Amid producers’ disappointment over whey factor ruling, all agree California’s dairy pricing system needs overhauling.
Overruling a state panel’s recommendation, California’s agriculture secretary recently gave dairy producers what seemed to be a small victory by slightly raising the whey-factor price cap they had sought.
But California dairy producers aren’t pleased. In fact, some are incensed.
“The increase was not substantial,” says Tom Barcellos, a dairy producer from Porterville, Calif., who serves as president of Western United Dairymen (WUD). “While the Secretary announced a change in the sliding scale, it fell far short of what was requested.”
“To say the results were disappointing doesn’t begin to capture the emotion felt on the producer side of the industry,” says Rob Vandenheuvel of Milk Producers Council (MPC), based in Ontario, Calif.
WUD and MPC were among the petitioners who asked the California Department of Food and Agriculture (CDFA) in March to amend the state’s 4b pricing formula. The two groups contended that California’s dairy producers were losing hundreds of millions of dollars each year because the whey factor in the state’s milk pricing system was under-valued compared to federal order levels. They wanted CDFA to replace the 4b formula with one that more closely tracked the market direction of federal orders’ Class III whey value.
California’s Class 4b price is what handlers pay for farm milk for cheese and whey production. California law places the responsibility for establishing minimum prices for the state’s five classes of milk on the CDFA Secretary.
The petitions led to a two-day hearing May 31-June 1 in Sacramento. Petition supporters and opponents testified before a panel about the proposed change. Weeks later, on July 20, the panel handed down its verdict: no change in the whey factor formula.
But that same day, CDFA Secretary Karen Ross ruled that challenging times for dairies, compounded by drought-fueled feed costs, compelled her to reject the panel’s no-change decision. Instead, Ross gave the green light to a modest increase in the whey-factor value in the Class 4b formula.
Beginning Aug. 1, CDFA will increase the cap to $0.75 per cwt., up from the $0.65 per cwt. that had been in place since last year. For each five-cent step in the dry whey commodity price, the corresponding whey factor will increase in increments of $0.0625 per cwt. The effect of the new sliding scale is an increase in the Class 4b price of approximately 10 cents per cwt. when the dry whey commodity market is at the upper end of the new scale.
At whey’s current price of 49.5 cents per lb., the increase will add 6.25 cents per cwt. to the Class 4b price. WUD says that the sliding scale it sought would have generated an extra $1.09 per cwt. to the Class 4b price.
In fact, the new whey factor will likely add just 2.5 cents per cwt. to producers’ August milk checks, Vandenheuvel says.