Review board signs off on quota proposal

California’s quota system came about in the late 1960s as a means to compensate milk producers selling into the higher Class I market and gain their support for establishing the state marketing order.
Carol Ryan Dumas

Capital Press

Published on September 20, 2017 8:34AM

Cows are milked at VanderWoude Dairy near Merced, Calif. The Milk Pooling Producer Review Board last week finalized a quota plan that would operate much like the current program once the federal milk marketing order is in place.

Capital Press File

Cows are milked at VanderWoude Dairy near Merced, Calif. The Milk Pooling Producer Review Board last week finalized a quota plan that would operate much like the current program once the federal milk marketing order is in place.

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California dairy farmers are one step closer to having a critical component in place to move ahead with their efforts to join the federal milk marketing order system.

That component is a stand-alone quota program to continue the long-standing, producer-funded state program that pays premiums to producers holding quota certificates. The Milk Pooling Producer Review Board last week finalized a plan that would operate much like the current program.

The main difference is that producers will be directly assessed to fund the program, where currently the program is funded by the milk pool.

But a couple of other items are substantially different from the current program. One brought widespread concern and the other is specific to the state’s four producer handlers.

The first was language that hinged continuation of the program on producers’ desire. The original proposal stated continuation was “subject to a producer survey every five years” to be evaluated by an independent party selected by the Producer Review Board.

Western United Dairymen did not immediately respond to Capital Press’ requests on Tuesday but Annie AcMoody, the organization’s director of economic analysis, stated its concerns in public comment on the proposal.

While the survey might not be a direct referendum trigger, it adds uncertainty and is a potential new challenge to quota and a departure from the current program, she said.

The three co-ops that petitioned USDA to establish a federal marketing order for California also objected.

Through public comment, California Dairies Inc., Dairy Farmers of America and Land O’Lakes said the survey could serve as a “mandatory mini-referendum” and “that kind of peril will destabilize the California quota program and diminish producers’ long-term faith in its reliability and thus its overall value.”

The program pays quota certificate holders $1.70 per hundredweight above the state blend price for the amount of milk covered by their certificate. Those certificates are worth $1.2 billion, an asset that can be transferred or sold.

While producers support abandoning the state marketing system and establishing a federal marketing order — hoping to bring their milk prices on par with milk prices across the country — they contend loss of quota value in that pursuit would be a deal-breaker.

The California Department of Food and Agriculture said that unlike the current program, the stand-alone program will be funded by direct assessment from producers and should include a review process consistent with other CDFA programs.

The mandatory producer survey was not removed from the final proposal but the language of continuation of the program being “subject” to a producer survey was abandoned.

While it’s not the same as a mandatory referendum, the survey still brings the quota program under the microscope more frequently than it currently is, AcMoody said in WUD’s newsletter on Friday.

“When producers buy quota, they do so because they feel it is a safe asset — not something up for review every five years,” she said.

That being said, the Producer Review Board has shown dedication to protecting quota, which should help with what the board decides to do with the results of such a survey, she said.

The other significant change in the stand-alone proposal is that producer handlers will now have to pay the quota assessment on milk that was previously exempt from the milk pool.

The plan is now in the hands of the CDFA secretary for review. If things go as planned, producers will receive a ballot on the proposal in October.



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