California’s Dairy Pricing Compromise
Jul 26, 2013
Dairy producers have jumped on a processor-proposed milk price increase. Now it’s up to state officials.
Last week, California dairy farmers submitted a proposal to their Department of Food and Agriculture that would raise state-mandated minimum milk prices about 65¢ to 70¢/cwt. for 4b cheese milk. That translates to about 30¢ to their overbase blend price, or some $5,500 more per month for a 1,000-cow dairy.
The increase would make up some of the difference between California’s 4b price and the Federal Milk Marketing Order’s Class III price, but by no means all of it. In June, for example, the California 4b price was $2.11/cwt. less than Class III. Over the past three years, it has averaged about $1.70 less.
Those lower prices, coupled with ethanol-fueled feed prices, have put California dairy producers in a world of hurt. It might be that dairy processors, who actually proposed this solution, are seeing the light.
It’s estimated that California dairy farmers have lost $2 billion collectively, and on average, $1+ million individually, over the past five years. There are nearly 400 fewer California dairy farmers in business than there were five years ago, and nearly 60,000 fewer cows. Because of more milk per cow, state milk production is still about 1% higher than it was in 2008.
But for the first six months of 2013, California milk production trails prior year output by 634 million pounds, a 2.9% decline from 2012’s first half yield. For comparison, that half-year decline is more than the total annual milk production of Maine.
California dairy producers tried, and failed, to get legislative relief this past session. California Assembly member Richard Pan (D-Sacramento) was instrumental in negotiating the current deal, says Rob Vandenheuvel, general manager of the California Milk Producers Council. The Dairy Institute of California, which represents state dairy processors, sent a letter to Pan July 8 outlining what would be an acceptable compromise.
Dairy producers jumped on the proposal, since it doubles what the California Department of Food and Agriculture (CDFA) had approved. Now it’s up to CDFA to decide whether it will hold a hearing. "We’re still a long way from the finish line," says Vandenheuvel. But he believes the proposal could be in place early this fall, if CDFA acts quickly.
The proposal is just a temporary, one-year fix. But it allows California dairy farmers time to study other options, including joining the Federal Order system. In the meantime, it’s better than nothing. "And our cheesemakers will still have the lowest cost milk in the country," says Vandenheuvel.
Read more on California’s milk price compromise here.