Capital Press

The California Department of Food and Agriculture has denied a petition for a hearing to consider a temporary, emergency milk price hike of 50 cents per hundredweight.

Western United Dairymen had petitioned the Ag Department to raise the minimum price of milk for all uses for a period of six months from October through March 2013.

The petition also asked for another look at the whey value in Class 4b milk prices and proposed a volume exemption on the whey component in the formula that might appease small cheese makers.

The department denied the petition on all points.

"We're disappointed of course," said Michael Marsh, CEO of Western United.

The organization was well aware of some of the concerns with its proposals, but had hoped to be granted a hearing to flush out some of those issues, he said.

In his response to the petition, Mike Masuhara, director of CDFA's marketing service, stated that Western United itself acknowledged that a 50-cent temporary price increase would not make dairy margins positive again.

The emergency price increase would not make producers whole, but it could have helped them cash flow and pay their bills for a couple of months, Marsh said.

"Fifty cents won't get us there, but it may help keep some people in business until we get some price relief," he said.

Producers are struggling to pay their feed bills, and feed companies are demanding advance payments and cash on delivery, he said.

It's something the secretary could have done, and on some dairy products, such as fluid milk, soft products and ice cream, that increase could have quickly and easily been passed onto consumers, he said.

There were some concerns about an increase to manufacturers of other products, such as cheese, butter and powder, who can't quickly or easily pass along the increase. But that was one of the issues Western United was hoping to flush out.

Mashuhura said CDFA Secretary Karen Ross has stated her commitment to finding long-term solutions to the problems facing dairy families. But, he said, "current fluctuating feed costs and milk prices combined with the short period of time since our last decision makes it premature to convene a hearing at this time."

On July 20 CDFA slightly raised the whey value in the state's Class 4b formula. But, Marsh said, it is still grossly inadequate and falls far below the value in federal order formulas, Marsh said.

Western United also again petitioned to raise the whey value. It proposed replacing the current whey factor sliding scale with one that caps at $4 per hundredweight of milk instead of the current cap of 75 cents per hundredweight.

That proposal was considered during a CDFA hearing on May 31 and June 1 and was rejected. Circumstances since that hearing and decision have not altered to the extent that requires reconsideration, CDFA stated in its response to Western United's petition.

Western United attempted to resolve the hearing panel's concern with raising the whey value by proposing an exemption from the whey component on the first 100,000 pounds of milk processed daily.

The concern was that small cheese manufacturers with no capability to process whey and reap the economic benefit couldn't afford the higher cost of raising the whey value in milk. That, in turn could put those manufacturers out of business and lead to a processing capacity issue in the state.

"I thought we had a shot at that," Marsh said.

CDFA, however, said it doesn't have the authority to implement such an exemption. Western United's legal counsel, who drafted the state's milk marketing order, is perplexed about that and thinks the Secretary does have that authority, Marsh said.

Western United has asked CDFA for a legal position on the matter. If indeed the secretary does not have that authority, the next step is to provide it through the Legislature, he said.

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