Federal Milk Marketing in CA May Increase Prices

Federal Milk Marketing Order to Help CA Dairies

By Melissa Moe, Associate Editor

California is getting closer to being included in the federal milk marketing order. The state has been operating on its own state order for decades. Up until the past few years, most producers have been content in operating under a state system. However, recently California has been failing to keep up with prices that are being paid for milk in other parts of the country.

Rob Vandenheuval is the Manager of the Milk Producers Council, with offices in Ontario (CA), Bakersfield and Turlock. The Milk Producers Council is a nonprofit that represents the California dairy industry.

“We’ve made a lot of progress, and we’re looking forward to, hopefully, an announcement out of the USDA sometime early this year. The next step would be the first draft of what that order would look like and the opportunity for the industry to then comment on it,” Vandenheuval said.

Producers believe that inclusion in to the federal order is going to result in California producers getting a milk price that’s more in line with the prices that are paid all over the country. This level playing field will help producers compete in the national market.

“We’re competing. We’re not on an island. We are part of the U.S. National Domestic Dairy Industry, and we compete with dairy farmers in Arizona and Washington and Wisconsin and Florida and New York. So, we need to update our regulations that oversee our milk pricing to keep them in line with what’s going on in the rest of the country. Rather than try to mimic what the federal order’s doing, it seems prudent to actually join the federal order system,” Vandenheuval said.

However, inclusion into the Federal Milk Marketing order may still be a long way off. California’s inclusion may be many producers’ saving grace, but it may not come soon enough to save producers that are struggling to stay in business today.

“We’re not going to get on that level playing field we talked about with federal order until sometime in the 2018. There’s a lengthy process and a vote, and then, even once it’s implemented, once it’s approved, it has to be implemented here in California, so that is more than a year away before that all gets shaken out,” Vandenheuval said.

The end of 2016 saw milk prices in an upswing, and many producers are hopeful that the rise in prices may be enough to keep them in business for the time being.

“Feed costs have been modest, and so with some additional strength in the milk prices, I think we could at least see a 2017 that is profitable as opposed to what 2015 and 2016 represented,” Vandenheuval said.

Keeping the California Dairy Industry Afloat

The Necessity of Keeping the California Dairy Industry Competitive

 

By Brian German, Associate Broadcaster

 

 

Anthony Raimondo, an attorney with 15 years of experience working with farmers and farm labor contractors, is concerned the California government is placing the state’s agricultural industry at an economic disadvantage compared to other states. Raimondo used the California dairy industry as a prime example in which arbitrary in-state legislation is giving other states an advantage.
dairy cows

 

“The state government tells the dairy farmer how much they get to charge for milk,” explained Raimondo. “They have now raised minimum wage and overtime, with AB-1066 becoming law, but they do not tie any of that [added cost] to the milk price. Farmers will lose money,” he said.

 

“The California dairy industry is still fighting to be a part of the USDA’s Federal Milk Marketing Order (FMMO),” Raimondo continued. “But until that happens, the added costs are causing many California dairymen to weigh their options.”

 

Increasing government regulation is making it difficult for California dairies to compete with other states, Wisconsin in particular. Raimondo elaborated, “For many years, Wisconsin’s milk production was on the decline and California’s milk production was on the rise; that trend has now reversed. Wisconsin is now on the rise again and California is on the decline because our dairies can’t make it with the level of regulation and the level of cost,” he said.

 

“Some dairies have reduced hours to keep costs low,” said Raimondo. “Other dairies are closing either because they are going out of business or because they are moving to places like Idaho and Texas where the milk price is better and the cost profile is more favorable.”

 

The move to a FMMO would help even the playing field for California dairies. Raimondo warned there is a lot at stake if nothing is done to lower milk production costs in the number one Ag state. “We are going to lose a segment of agriculture that is 100% family farms. Family farming is one of those things that is precious to our state, and it can’t be brought back once it’s gone,” Raimondo said.

Vandenheuvel Justifies FMMO in CA

Vandenheuvel Justifies FMMO in California

By Charmayne Hefley, Associate Editor

This Federal Milk Marketing Order (FMMO) hearing in Clovis, now in its seventh week, still has more ground to cover before it wraps up. Rob Vandenheuvel, general manager of the Milk Producers Council (MPC), reflected on the current California Marketing Order, “We’ve been operating under a separate system for many, many years. And while that may have worked for a good chunk of that time, in recent years, we’ve seen that the California system has not kept up with prices paid for milk in other parts of the country. So we’re trying to get on an even playing field.”

Vandenheuvel said resistance to the FMMO has come mainly from those who currently purchase California milk. “They’re not interested in a system that would require them to pay more for their milk,” he said. “They’ve had a pretty good deal in California, so they’re trying to protect it.”

He said some minor resistance comes from non-California dairymen concerned their prices could decrease should California join the FMMO. “There was talk earlier in this hearing that if dairy farmers in California were put on an even playing field and had more money paid for their milk, would they increase production? What impact might that have on the overall market?”

“When you look at California and the competition for land from pistachios and almonds,” Vandenheuvel said, “dairy is not the only agricultural interest here. So competition for land and competition for water are really going to put a lid on future growth—no matter what the dairymen get paid.”

Significant LossesMilk Producers Council

Vandenheuvel said the state’s current system has caused a significant profit loss for dairymen in California. “Our milk going to cheese plants is the largest class of milk sold in the state, but it’s still 45 percent of the total milk production. So, the state cheese price is less than the Federal price on that 45 percent of milk. The difference is a shortfall of nearly $2 billion since 2010 for the California producer.”

