Processor group says lower rates justified by climate, rules

By CAROL RYAN DUMAS

Capital Press

The debate is growing louder between dairy producers and cheese manufacturers in California over the state's pricing of milk for cheese.

Organizations representing dairy producers contend the value of whey in the pricing formula is too low and does not reflect its value in federal milk marketing orders.

Dairy groups have filed petitions with the California Department of Food and Agriculture requesting it hold a hearing on the matter. Cheese processors have requested the department deny a hearing.

The issue has forged an unprecedented coalition of dairy farmers, representing 80 percent of the milk produced in California, said Rob Vandenheuvel, manager of the California Milk Producers Council.

The Milk Producers Council, the Alliance of Western Dairy Producers, California Dairy Inc., California Dairy Campaign, Dairy Farmers of America's Western Area Council, Land O'Lakes, and Security Milk Producers Association filed the petition for a hearing.

California's code states milk prices must have a reasonable and sound economic relationship to the national value of milk.

California's 4b price is more than $2 per hundredweight below the comparable price around the country, and Vandenheuvel doesn't know how anyone can "make an argument with a straight face that that is reasonable," he said.

Dairymen are currently losing $35 million a month because the state discounts the price of milk to cheese processors, he said.

The Dairy Institute of California, representing processors, filed a lengthy letter with the department outlining the differences between milk markets in California and the rest of the country.

It characterizes those calling for a change as zealous "agitators," who either "misunderstand or misrepresent the comparability of the two price series."

They say that while California plants get lower prices for their cheese, they serve a more commodity-oriented market, with cheese that is sliced or shredded and repackaged, where plants in the Midwest handle more bulk product. In addition, California producers have a lower cost of production and the cost of processors doing business in California are higher than in most other states, the Institute stated.

Western United Dairymen's Association also filed a petition, its second in three months.

"Producers are struggling here as elsewhere with feed costs so high and milk prices soft. We simply have to get the whey value fixed in our cheese formula," said Michael Marsh, Western United's executive director.

Both Western United and the coalition are proposing a new sliding scale capped at $4 per hundredweight.

Farmdale Creamery and Rizo Lopez Foods also wrote letters saying they are already facing challenges with the department's Sept. 1 increase in the whey value, which changed from a flat 25 cents per hundredweight to a sliding scale capped at 65 cents per hundredweight. Any further increase would render them unprofitable, they stated.

"Quite frankly, it's a lot of rhetoric," Vandenheuvel said.

What matters at the end of the day is the legal issue of a reasonable and sound economic relationship to the national value of milk, he said.

"All the rhetoric in the world is not going to get around that," he said.

California's Ag Secretary Karen Ross has until March 16 to order a hearing or deny the petitions.

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