Dairy groups seek temporary increase in milk price

Two California dairy groups have asked the state for an emergency hearing to consider temporary price increases on all classes of milk.

The California Department of Food and Agriculture acknowledged receipt of the petition, filed last week by California Dairy Campaign and Western United Dairymen, and said it will decide whether to call a hearing no later than Feb. 2.

Specifically, the dairy groups have asked the department to raise prices on Class 1, 2 and 3 milk by 60 cents; Class 4a by 10 cents; and Class 4b by 40 cents. They have asked that these prices remain in place for 12 months, starting in April.

In their letter to CDFA, the groups called attention to the "severe economic hardship" California dairy farmers have had to endure during the last three years, with "significant negative margins" during that time. Even though markets made "a modest recovery" in 2017, they said, the improvements were not enough to give producers positive margins.

"As a result, many have gone out of business or acquired massive debt on top of eroded equity," the letter said.

The groups further noted that cost of production during the third quarter of 2017 totaled $18 per hundredweight, as calculated by CDFA, and that current commodity prices yield an overbase price of $13.30 per cwt. for dairy farmers.

"Unfortunately, the forecast is even more concerning, with potential for prices to fall below that level in the next few months," the letter said, adding that "this clearly illustrates how the price of milk will be insufficient to cover costs."

Meanwhile, California dairy farmers continue to await a final decision from the U.S. Department of Agriculture on a federal milk marketing order for California. The state's dairy groups and dairy cooperatives have supported establishment of a California federal order, saying it would help align California milk prices with federal order prices, which they say have been consistently higher than California prices.

CDC and WUD noted that even if producers ultimately vote to join the federal order, implementation could be another year away, and milk prices need to increase now "to prevent the closure of more California dairies."

The groups pointed out that year-over-year milk production in the state declined 1.1 percent in November, while U.S. production rose 1 percent.

"This is not a recent pattern but rather a result of depressed margins these past three years," they said, noting that California milk production also declined in 32 of the past 36 months.

CDFA last adjusted the state milk pricing formula in 2015, a temporary change that raised prices on Class 4b milk, which relates to milk used to make cheese and its byproduct whey. The change was made permanent in 2016.

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