Increasing minimum price would stabilize industry, groups say
By CAROL RYAN DUMAS
Two California dairy organizations are calling on the state's Department of Food and Agriculture for financial help.
Western United Dairymen and The Alliance of Western Milk Producers have asked state ag secretary A.G. Kawamura to raise the minimum price of milk and have petitioned for a hearing.
"Dairymen in the state of California have been in a very tragic financial position for over a year," said Mike Marsh CEO of Western United Dairymen. "They've been losing money hand over fist for over a year."
The alliance is asking for a permanent Class I price increase of 50 cents a hundredweight and a permanent increase in Class II and Class III of 26 cents per hundredweight -- the amounts they were reduced in 2008. But Western United Dairymen has stated more assistance is needed and called for an increase of 50 cents per hundredweight on all milk from January 2010 to June 2010.
The timing of the petitions is in response to moderately improved markets, Marsh said. Now that markets are starting to turn around and feed costs are declining, raising the price of milk could help stabilize the industry, Marsh said. While markets are starting to improve, "prices aren't likely to come up fast enough or high enough to replace the amount of equity lost in the past year."
Marsh estimates 10 percent of the state's dairymen have gone out of business this year. Of California's 1,750 commercial operations, he expects 1,600 will survive by the end of 2009.
"The board of directors wants to be sure at least some of their neighbors are left at the end of the year and some of their neighbors are there into the future," he said.
Bill Van Dam, executive vice president of The Alliance of Western Milk Producers, was out of the office this week and could not be reached by phone. But in his hearing request, Van Dam said conditions that led to the price decrease in October 2008 have changed and a hearing on the matter is warranted.
"The overriding concern held for the California dairy industry throughout much of 2008 was the imbalance of milk supply and processing plant capacity," he wrote.
That is not the case today, following 11 months of decreases in milk production. Processors are no longer actively limiting the amount of milk being produced, he said.
Van Dam stated the year-over-year August milk supply declined 6.1 percent, by 6.8 million pounds a day.
"That is equivalent to 120 tanker loads per day less milk than was being produced in July 2007," he wrote.
Nearly all of the conditions that justified a reduction of Class I prices a year ago have changed, and the alliance believes it is time to correct the existing pricing inequities, he said.
Staff writer Carol Ryan Dumas is based in Twin Falls. E-mail: email@example.com .
The California Department of Food and Agriculture has set a public hearing for Nov. 9, 8:30 a.m., at the department auditorium, 1220 N. Street, Sacramento, to consider the petitions.
Western United Dairymen: www.westernuniteddairymen.com .