Dairy producers reject effort to end state milk pool quota

By Ching Lee

A producer referendum to end the state’s milk pool quota, known as the quota implementation plan, or QIP, has failed, the California Department of Food and Agriculture announced earlier this month.

Of the 63.76% of eligible producers who voted in the referendum, 40.46% voted in favor of terminating the QIP, short of the 51% needed to pass, CDFA reported. Those who voted in favor represent 47.55% of the fluid milk produced in the state, falling short of the 65% threshold needed. 

CDFA received a total of 482 valid ballots out of 756 producers who were on the state list to receive ballots. This met the participation criteria, which called for at least 51% of eligible producers to vote in the referendum.

The referendum was held because CDFA received a petition from the group Stop QIP on Aug. 6, 2024, to terminate the QIP, a controversial state program that has divided the industry for years. 

Chino-based dairy farmer Craig Gordon, the leader of Stop QIP, said the failure of the referendum is not the end of the road for his group, adding, “we will never cease our efforts to get rid of this illegal tax that is destroying our industry.”

A tradable financial asset exclusive to California, quota entitles dairy farmers a higher price for milk covered by their quota. The program is contentious because premiums are funded by deducting money from the milk checks of all California dairy farmers, whether they own quota or not. 

Stop QIP has for years tried to discontinue quota. It has submitted at least four previous petitions to abolish the program and sued the state without success for the QIP assessments. The legal challenges continue.

This past summer, a group of nonquota holders known as Exploited Milk Producers Inc. filed suit against CDFA Secretary Karen Ross in the California Superior Court of Stanislaus County, challenging the QIP’s validity and seeking to halt the collection and distribution of quota payments. 

This fall, a group of nonquota holders also filed a federal antitrust complaint, alleging that the QIP operates as a cartel that harms nonquota holders and milk buyers by artificially increasing prices and stifling competition.

Voting in the recent referendum was supposed to run from June 12 to Sept. 10, but CDFA granted a special extension because it had received 53 hand-delivered ballots on Sept. 9 that the department said had been removed from their sealed envelopes. CDFA reissued those ballots, allowing them to be resubmitted between Oct. 8 to Oct. 24. 

In total, CDFA reported that 14 ballots were found to be ineligible: 12 were received after the postmark date, and two were from producers no longer in business. Another 11 ballots were deemed invalid due to missing or unauthorized signatures. 

In the end, the invalid ballots “were immaterial to the outcome of this referendum,” CDFA said in its breakdown of the voting results. Had those ballots been counted, producers who voted in favor of ending the QIP would have been 40.57%, and the volume of milk they represented would have been 47.53%—still short of the 51% and 65% threshold needed.

Gordon of Stop QIP said the group has demanded an audit to determine if any rules were broken.

A producer referendum to change certain aspects of the QIP also failed earlier this year. That referendum was prompted by a proposal from San Diego County dairy farmer Frank Konyn, who sought a compromise between quota holders and nonquota holders. His proposal called for reducing the quota payout, among other changes. 

California dairy farmers in 2021 also rejected a plan from United Dairy Families of California to gradually phase out the QIP by 2025, though that producer referendum failed by a much narrower margin, with 11 votes separating the “yes” and “no” votes. 

The state created milk pool quota in 1969 due to inequities in milk contracts. Because milk is priced according to how it is used—with fluid milk commanding the highest price—a dairy farmer who ships milk to a plant that bottles milk always earned more than another who sends milk to a processor that makes cheese, powder and other dairy products. 

To fix this disparity, the state in 1967 began pooling producers’ milk so they all could share in the higher revenues of fluid milk. Quota was established to compensate producers with fluid-milk contracts, as they were giving up their higher income due to pooling.

Through the years, quota became entrenched in the state’s dairy industry, with some quota holders building their businesses around the additional revenue entitled to them. Those who want to end quota say they’re being forced to subsidize quota holders, who they say are given an unfair pricing advantage. The issue is especially contentious during tough economic times. In recent years, more dairies have filed hardship consideration requests with the state dairy Producer Review Board in hopes of getting relief from quota assessments. 

Ching Lee is senior editor of Ag Alert. She can be reached at clee@cfbf.com.

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