Dairy farmers say price raises help, but not enough

Issue Date: January 30, 2013
By Ching Lee
California dairy farmers will earn a higher price for milk beginning next month in response to higher production costs, though dairy groups had petitioned for a larger increase than enacted by the state Department of Food and Agriculture.

California dairy farmers will earn a higher price for their milk starting next month as a result of a hearing decision made by the California Department of Food and Agriculture, but producers said the new prices are still not high enough to overcome soaring feed costs and other financial woes.

Announced last week, the CDFA decision raises the minimum price the state sets for all five classes of milk for four months—from February to May. The department said the temporary adjustments would amount to an increase of about 25 cents per hundredweight in producers' average monthly pool price for those four months.

Specifically, the changes will increase Class 1 milk prices by 5 cents per cwt.; Class 2 and 3 by 10 cents per cwt.; and Class 4a and 4b by 30 cents.

The department had called an emergency hearing in December and said it would consider temporary changes to the state's milk pricing formula that would last for no longer than six months.

In its decision, CDFA said "the severity and wide reaching effects" of last year's drought, which led to record-high corn prices, "caused extraordinary financial stress to dairies to the point of warranting some level of temporary price relief."

"We welcome the increase," said Lynne McBride, executive director of the California Dairy Campaign, "but we just think it's long overdue, and for a lot of the dairy producers in the state, it's going to be too little, too late because a number of them continue to go out of business."

Her group had asked the department for a six-month increase of $1 per cwt. in the pool price, the highest of six proposals CDFA received. McBride said there's currently about $1 per cwt. difference between what California dairy farmers earn for their milk and what producers in other states receive under federal milk marketing orders.

"What we'd like to do is see our prices be in alignment with prices in those states, so we're going to continue to work toward that end," she said, noting that the California Dairy Campaign favors the state joining the federal orders.

Rachel Kaldor, executive director of the Dairy Institute, which had proposed an 8 cent per cwt. increase to the pool price for three months, said processors would much rather see milk prices be determined by market conditions rather than regulatory intervention. But she said she also understands that the department is trying to "strike a balance between what dairymen need and what processors can pay."

"Obviously, we had asked for less time and less money, but we respect (CDFA Secretary Karen Ross') continual effort to try to keep milk prices in balance so that we don't outstrip our processing capacity, that we don't set ourselves on a course of overproduction and at the same time, we provide processors with a competitive milk price so that they can market products that they make here in California," Kaldor said.

Rob Vandenheuvel, general manager of the Milk Producers Council, said while the price changes will put more money in producers' pockets, they do not address an underlying issue with the state's current milk pricing system, which is to "provide enough money on a long-term basis for our producers for the milk that they're selling."

"What our dairy farmers need is a long-term solution that will result in prices being paid for milk that are competitive with prices paid throughout the country for the same kind of milk," he said. "We need permanent law changes and we need significant, meaningful changes."

One change being considered is for the state to join the federal system, although not all dairy farmers support that idea. Legislation has also been introduced to more closely align the whey value in the state Class 4b formula with the regulated minimum price for whey found in surrounding states.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.