California dairy

A California dairy. Farmers are debating the value of the state’s quota system.

Two years ago, most of California’s dairy farmers were united in retaining the state’s quota program — a crucial component in their efforts to secure votes to join the federal milk marketing order system.

Today it divides them.

The quota system came about in the late 1960s as a means of compensating milk producers selling into the higher-value Class 1 fluid market to gain their support for establishing a state marketing order that would pool milk and distribute payments more evenly to producers across all utilizations.

Quota programs don’t exist in the federal order system, but USDA allowed California’s quota program to continue as a stand-alone administered by the California Department of Food and Agriculture. California’s dairy farmers overwhelmingly approved the state’s Quota Implementation Plan in January 2018.

Under the plan, the state assesses all grade A milk producers 38 cents per hundredweight (on standard components) and redistributes that money to quota holders. It pays up to $1.70 per hundredweight above the state blend price for the amount of milk covered by quota certificates.

The program runs pretty much the same as it has for the past 50 years, but it has fallen out of favor with producers who now realize how much they’re paying into the program — many with no return.

Milk producers have always paid the assessment. But before California joined the federal order system, it was taken off the top of the pool and producers never saw the deduction on their milk checks.

Joining the federal order brought more transparency to producers’ milk checks, and the assessment is clearly listed — and that’s brought unrest, said Travis Kamper, a member of United Dairy Families of California.

Producers are paying the same amount they did before, but now they see it and they don’t like paying that much money for the program, he said. They pay a total of about $12 million a month and have to own quota on 22% to 25% of their milk production to break even, he said.

But it’s more than a cash flow issue, it’s also an asset issue, he said.

In the 10 years before the change to the federal order system, the quota averaged $480 (per pound of solids-not-fat), he said.

He said family, friends and neighbors are on both sides of the quota issue, and it can be divisive.

United Dairy Families was started to create a platform to get a consensus in the dairy industry on the quota’s future. Joined by three dairy cooperatives and the Stop QIP Dairy Tax Coalition, UDFC has held a series of meetings to solicit and analyze industry input to come up with a proposal that a majority of the industry will support.

Kamper said UDFC doesn’t have the solution but would oppose a proposal that would eliminate quota without compensation.

Stop QIP, however, is calling for the elimination of quota. The program holds no benefit for non-quota holders or those who hold quota certificates on less than 25% of their milk production. In addition, it only benefits about 300 producers at the expense of everyone else, the coalition contends.

Stop QIP filed a petition with CDFA in April (before the collaborative meetings began) for a referendum to terminate QIP. That petition was denied. It also filed a lawsuit against CDFA in California Superior Court last month asking the court to vacate QIP.

Stop QIP declined to comment.

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