California Dairy Farmers Get a 46 Cent Raise

July 17, 2015 03:28 PM

The California Department of Food and Agriculture released new whey factor values today, effectively raising California milk prices an average of 46¢/cwt, based on a five-year average of whey prices.

The new values will be in place from August 1, 2015 through July 31, 2016.

“Having carefully weighed the contents of the hearing record from the June 3, 2015 milk price hearing, the Department has decided to amend the Class 4b pricing formula in the Stabilization and Marketing Plans for Market Milk,” says Don Shippelhoute, Chief of Calfornia’s Dairy Marketing Branch.

“Had these changes been in effect from April 2010 to March 2015, the effect of these changes would have resulted in a five-year monthly average increase of $1.01/cwt in the Class 4b price and 46¢/cwt in Quota and Overbase prices,” he says.

"Western United Dairymen is encouraged by the Secretary's actions today on milk pricing.  We are appreciative of the intensive effort by the CDFA to listen and respond to the industry and act accordingly,” said WUD President Frank Mendonsa. "While we had hoped for more, we will continue to work closely with the Department to be more consistent with the Federal order."

Higher milk production could result, say analysts. “We view this as a bearish influence to the marketplace overall as a price increase on milk checks is expected to insulate producers somewhat from lower prices overall and could potentially lead to higher milk production in the future,” says Dave Kursawski, with FCStone based in Chicago.

“But the real kicker is the hit taken to California cheese manufacturers,” says Eric Meyer, with HighGround Dairy, also based in Chicago. “This [change to whey value factors] can be viewed as a double whammy to their bottom line as revenue is being removed from lower whey product sales returns and more money being returned back to the farmer in the milk check.

“As demand for cheese is starting to back up around the countryside, a potential overage increase to recoup lost revenue will not sit well with end-users, particularly off-shore customers that will have additional choices from Oceania and Europe in the coming months,” he says.

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