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California’s Dairy Industry Awaits Thursday’s Whey Factor Hearing

September 9, 2013
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California Ag Secretary will consider whether to implement the milk pricing deal agreed to by dairy farmers, cheese makers.

California’s dairy industry is awaiting a hearing Sept. 12 in Sacramento at which dairy producers and processors are expected to speak out on a petition that would increase the current cap for the whey scale factor to $1 per cwt.

The petition was proposed by Western United Dairymen, California Dairies Inc., Milk Producers Council and California Dairy Campaign and agreed to in July by Assemblyman Dr. Richard Pan (D-Sacramento) and the processor-focused Dairy Institute of California. The petition seeks to modify the sliding scale that determines the dry whey factor in the Class 4b formula and replace the temporary price adjustment now in place with another.

The hearing will be held Thursday, Sept. 12 at 8 a.m. in the CDFA’s auditorium at 1220 N Street in Sacramento.

WUD President Tom Barcellos urged producers to attend the hearing and speak out in favor of the proposal. "This hearing is the first step in bringing long-needed relief to our dairy families and moves us in the direction of mitigating the pricing inequity in our formula for milk going into cheese," he said.

The pricing changes proposed by the producer groups reflect the same proposals put forward by the Dairy Institute of California in a July 8, 2013 letter sent by its advocate to Pan. In a letter signed by Joseph Lang of the Sacramento government relations firm of Lang, Hansen, O’Malley & Miller, the Dairy Institute said it would support CDFA hearings regarding milk pricing if those hearings resulted in the following:

• The current emergency price relief is extended through June 2014, provided that no more than $.46 per cwt. is assigned to Class 4b milk. This is estimated to generate $43 million.

• An increase in the current cap for the whey scale factor from 75 cents to $1 per cwt. This is estimated to generate $42 million.

Combined with the current emergency price relief of $25 million, the total pricing proposal would total $110 million.

"We are pleased to see that the Dairy Institute is in agreement with the pricing changes being put forward in the petition submitted by Western United Dairymen and the other producer groups," said WUD CEO Michael Marsh. "We look forward to their testimony in support of this petition at the September 12 hearing."

In January of this year, CDFA raised minimum prices paid to the state’s dairy producers by an average of about 25 cents per cwt. That temporary increase remained effective from February through May. In June, the agency again increased minimum milk prices by an average of 12.5 cents per cwt. The state’s dairies, struggling with high production costs and unprofitable margins, reacted with disappointment.

In July, producer and processor groups agreed on a short-term fix of $110 million in new money that cheese processors would pay into the milk pool to be shared by dairy farmers.

Under California’s dairy pricing system, manufacturers must pay for their milk based on the monthly minimum price formulas established by the state. There are five individual formulas, with each representing a different utilization of milk:
• Class 1 (fluid products)
• Class 2 (soft products like yogurt/sour cream)
• Class 3 (frozen products)
• Class 4a (butter/powder)
• Class 4b (cheese/whey products)

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