California's Ag Department to Consider Class 4B Pricing Amendments in June 3 Hearing

May 8, 2015 04:33 AM
California's Ag Department to Consider Class 4B Pricing Amendments in June 3 Hearing

The state’s dairy producers are eager to push for changes that will increase the price of whey.

The California Department of Food and Agriculture (CDFA) has called for a June 3 hearing that will focus on the dairy industry’s much-debated Class 4b pricing formula and its whey factor.

CDFA Secretary Karen Ross, who called the hearing May 1 on the agency’s own motion, said she is “concerned that the current conditions impacting the production of milk and the marketing of dairy products may warrant short-term adjustments to current pricing levels.”

“I was happy to see the announcement on Friday, and even more pleased to see Secretary Ross’ support for immediate action,” said Frank Mendonsa, a dairy producer from Tulare, Calif., who serves as president of Western United Dairymen (WUD). “I encourage dairymen to be present at the hearing and make sure CDFA hears directly from the family-run dairies this pricing will affect.”

The hearing will consider proposed amendments to Class 4b with a sunset clause having an expiration date not to exceed 24 months. Proposals regarding the Class 4b pricing calculation are due to CDFA by May 20.

CDFA Secretary Karen Ross Portrait   Copy
CDFA Secretary
Karen Ross

Under California’s current state milk-pricing system, Class 4b relates to cheese and its byproduct, whey. Repeated efforts have been made by producer groups in recent years to change the 4b formula to increase the whey price. While some adjustments have been made, many producers feel they were inadequate, resulting in more than $1 billion in lost revenue for dairies.

Ross pointed out that in 2014, CDFA held meetings with the California Dairy Future Task Force and its work groups “to create a 21st century pricing system with the goal of taking advantage of the new global marketplace to create growth and prosperity for California’s dairy families and processors.”

Although those efforts did not result in improvements, Ross said she remains “committed to finding long-term solutions to the issues affecting the California dairy industry.”

The CDFA hearing comes as WUD and other California dairy producer groups push to abandon the state’s 60-year old state-administered pricing system. They have petitioned USDA to consider a historic Federal Milk Marketing Order (FMMO) for the state. Because the FMMO process could take up to two years to unfold, the state’s dairy producers are eager to push for changes that will increase prices now.  The drop in milk prices to the $15-$16 range is $2 per cwt. below the cost of production for many California dairies.

California’s Class 4b price continues to show steep discounts to the Federal Order Class III price, says Rob Vandenheuvel, general manager of the Milk Producers Council, a trade group that represents California dairy producers.  

In April, that discount fell to $1.59 per cwt., Vandenheuvel notes, adding that since January 2010, the discount has totaled more than $1.78 billion. The Class III price is the benchmark reflecting the price for milk sold to cheese manufacturers in the 10 Federal Orders throughout the rest of the U.S.

The June 3 hearing will begin at 8 a.m. in the CDFA auditorium, 1220 N Street, Sacramento. To learn more, click here.

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