Pricing disparity upsets producers; higher prices sought


Capital Press

California dairymen aren't happy with the California Food and Agriculture Department's decision to deny a hearing on the whey value in its minimum pricing formula for Class 4b milk going into cheese vats.

California dairymen aren't getting the value in their milk check that dairymen in federal milk marketing orders are seeing, with as much as a $2 per hundredweight of milk disparity, producer organizations and dairy co-ops say.

Western United Dairymen filed a petition for a hearing Dec. 2, and the Department denied the request on Dec. 15, stating lack of data.

"Of course, I'm not very happy," said Michael Marsh, executive director of Western United Dairymen.

The department's reason was weak, he said, adding he could provide the department 10 years of data.

Dairy groups were granted a hearing on the issue last summer. The department did rule to replace the fixed value of 25 cents per hundredweight of milk with a sliding rate between 25 cents and 65 cents, based on the Western dry whey price.

The new sliding scale went into effect Sept. 1, providing the department with only three months of data, not enough to determine how the current formula will perform, said Kevin Masuhara, director of the department's Division of Marketing Services, in his Dec. 15 response to Western United.

Since the new sliding scale went into effect, the California whey value has averaged $1.75 per hundredweight less than that value in federal orders, Marsh said.

"It's a huge disparity. That disparity drove us to file the petition," he said.

Just in the last three months with the new Class 4b price in play, the difference in California's whey value compared with the Class III value represents $80 million, said Rob Vandenheuvel, manager of California Milk Producers Council.

"This is a huge problem. We're talking vast amounts of money," he said.

Ninety percent of milk going to cheese plants is producing high-value whey products, and that value is not being passed on to producers, he said.

"I don't see how you justify not having a hearing to fix those inequities. It doesn't matter if they had a hearing six months ago; they didn't get it right," he said.

Western United, Milk Producers Council and Dairy Farmers of America all quoted state code in their support of a hearing. That language states the formulas "shall be a reasonably calculated to result in prices that are in a reasonable and sound economic relationship with the national value of manufactured milk."

That is clearly not the reality, Vandenheuvel said. The department has no choice but to hold a hearing, he said.

Formally opposed to a hearing were the Dairy Institute of California, which represents processors Farmdale, Saputo, Hilmar and Kraft Foods.

Dairy groups can sue the department, but there is little likelihood of success, Marsh said. In similar cases, it comes down to the matter being at the discretion of the ag secretary, and the courts have determined that discretion to be broad.

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