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California Dairy Producer Groups Again Petition for Change in Whey Pricing Formula

November 15, 2012
By: Catherine Merlo, Dairy Today Western and Online Editor google + 
CDI AMikhalevsky 1 12 101   Copy

The controversial whey factor pricing request galvanizes producer groups but is opposed by processors. State ag department will decide.

The tense “whey factor” battle between California’s dairy producers and processors continues as both sides again seek support from the California Department of Food and Agriculture (CDFA) for their stance on the state’s milk pricing formula.

Three heavy hitters in California’s dairy industry -- California Dairies, Inc. (CDI), Dairy Farmers of America Western Area (DFA) and Land O’Lakes, Inc. (LOL) filed a petition Oct. 30 with CDFA, requesting another emergency public hearing to consider a change to the Class 4b pricing formula.

This is the second producer request to change the whey factor since a July decision by CDFA. Dairy producer interests petitioned CDFA earlier this year and received a small boost in the whey pricing formula from CDFA in July. They maintain, however, that the increase was too small. CDFA denied a follow-up request in August.

Combined, CDI, DFA and LOL represent an estimated 80-85% of California’s milk production. Whey, a byproduct of cheese-making, is included in the state's 4b pricing formula.

The three producer-owned processing and marketing cooperatives are asking CDFA to consider a temporary modification to the sliding scale that translates market prices for dry whey into higher monetary contributions to the California Class 4b price. The change would remain in place for 12 months “to give our members the financial relief they desperately need,” the petition said. It would also represent the full value of whey as contained in the federal Class III pricing formula.

“California dairy families have been and continue to be under a great deal of financial stress, and the major factor in the question of California dairy farm survivability is achieving a sustainable margin,” CDI said in a Nov. 6 news release. “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. 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.”

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,” the cooperatives noted in their Oct. 30 petition.

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 Dec. 1.

The Dairy Institute of California and other processor interests have asked CDFA to deny the Class 4b petition.

“While we are cognizant of the struggles facing many California dairy farms, the solution proposed again by the co-operatives simply cannot be the answer,” the Dairy Institute of California wrote in a Nov. 7 letter to CDFA Secretary Karen Ross. The organization represents California dairy processors.

“The minimum price requirements that would result from their proposal would be devastating to numerous California cheesemakers and would poison the climate for any additional proprietary investment in the state’s cheese industry,” Rachel Kaldor, executive director of the Dairy Institute, noted. “For this reason, the cooperatives proposal should be vigorously rejected.”

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COMMENTS (2 Comments)

The petition has been denied based on specific wording from my understanding. The three dairy groups are working on getting the wording correct and re-submit the petition.
8:43 AM Nov 20th
The petition has been denied based on specific wording from my understanding. The three dairy groups are working on getting the wording correct and re-submit the petition.
8:43 AM Nov 20th



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