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.


 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.

Dairyman Xavier Avila on Federal Milk Marketing Order

Continued Federal Milk Marketing Order Hearing Coverage

Kings County Dairyman, Xavier Avila Worked Hard to Get Federal Milk Marketing Order on the Docket 

By Laurie Greene, Editor

Xavier Avila, a dairyman in Kings County, is monitoring the USDA Federal Milk Marketing Order (FMMO) Dairy Hearing in Clovis very closely. “Well, I was one of the ones who pushed for it five or six years ago. It’s kind of dear to me to get it done,” he said.

Avila explained, “As a kid growing up in the sixties and seventies, all my family members who were in the dairy business talked about how bad it was before the orders. Milk needs to be picked up everyday, so it it’s really easy to mess the market up if you don’t pick up a guys’ milk or threaten not to pick it up. So the California marketing order was established to bring order to California milk.”

Avila said the California marketing order worked for many years when dairies across the country were making the same amount of money per hundredweight. But prices are not equal now, and California dairy farmers are getting paid much less than those other parts of the country.

“We set up a solution on end-product pricing. Yet in California, the CDFA was not following the rules. If the rules had been followed, we wouldn’t have a need to go to the FMMO,” said Avila. “But CDFA just wouldn’t follow the rules regarding end-product pricing and the USDA does follow the rules; so it is just a simple matter of going with the people who are following the rules.”

“For the past ten years,” Avila said, “our whey prices have been much less than the national whey price, so the California dairy industry has lost billions of dollars.”  “It’s really simple. There are six pounds of whey per every 100 pounds of milk. Basically for the last few years, whey was 60 cents/pound. Doing the math, 60 cents times 6 pounds; you come up with a total of $3.60 for the whey in each 100 pounds of milk. With the California Milk Marketing Order, we were paid just 25 cents towards that total and the plant kept the rest. The Federal order is basically the reverse; not quite, but almost the reverse.”

Avila is bullish on the California dairy industry’s conversion to a FMMO. “I think it’s going to happen. Nothing is for certain, but the industry is united. Milk is the same everywhere, and I think it is in California dairy farmers’ hands because we are going to vote on this. Whenever you produce the same product and earn far less for it, it is inevitable that something is going to happen.”

Avila noted it will take some time, “but I knew that from the start, it would not be quick and easy. We are looking at anywhere from one to two years,” Avila said, affirming his belief the California dairy industry can hang on for two years. “We’ve got not choice. Now with the drought, there are other crops you can do better with. Some dairy farmers will leave the business just because they have something better to do than milk cows. So we see this as saving the California dairy industry,” Avila said.

Click here to view Video of Xavier Avila, September 22, 2015.