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California producers and processors discuss marketing orders

Cecilia Parsons Published on 29 October 2012

Looking for another avenue to price relief, California dairy producers and processors gathered in Tulare Sept. 20 to explore federal milk marketing orders.

What they learned about the complicated and challenging process of proposing and securing a federal order prompted numerous questions – many of which could not be answered. A question and answer session also revealed doubt that enough producers and processors could agree on all aspects of an order which must be voted in by a two-thirds majority of producers and processors or producers and processors representing two-thirds of milk production.

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Sponsored by producer group Western United Dairymen , the meeting drew about 200 people curious about a process they see carried out in other states but not in California.

Dairy producers in California contribute 20 percent of the nation’s milk supply but remain outside a federal marketing order. Federal milk marketing orders require regulated milk handlers to pay minimum prices for milk and have other specified rules. Nationally, there are 10 federal milk marketing orders, affecting about 60 percent of all milk marketed in the U.S.

California has its own order but there is a lot of frustration with the current price structure, said Mike Marsh, executive director of Western United Dairymen.

With the failure of the California Department of Food and Agriculture to raise the Class 4b price to a level found in regions with federal MMOs, the California dairy industry is exploring the possibility that a federal order can be established.

The 14-months-long process might bring about better prices for struggling producers, according to Rob Vandenheuvel, general manager of Milk Producers Council . The Ontario-based industry group filed suit in August charging CDFA failed to follow the law by refusing to bring that state’s Class 4b milk price in alignment with the price paid in other states with federal orders.

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CDFA Secretary Karen Ross has called for formation of a Dairy Future Task Force to make recommendations for changes to the milk pricing structure. In a statement, Ross said short-term price adjustments were not long-term solutions for the dairy industry in California.

In his presentation, Bill Wise, USDA market administrator for the Pacific Northwest and Arizona, highlighted what marketing orders can and cannot do, rules of pooling and depooling and the hearing process.

Federal milk marketing orders classify milk according to use, conduct impartial audits, verify weights and tests, regulate interstate commerce and provide market information. What they don’t do, according to Wise, is regulate producers, guarantee markets or prices.

Understanding the differences between the California milk marketing order and a federal order had left many dairymen in the audience scratching their heads. Leaving an order that has been in place since the 1930s for a new set of rules leaves a lot of difficult details to be ironed out.

What would happen to California’s quota price, blended price, standards for milk quality and other aspects of the current state marketing order if it was replaced by a federal order, sparked numerous questions by producers.

Industry panelists Annie AcMoody of WUD, Eric Erba of California Dairies Inc ., Tom Wegner of Land O’Lakes and Bill Van Dam of Alliance of Western Milk Producers – along with Wise – answered some but not all audience questions. For specifics, they were referred to the Order Formulation Branch of FMMO.

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AcMoody said it was not a simple comparison between the current state order and a federal order. There are many intricacies and qualifying aspects beyond milk prices that make comparisons difficult, she said.

Details of FMMOs presented were important for producers to hear, said WUD President Tom Barcellos.

One cited by Vandenheuvel was the length of time it took for FMO hearing process. That is due to cross-examination, he said, and is important because it tests the decisions. Cross-examination is not part of the state process, he said, but “quick doesn’t always mean good.”

Dairy producers took in a lot of technical information at the meeting but burst into applause when they heard Tulare dairy producer Cornell Kasbergen say that California is losing $1 million a day in milk revenue because “somebody doesn’t want to lead.”

Kasbergen, who also has a dairy in Wisconsin, said dairies there receive $3.75 more per cwt than California producers due to price differences between the federal orders’ Class III level and the state’s 4b price.

“It’s a road we need to go down,” said Kasbergen. He noted that three large milk cooperatives have written a letter to Congress asking that California be included in a federal order with quota.

That is the first step in the process, he said. After putting the order together and holding hearings, he said producers could vote to enter the marketing order or reject it. PD

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