California Dairy Groups Gear Up for Whey-Value Petition Hearing May 31-June 1

May 23, 2012 08:38 AM

State ag department will consider petitions that contend California dairy producers are losing millions of dollars because of an undervalued whey factor in the state's milk pricing system. One cheesemaker calls the petition’s demands "obscene."

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California’s dairy industry is gearing up for a May 31-June 1 hearing that seeks to modify the whey value portion of the state’s Class 4b formula.

The hearing will consider petitions from two producer groups who believe California dairy producers are losing hundreds of millions of dollars each year because the whey factor in the state’s milk pricing system is under-valued compared to federal order levels.

Processors disagree, saying another change in the 4b formula is unneeded and would hurt the industry’s competitiveness.

Western United Dairymen (WUD), one of the two petitioners, says that last year’s modification to the formula’s whey factor "does not provide a fair or legally sufficient means of determining the whey value as part of the Formula."

"Our members are concerned about and are suffering significant financial losses as a result of the large discrepancy between the whey value contribution in the Formula and Federal Orders’ Class III," WUD notes in its May 18 Weekly Update.

Since the new formula was implemented on Sept. 1, 2011, WUD says, the California whey value averaged $1.93 per cwt. below federal order levels.

The second petitioner, collectively known as the "Coalition," is comprised of California Dairies, Inc., Dairy Farmers of America-Western Area Council, Land O’Lakes, Inc., Security Milk Producers Association, Milk Producers Council (MPC), California Dairy Campaign, and Alliance of Western Milk Producers.

MPC's Rob Vandenheuvel says the April discrepency between Californa's Class 4b formula and the Federal Order Class III price was $2.29 per cwt. Over the past eight months, that difference has averaged $2.54 per cwt., giving California cheese manufacturers "a state-sponsored discount of at least $260 million."

Like many of the state's cheese processors, Farmdale Creamery opposes the petition request. Farmdale says it -- like other smaller-scale cheesemakers -- is struggling to dispose of its whey streams at a minimal cost to its cheese operations.

In a May 1, 2012, letter to the California Department of Food and Agriculture (CDFA), Farmdale officials Norman R. Shotts II and Scott Hofferber also noted their company and all California cheesemakers have "suffered a significant increase in the cost of whey disposal with the September 2011 implementation of the $0.25 to $0.65 sliding scale whey factor."

In addition, Shotts and Hofferber say cheesemakers "are challenged because any notion of constructing a whey plant that would provide a market value sufficient to overcome the 9/11 cost increase is completely destroyed by the onerous and obscene demand called for in the Petition."

Whey, a cheese-making byproduct, has become a critical part of producers’ milk checks in the last two years. Its value has risen with its growing global demand.

CDFA will administer the two-day hearing, which will be held each day at 9 a.m. in the CDFA auditorium at 1220 N Street in Sacramento.

"The dairy producer side of our industry is coming into this hearing with a collective, unified voice that this outrageous inequity must be fixed," Vandenheuvel says.

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