Policy: A California Federal Order?

February 26, 2013 08:04 PM

Co-ops won’t pursue a Federal Order unless Class I quota is protected

California’s interest in adopting a federal milk marketing order (FMMO) continues to draw intense interest from the state’s dairy producers, as evidenced by a recent standing-room-only meeting in Tulare, Calif.

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Held at World Ag Expo Feb. 13, the meeting drew more than 300 producers and industry representatives to hear about the ins and outs of adopting a Federal Order. Talk surfaced during the meeting that California could be carved into more than a single FMMO. Another idea emerged that the state’s financially stressed dairies would benefit from a two-pronged effort to seek change at both the state and federal levels.

If a Federal Order is to move forward, "it’s critical that producers be unified behind the proposal," Tom Wegner, director of economics and dairy policy for Land O’Lakes, told the audience.

Adopting a Federal Order will mean addressing issues such as pooling and California’s quota pricing system. The three major dairy cooperatives in California—Land O’Lakes, Dairy Farmers of America (DFA) and California Dairies Inc. (CDI)—all agree that they will not pursue a Federal Order without assurances that California’s quota will be protected.

Land O’Lakes, DFA and CDI have jointly funded a study of Federal Orders in California. Conducted by the University of Wisconsin, that report is due this month. While that analysis will help guide decisions about a Federal Order, more steps must be taken, Wegner said.

The FMMO effort must also pursue congressional assurances that California’s quota system will be retained under the Federal Order.

In addition, the state’s producer interests must be aligned so that the industry can move forward with developing a proposal to USDA.

"We need to understand your thought and concerns," Wegner said, speaking on behalf of Land O’Lakes, DFA and CDI.

Ultimately, a two-thirds majority of producers will be needed to approve the adoption of a Federal Order. The entire process could take 12 to 24 months.

The California Department of Food and Agriculture (CDFA) has regulated the state’s milk pricing system for more than 60 years. Producers have repeatedly requested formula changes to boost milk prices, but many feel CDFA has failed them. Financial stresses among the state’s dairies and hopes that a Federal Order could bring them at least $1 more per cwt. have fueled the movement for change.

One audience member, James Netto, asked if a parallel effort of working simultaneously for both state and federal pricing reform might produce faster results for California’s beleaguered dairies.

Another producer, Joey Airoso, said he supported that two-pronged effort, adding, "Why do California dairymen have to take less [in prices] than the rest of the country? CDFA doesn’t really listen. We [producers] are subsidizing processors...CDFA is going to let half of us go broke before it figures out [there’s not] enough milk."

CDI member Jake Haamstra asked if California could be carved into multiple Federal Orders. "That’s a good question," responded Eric Erba, CDI’s senior vice president and chief strategy officer. "It may not make a lot of sense that California be a single Federal Order."

From the audience, producer Barbara Martin expressed frustration with how CDFA "has treated us" and "the disrespect of processors" she has seen. The audience clapped loudly.

"I’m seeing $1 [per cwt.] more in our checks under a Federal Order," Martin said. "I’m asking all producers here: If it’s even 25¢ more, why aren’t we choosing to go with a Federal Order?...California has failed us. We need to get on the same page so we can compete."

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