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Proposed Federal Milk Order Moves to Referendum


Published April 4, 2018

More than three years after petitioning the U.S. Department of Agriculture to allow the state to join the federal milk marketing order, California dairy farmers will now decide in a referendum if they want to go that route.

USDA published a final decision last week laying out how a federal milk marketing order, or FMMO, would operate in the state. The decision is identical to what the department proposed early last year. It recommended that the state adopt a federal order similar to the 10 existing orders in the nation, with the same pricing formulas and the same dairy-product classifications.

The proposed order also allows California dairy farmers to keep in place producer quota, a key piece of the current state pricing system. Producers approved a state plan earlier this year to operate a stand-alone quota system if they ultimately decide to join the federal order. The California Department of Food and Agriculture would continue to administer this program as it does today.

USDA's proposed order does not feature everything dairy farmers wanted.

For example, California Dairies Inc., Dairy Farmers of America and Land O'Lakes—the three dairy cooperatives that petitioned USDA in 2015—had sought a federal order that requires mandatory pooling of all classes of Grade A milk, a feature of the current state system. The USDA proposal matched other federal orders in the nation: mandatory pooling for Class 1 (fluid) milk, but allowing handlers the option not to pool milk used in manufacturing.

The proposed order also does not feature transportation and fortification allowances included in the current state system.

Dairy farmers will have until May 5 to weigh these aspects and decide if they support the proposed FMMO. USDA said it is mailing ballot materials to eligible dairy producers. To pass, two-thirds of producers voting, or producers representing two-thirds of the milk, must approve.

"We are relieved to be arriving at this point in the federal order process and look forward to engaging producers in their education of this potential new pricing structure," said Sonoma County dairy farmer Lucas Deniz, who serves as president of Western United Dairymen.

Lynne McBride, executive director of California Dairy Campaign, said her organization has "strongly supported" moving to a federal order system for many years "because we think it'll bring our prices in line with the rest of the country, improve pricing in California and sustain dairies across the state."

She noted that dairy farmers gave a strong signal they want to move in this direction in their voting on the quota implementation plan, which was approved by more than 87 percent of producers who voted in that referendum.

"We just think that was a strong vote of confidence that dairy producers in California want a different pricing system and policy," she said.

A fundamental benefit of joining the federal order, she said, is that the state would have identical milk pricing formulas as other FMMOs. She said having uniform pricing for manufactured products in particular is important because so much of the state's milk goes into making products such as butter, powder and cheese.

On milk pooling, she said farmers did have some initial concerns about how the changes would affect them, but she noted rules built into the proposed order would limit how much milk handlers could pool if they decide to depool and then later want to return to the pool. Such limits, she said, provide some assurance.

One concern some farmers have about being in a federal order is that pricing adjustments under the federal system require a much lengthier process than under the current state system. But McBride said her group thinks this "will bring more stability and certainty" to milk pricing than how the state system has operated.

Understanding how the proposed pricing system may work in the California context will be the focus of much discussion in the coming weeks, Geoffrey Vanden Heuvel, an economics consultant for the Milk Producers Council, said in a newsletter to its members.

"The fundamental question California producers will have to answer is this: Given where we are today as an industry, and what we know of the history of the California state order and the history of the federal orders, which system is likely to provide the best opportunity for a prosperous future?" he wrote. "It is a big decision."

He noted the state's dairy cooperatives will let USDA know in the coming days whether they intend to vote as a bloc on behalf of their members. Under the federal order system, qualified cooperatives are allowed to bloc-vote, even if some of their members might not agree with the vote.

Independent producers will receive individual ballots, as will producers who either belong to cooperatives that don't qualify under a federal order or belong to qualified cooperatives that choose not to bloc-vote. Producers of grade B milk, which is not regulated by federal order, are not eligible to vote on the decision.

McBride said her group supports bloc voting in the FMMO process "because we think it's really important to move ahead in the direction of joining the federal order."

To answer questions about the proposed California FMMO, USDA will hold a public meeting April 10 at 9 a.m. at the Clovis Veterans Memorial District Building, 808 Fourth St., Clovis. There will also be a webcast of the meeting. More information is available at www.ams.usda.gov/rules-regulations/moa/dairy/ca.

Western United Dairymen will host three informational meetings this month to discuss economic analysis of the California FMMO. Those meetings will be held: April 16 at 10 a.m. at the Sonoma County Farm Bureau, 3589 Westwind Blvd., Santa Rosa; April 17 at 9 a.m. at the Stanislaus County Harvest Hall, Training Room Center DE, 3800 Cornucopia Way, Modesto; and April 18 at 10 a.m. at the Tulare Agri-Center Social Hall, 4500 South Laspina St., Tulare. RSVP by emailing molly@westernuniteddairymen.com, or by calling 209-527-6453.

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