Dairymen and their co-ops have sought to correct spread
By CAROL RYAN DUMAS
Legislation to bring California's milk-pricing formula for milk going to cheese vats more in line with prices paid for similar milk across the country has advanced in the California Assembly and is now up for review by that body's Ag Committee.
The bill, AB31, takes aim at the value of dry whey in the state Ag Department's formula for setting minimum prices for Class 4b milk.
"We're very happy that it's moving, that's the first step," said Michael Marsh, CEO of Western United Dairymen.
Western United has been in discussions about the legislation and the issue with staff of both Assembly and Senate Ag Committee members, and passage of the legislation looks very good, he said.
The bill needs to get passed in the Assembly Ag Committee then on the floor and has to go through the same process in the Senate, but Western United is very positive, he said.
"We're ready to role," he said.
The issue has been at the forefront since January 2010, gaining heat as the spread between Class III prices in federal marketing formulas and Class 4b widens and California dairyman struggle to stay afloat.
That spread has represented about a $2 per hundredweight discrepancy for the last two years, Marsh said.
The bill, introduced in early December by Assemblyman Richard Pan of Sacramento, would require the dry whey value in 4b pricing would be no less than 80 percent of its value in Class III pricing in federal orders.
At a value of $2 per hundredweight in federal orders, that would translate to an additional $1.60 per hundredweight to California's milk pool and to dairymen.
Dairymen and their co-ops have sought to correct the inequity through the California Department of Food and Agriculture to no avail. Hearings on the matter have produced little results in that arena.
Western United decided to take the legislative route last fall and drafted the bill introduced by Pan, Marsh said.
The bill would help correct the pricing inequity, but the real push is for a federal milk marketing order in California, said Tom Barcellos, Western United president and a Porterville producer.
"Some will argue that inequity," he said.
There will be processors who don't want to pay the higher price for milk and think they shouldn't have to participate in the milk pool, he said.
"Pooling has helped build plants and made the industry what it is," he said.
Those processors have benefited from pooling, and if they don't want to participate, they shouldn't receive the benefits, such as make allowances, he said.
The bill does contain an exemption for small processors, such as farmstead cheese makers, that would address the concerns that higher milk prices would put them out of business and harm processing capacity in the state, Marsh said.
Unlike the state's large cheese plants, small manufacturers don't run whey-processing streams to produce higher value products and don't realize the value of that whey, he said.
That's been a challenging issue, but the legislation takes that off the table with a dry whey credit for up to 264,480 pounds of milk per month, he said.
Milk Producers Council has been vocal in its battle to raise the whey value in 4b pricing, calling Secretary Ross on the mat repeatedly and joining other producer groups and co-ops in filing a lawsuit against her in August of 2012.
The price discrepancy between 4b and Class III in January was $2.30 per hundredweight, conservatively representing $30 million that processors didn't have to put into the California pool, said Rob Vandenheuvel, manager of Milk Producers Council.
Since January 2010, that "discounted" milk represents more than $745 million, more than $440,000 for an average California dairyman milking 1,000 head, he said.
Whether the remedy is legislation or a federal milk marketing order, it can't happen fast enough for California dairy families that are in desperate need of a fair price for their milk, he said.
A hearing on AB31 will likely take place mid to late March, Marsh said.