Federal Milk Marketing Order in California in Effect Nov. 1

Questions Arise Regarding Milk Quota

Edited by Patrick Cavanaugh

Dairymen and women throughout California are working hard to provide milk and other dairy products for consumers in California and the world. Because the industry has struggled over the past decade with price swings that have often landed dairies in red, many dairies have gone out of business. Still, other operations relocated to others states where regulations are a fraction of what they are in California.

In June 2018, California dairy producers voted to establish a new Federal Milk Marketing Order (FMMO) for the state. The vote was a paramount step in a long process that would culminate with the new order taking effect on November 1. The order will adopt the same dairy product classification and pricing provisions currently used throughout the FMMO system.

California accounts for more than 18 percent of U.S. milk production and is currently regulated by a state milk marketing order administered by the California Department of Agriculture (CDFA). Once this new FMMO takes effect, more than 80 percent of the U.S. milk supply will fall under the FMMO regulatory framework.

Western United Dairymen is a trade association based in Modesto. Annie AcMoody is the Director of Economic Analysis. She explained that there have been questions from the industry regarding the upcoming FMMO.

Among the often asked question revolves around when the state switches to FMMO in November, what will happen to their quota if a dairy ships milk out of state?

Annie AcMoody: When our California state system goes away to make way for the Federal Milk Marketing Order (FMMO) in November, the Quota Implementation Plan (QIP) will be the language in place to ensure the quota system’s smooth transition into the FMMO system.

When we enter that new world, all market milk received from California producers at a California plant will be assessed for quota. By “received”, the language defines “to convey milk physically into a milk plant where it is utilized within the plant, or stored within such milk plant and transferred to another plant for utilization. This means that a milk truck driver cannot drive by a plant, wave hello to an operator, and keep on going out of state and still call this milk received in California. Basically, if your California milk leaves the state, you will not be assessed for quota.

But you also will not be paid for it. But, if your milk is 60% quota and only 40% of your milk goes out of state, you will be assessed on 60% of your milk and get paid quota on that same 60%. If your quota covers 100% of your milk and 40% of your milk goes out of state you will be assessed on 60% of your milk and get paid quota on that same 60%. In this instance, one could wonder if it makes much sense to keep your quota.

While it may not make much economic sense to hold on to quota you are not paid for, some reasons may validate that decision (perhaps it is expected milk will be shipped to a California plant in the near future). If you were to decide to hold on to that quota, it is important to keep in mind that “if quota is not made active by shipments of market milk to a California plant or cooperative association or is not transferred within the 60-day period, such quota shall revert to the Department”.

This excerpt from the QIP means that if your quota milk is not paid on for over 60 days, you will lose it, so you better sell it. This is likely going to be an issue if you ship to a proprietary plant and all your milk goes out of state. If you ship milk to a cooperative, there is more flexibility because that coop has the ability to combine quotas assigned to it by its members.

So as long as the quota total within the coop is not larger than the total amount of market milk produced and received in California, then there should be no issue for you as a quota holder.

What 
is 
defined 
as 
market 
milk?


Answer:
 Grade A milk.

If your milk is Grade B, you cannot have quota now and will not be able to under the QIP. You will not be assessed for it either. Currently, only around 3% of the milk in California is Grade B. WUD will keep an eye out on this topic to ensure that percentage does not deviate significantly. As a reassurance, this is not something that could grow from 3% to 50% in a month since fluid milk is not allowed to take in Grade B milk and the three largest coops in the state (CDI, DFA and LOL) committed to not taking in any more Grade B milk after the transition to the FMMO.

Hilmar Cheese Company Unveils Largest Dairy Mural in the U.S.

Scoop it Forward Event Collects Food for Hilmar Helping Hands 

News Release

Hilmar Helping Hands received thousands of food items on July 13 as part of a “Scoop it Forward” event to celebrate the official unveiling of the largest hand-painted dairy mural in the United States at the Hilmar Cheese Company Visitor Center.

Hilmar Cheese Company owners, employees, local officials and the community brought non-perishable food items to donate in exchange for a scoop of delicious ice cream made with Real California Milk as part of the mural celebration, which honors the partnership between the dairy industry and the local community.

“Dairy farm families are the backbone of many of our local communities,” said Jenny Lester Moffitt, California Department of Food and Ag Undersecretary. “But their impact goes well beyond that. They benefit the entire state—economically and by providing wholesome, affordable dairy foods.”

The mural is part of a national effort to celebrate the contribution of dairy farms and farm families to local communities. The Hilmar Cheese Company Visitor Center was selected by the Innovation Center for U.S. Dairy as one of seven locations across the nation to feature a custom mural as part of the Undeniably Dairy campaign. Undeniably Dairy is an industry-wide, national campaign that aims to increase consumer trust in the practices, principles, and people behind the dairy foods people know and love.

Standing 32 feet tall by 60 feet wide, the mural is a creation of muralist Ed Trask of Richmond, Va. The mural creation used 22 gallons of paint and 273 different colors. It depicts the Hilmar Cheese Company’s founding principles of farmers, family, community and faith—and its passion for Jersey cows. It also depicts a child’s journey from experiencing the visitor center as a youth and showing cows to discovering her devotion to dairy and pursuing a career in dairy innovation and research.

“This mural represents our values and foundation,” said Jim Ahlem, chairman of the Hilmar Cheese Company Board of Directors. “We are grateful to our local communities, our employees, the wholesome dairy foods we produce, the next generation of agricultural leaders developed through 4-H and FFA, and of course, the dairy farm families who ship their milk to us and the Jersey cows that produce it.”

“We appreciate that we were selected as one of the mural locations,” added David Ahlem, CEO and President of Hilmar Cheese Company. “We have thousands of families and school children visit each year. It’s important that people understand where their food comes from, and we hope this mural will bring a new connection to dairy.”

Dairy Prices Still Low

UC Davis’ Bees Butler on Low Dairy Prices

 

By Laurie Greene, Editor

 

As previously reported, the dismal below-production-costs dairy prices in California—the #1 dairy state—as well as in the rest of the nation, emanate from excessive inventory and slumping sales, particularly in the export market.

Leslie (Bees) Butler, a UC Davis Cooperative Extension specialist and lecturer in the Department of Agricultural and Resource Economics, explained why dairy producers don’t cut back on milk production. “It is easier said than done,” he said, “and for many producers, it comes down to an income problem. Most production units are set up on a certain sort of ‘scale,’ if you like. So if I am all set up ready to milk, let’s say, 800 cows, or 1000 cows, and then you come along and tell me, ‘Well, you ought to reduce it a bit.’”

“Quickly, I, the dairyman, have to think of what I can do,” said Butler. “There may be a couple of things I can do. First, I can get rid of some cows, my lowest producing cows. You can do that, but it would be a temporary solution to the problem. The second is don’t add those high-producing heifers back into the herd, but they are the most efficient cows. So as you do add them in, you have to cull more lower-producing cows. Many heifers are much better producers than their mothers, so it just reduces the lifecycle of the poor mom.”

“And of course, cash flow in the dairy business is so important,” emphasized Butler. “You know there is a limit to how much a dairy farmer can reduce his income without impacting too seriously his ability to pay off loans, etc.”