Vandenheuvel said when all dairies in the United States slumped in 2009, those outside of California were better able to recover under the FMMO than those inside under the CSMO. “When you look at the peaks and valleys that the dairy industry has gone through, we’ve had years like 2009, which was the worst ever,” Vandenheuvel said, “and 2012 was probably the second worst ever due to high feed costs. Most of the rest of the country recovered in the months and years following 2009 and then again 2012.

“California is still reeling. If we had sold off assets, we really haven’t recovered to where we were before 2009. So that $2 billion divided by the 2,000 dairymen that existed at that time in California was the difference between catching up and netting a profit. But actually happened, is that the industry has never recovered the losses, even after a few good years,” he noted.

Out-of-State Dairies Object to Federal Order

Vandenheuvel said that many California dairymen are looking to become part of the FMMO to get on a level playing field with the rest of the country’s milk producers. “If you buy into the theory that California dairymen got a fair price for milk will increase milk production and that would have a negative impact on the rest of the country,” Vandenheuvel said. “The best thing to happen to the rest of the country would be for California to go completely broke and shut down our entire dairy industry because they would be better off because we’d have twenty percent less milk in the whole country. That’s why I don’t think that those concerns are really strong. This hearing is more about the sellers of milk getting a fair shake and the buyers of milk not wanting to pay that fair shake.”

Vandenheuvel said that the way the dairy industry works—with milk spoiling each day—the government had to get involved in order to prevent buyers from refusing to buy one dairy’s milk and significantly devaluing the price of milk. “Cows don’t produce Monday through Friday only; there is no on or off spigot,” Vandenheuvel said. “So when you have a product that is being produced and piled up every day and has to be sold every day to a group of buyers who don’t have to buy every day –and they don’t have to buy from you—you’re at a huge disadvantage negotiating a fair price for that product.

“Imagine going to a car dealership where they had to sell a certain amount of cars that day or the vehicles would literally spoil, go bad and be worthless,” he noted. “You would have a great position to buy a car. That’s where we are, and that’s why the government got involved, said milk is important and we know dairymen are at a disadvantage. So we’re going to play referee between the two parties. Our problem in California is that that referee has been much more on the side of the processors keeping a low price in California.”

Two Main Proposals

Vandenheuvel said that two major proposals have been submitted to the USDA—one from the dairy-farmer-owned cooperatives and the other from the manufacturers. He said the USDA would decide upon the final proposal that will be voted on by producers.

“Manufacturers do not vote on Federal orders,” Vandenheuvel said, “It’s a producer vote. So it really comes down to the USDA. We think we’ve put together—as a producer coalition—a very sound, comprehensive approach of going to a FMMO while still respecting some of California’s issues—like our quota program; our transportation program.”

Vandenheuvel explained that it was very difficult to get the USDA to hold a hearing on the Milk Marketing Order. “We had to basically exhaust every alternative option in the state system,” he noted. “We tried a dozen hearings over the last ten years. We’ve tried legislation in California. We’ve tried suing the Secretary of Agriculture in California. We’ve tried protests and rallies on the steps of the capitol in front of CDFA, and at the end of the day last year our milk prices, compared to the rest of the country, had a bigger gap than we’ve seen in the last ten years.”

Vandenheuvel said the CDFA could have easily addressed many of the issues that caused milk producers to fight for a FMMO. Nevertheless, one issue, the CDFA could not have regulated for producers is interstate commerce. “That’s big for a state like California,” Vandenheuvel said. “We’ve got 35-40 million people here who drink milk and we’ve had situations in the past and currently in which milk is moving into California just to take advantage of the fact that California can’t do anything about it. Only a FMMO can regulate interstate commerce because of the way the constitution is drafted.”

Vandenheuvel said he hopes to see a recommended decision on the order by the middle of next year.

 

Historic Milk Pricing Hearing in Clovis

Historic Milk Pricing Hearing in Clovis:

Converting California to the Federal Milk Marketing Order

By Patrick Cavanaugh, Deputy Editor

In Clovis last week, an historic USDA milk pricing hearing commenced to gather testimony from the California dairy industry, which for the most part, favors changing to the Federal Milk Marketing Order (FMMO). This represents an abandonment of the state marketing order which has been harmful to dairies since it was altered 10 years ago to disallow dairies from getting paid the same price for their milk and whey products.

William Francis, director, USDA Order Formulation and Enforcement, is involved in the formal rule-making process for marketing orders. Francis commented, “There’s been tremendous interest in a federal order for California and we are holding a formal rule hearing for the promulgation of a California FMMO. This is an historic event. For years, the state has operated a program. But, farmers have gotten together and invited us to come in for the state’s hearing.”

The hearing could last as long as eight weeks to review each of four proposals. Francis noted, “We are here as long as it takes. We want to make sure we have a complete and accurate record so there are no time constraints,” He said the USDA will post a transcript on their website, filter through all of the documentation and make a recommendation.

A comment period with a sufficient amount of time will follow the public announcement of the USDA decision. “Then we will generate a modified final decision,” Francis said. “By the time we complete that process, farmers will have the opportunity to vote on the modified decision through a referendum process, which could be up to two years away.”

USDA Federal Milk Marketing Order (FMMO)

Industry Information Request postings

All of the proposals can be viewed at www.ams.usda.gov/CAOrder.