Referendum to end state dairy quota program fails

By a narrow margin, California dairy farmers voted to keep the state quota program, while a group working to end quota has vowed to challenge results of the producer referendum—and launch new efforts to terminate the program.

For now at least, dairy farmers know that the state quota implementation plan, or QIP, will not end on March 1, 2025, the effective date of the proposed sunset.

Failure of the referendum also means proposed changes to regional quota adjusters—to equalize quota premiums in all counties at $1.43 per hundredweight—will not be implemented.

Out of 933 producers who were eligible to vote, 733 or 78.56% cast valid ballots in the referendum, according to the California Department of Food and Agriculture. This satisfied the requirement that at least 51% of eligible producers needed to have voted.

To pass, the referendum needed a "yes" vote from at least 51% of eligible dairy farmers who produce at least 65% of the state's milk or 65% of eligible dairy farmers who produce at least 51% of the milk.

Only 49.25% of producers representing 54.47% of the state's milk voted in favor of the proposed sunset, falling short of the required threshold, CDFA reported. Just 11 votes separated the 361 "yes" votes and the 372 "no" votes.

"What (the outcome of the referendum) has shown us is that the industry remains in a position of great divide," said Kings County farmer Dino Giacomazzi, a spokesman for United Dairy Families of California, which submitted the petition to end quota in 2025.

Debate about ending the state's 52-year-old quota program has been likened to a civil war between the haves and the have-nots. Owning quota entitles dairy farmers a higher price for milk covered by their quota. The program—unique to California—is funded by assessing all Grade A milk producers, whether they own quota or not. The funds are then distributed monthly to quota holders.

Dairy farmers who own and benefit from quota say they would face financial hardship if quota were eliminated without compensation, while those who own little or no quota characterize quota assessments as a "tax" and a financial burden on their businesses.

In a letter to its members, Stop QIP, which endorsed the sunset proposal and has been working to terminate quota outright, said it does not accept the results of the referendum, claiming "numerous instances" of dairy farmers who did not get their ballots and other irregularities. The group said it will ask CDFA for access to the ballots so that they may be reviewed.

The group also said it has sent its members new petitions to terminate or reapprove the QIP without compensation to quota holders. Chino-based dairy farmer Craig Gordon, a leader of Stop QIP, said the group plans to submit a petition to CDFA every six months "until we get rid of this mess called quota."

"We will not quit until the QIP is gone," the Stop QIP letter said.

Marin Bozic, a dairy economist at the University of Minnesota who developed the sunset proposal based on producer discussions facilitated by UDFC, said had dairy farmers not lost a year in court battles and efforts by Stop QIP to suspend the QIP with a simple majority, perhaps more producers who were "on the fence" would have voted in favor of the sunset "as a solution based on fair and balanced principles."

"But after a year of fighting on other fronts," losing in the courts and having Stop QIP's referendum denied, he said, "it must have been perceived by quota holders that the Stop QIP leadership was only in support of the sunset because they exhausted all other options."

"At that point, it became a power game: who has more votes, not who has better reasons for what is just and fair," Bozic said.

In a website post earlier this year, Stop QIP encouraged its members to vote "yes" on the referendum, saying, "as it stands now, this is our only option to put an expiration date" on quota.

Bozic said leaders of Stop QIP and Save QIP, a group of large quota holders, may want to consider options to buy out quota holders such as through a bond or a loan. He said he thinks there would be interest in banks supporting such an idea.

"The question is: Is there a price that would work for both sides?" Bozic said.

A quota holder since 1972, Marin County dairy farmer Jerry Corda, who voted against the sunset, said he knew the votes would be close but "didn't think it would be this close." Knowing results of the referendum, he said, not only helps his dairy operation but also in the decisions he makes for the business.

"I think my banker is going to look at it more positive also," he said.

Now that the referendum has been decided, San Joaquin County dairy farmer Hank Van Exel, a member of Save QIP, said he thinks there will be "a cooling-off period"—at least for the next several years until dairy farmers revisit the quota issue to evaluate the effectiveness of the QIP, which calls for such a review at least every five years.

"We've got to digest this and see where it goes," he said, adding that he thinks the referendum process "got people thinking."

Van Exel said he thinks there are "more pressing issues" besides quota that need to be addressed, such as state water shortages, whether joining the federal milk marketing order was the right thing and transparency in milk checks on all deductions, not just for quota. With the referendum over, he said he does expect the value of quota "to go up substantially," with more producers buying it.

Mel Gadbut, a dairy broker in Manteca who sells quota, said it's too early to know the impact of the referendum on quota values. Though the results should stop the decline in quota prices, he said, how fast and to what extent prices will strengthen remains unclear. Much will depend on how confident dairy farmers feel about the future of the program—and any future attempts to change or terminate it.

"The quota market is very, very susceptible to rumor," Gadbut said. "It's just like the stock market. One rumor will bring it up; one rumor will bring it down."

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