In the category of being careful what you wish, an odd twist in California milk pricing has actually lowered milk prices.
The California Department of Food and Agriculture changed pricing regulations this past summer, which based on historical data, were designed to increase milk prices a $1/cwt.
The old regulations had a ceiling and a floor for dry whey, which meant dry whey could never impact Class 4b price by more than 75¢/cwt or less than 25¢/cwt.
The new, temporary regulation still contains a ceiling, actually raising it to $2.005/cwt and a floor of zero. “When the final October market prices were announced, it became clear that dry whey would contribute $0.00/cwt to the Class 4b price for the month, rather than the 25¢cwt it would have contributed under the previous calculation,” says Rob Vandenheuvel, general manager of the California Milk Producers Council.
As a result, California 4b prices were 25¢/cwt lower under the new regulations than they would have been under the old. The futures market indicates that this zero contribution from whey may be short-lived. But it is an odd twist, when for years California 4b milk prices were capped by the 75¢ upside limit, says Vandenheuvel.
“Of course, California producers have advocated that no ceiling or floor is needed if we simply are put on a level playing field with Federal Order prices,” he says.