Dairy farmers hear proposals on milk pricing


Issue Date: May 13, 2015
By Ching Lee
A decision could come by late summer as to whether the U.S. Department of Agriculture will hold a formal hearing on proposals to change how milk is priced by establishing a federal milk marketing order for California.
Photo/Ching Lee

In meetings with the U.S. Department of Agriculture last week, California dairy farmers received their first detailed look at four different proposals that could change how their milk is priced under a federal milk marketing order for California.

The meetings—held in Chico, Fresno and Palmdale—were meant as informational only and did not discuss the merits of each proposal. Officials from USDA said they will likely decide by late summer whether to hold a formal hearing on the matter.

For some of the farmers attending the meetings, it was the first time they had heard the specifics of each proposal, while others were there to become better acquainted with the information and the upcoming process.

The initial proposal from the state’s three largest dairy cooperatives—California Dairies Inc., Land O’Lakes and Dairy Farmers of America—started the process by petitioning USDA to establish a California federal order. Their proposal would give the state the same pricing system as other federal orders but would preserve California’s quota program, require mandatory pooling of all milk and provide transportation subsidies.

Under a counterproposal from the Dairy Institute of California, which represents processors, pooling would be voluntary, as in all other federal orders, but depooled milk would be subject to repooling restrictions.

A separate proposal from the state’s four producer-handlers seeks to keep the quota exemption that’s currently in the California system. The fourth proposal, from a Nevada dairy that ships milk to California, would allow its milk to remain outside the California pool.

Proponents of the various proposals gave 30-minute presentations and answered questions from the audience. They have until May 20 to make any changes to their proposals. USDA officials said the department will publish an economic impact analysis of the proposals if a hearing goes forward.

Dairy farmers interviewed after the meetings expressed a range of opinions.

Tehama County dairy farmer Brenda Alderson, who attended the Chico meeting, said she still has much to learn before she can decide whether she likes what’s being proposed.

"A lot of it is Greek to me," she said. "The whole pricing—you don’t realize what’s all involved in our paycheck, the different components that put together the price of milk."

As someone who ships milk to Dairy Farmers of America, an author of one of the proposals, Alderson said she’s confident the cooperative would "do their due diligence to try to get what they can for us as producers." She said she hopes USDA grants a hearing.

Sonoma County dairy farmer Frank Gambonini, who attended the same meeting, said he came to the meeting "to get more up to speed" on the proposals. Even though he does not own quota and operates an organic dairy that earns a premium for his milk, Gambonini said the minimum price for his milk is still based on the regulated price and added he thinks the state’s current pricing system needs to be amended to give dairy farmers a more-fair price.

But whether the state system needs to be scrapped in favor of a federal order has yet to be determined, he said.

"That’s all part of this process—not just learning which proposal we prefer, but whether we prefer any proposal or to keep our current system. We have to decide if it is worthwhile changing what we have," Gambonini said.

As a high quota owner, Marin County dairy farmer Jerry Corda, who also attended the Chico meeting, said it’s important to retain the current quota program, and it appears the cooperatives’ proposal would do that. But he acknowledged he’s still trying to digest the details of the proposal.

"There’s a lot in it," he said. "I hope a lot of dairymen will pay attention to what’s going on. I think it’s important for all dairymen to be involved in this important issue."

After the Fresno meeting, Tim Coelho, a dairy farmer in Madera and Merced counties, said he has real concerns about the Dairy Institute proposal, which he described as "trying to go back in time" to a pricing system in California before pooling.

Regarding the proposal from the producer-handlers, Coelho said he doesn’t have a problem with allowing them to keep their quota exemption. But he took issue with the proposal from Nevada-based Ponderosa Dairy, which he characterized as "a money grab" for trying to capture the pool price in its own state and in California.

Merced County dairy farmer Paul Pacheco said the Dairy Institute proposal appears to be leaning toward deregulation and a more market-driven system, and he said he could see why processors would want that. But as a producer who owns "quite a bit of quota," he said he likes the certainty of the cooperatives’ proposal, which does not allow plants to depool.

"If you work deregulation to a point where you can’t maintain a pool and you can’t maintain quota, then that dissolves the whole system," he said. "It makes sense for processors, but I don’t know if it makes sense for producers."

Kenny Fischer, who also operates a dairy in Merced County, said he is not completely sold on the idea of going to a federal order, adding that he is "not a big fan of the federal government getting involved in anything." But as someone who ships milk to Foster Dairy Farms, a producer-handler, he acknowledged he is also in the minority, as the three cooperatives represent more than 75 percent of the state’s milk.

A final marketing order would require support from at least two-thirds of voting producers or producers who represent two-thirds of the state’s milk.

Fischer said he would rather tweak the state’s current milk pricing system so that it mirrors more of the federal order. He said he hopes a June 3 hearing that the California Department of Food and Agriculture has called will result in temporary changes that could eventually lead to a new California pricing system that is more favorable to dairy farmers.

"I would much rather see us stay on our own California order and not go to a federal order," he said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.