legislature’s intent to encourage the CDFA to hold two hearings regarding milk pricing:
(1) A hearing to amend the recent emergency price relief decision, issued by the Secretary of Food and Agriculture on June 24, 2013, to allow for additional emergency price relief.
(2) A hearing to address changes to the whey scale factor that is used to determine the amount paid into the milk pool in California by California cheesemakers.”
Additionally, the bill would charge the California Dairy Future Task Force, whose members are dairy producers and processors, with providing economic research materials and proposed structural changes to the California dairy industry’s milk pooling and milk pricing programs. The bill would require that the administration and activities of the California Dairy Future Task Force, which has been previously established by the secretary, be funded by the assessments collected by the secretary.
The WUD release continues:
“The developments come after lengthy discussions between industry stakeholders. “We are extremely pleased with the hard work that all have put in to help our family dairies,” said Western United Dairymen Government Relations Director Gary Conover. “Although we have already lost hundreds of dairy farms in California, there is a light at the end of the tunnel for those that are still fighting to stay in business.”
California’s dairy industry has suffered more than $2 billion in losses in the past five years, forcing nearly 400 dairy farms in California out of business. The remaining 1,500 dairies are fighting for survival.
WUD President Tom Barcellos said, “We sincerely appreciate the work that lawmakers and the California Department of Food and Agriculture have put in for our family dairy farmers who are losing their livelihoods. Dr. Pan has not relented in his determination to help those whose businesses, home and communities depend on the milk they produce 365 days a year.”
Barcellos also thanked Sen. Cathleen Galgiani, chair of the Senate Food and Agriculture Committee, and Assemblymember Susan Eggman, chair of the Assembly Committee on Agriculture, for their efforts in working with other legislators to help California’s milk industry.”