Farmers testify at hearing about federal milk order

As the U.S. Department of Agriculture hearing to consider proposals to create a federal milk marketing order in California moves into its third week, dairy farmers who have already testified in support of one of the proposals stressed the importance of more producers participating in the proceedings.

"The stakes are really high in this debate because unless California dairy-producer prices can get in line with the rest of the country, it's going to put the whole dairy industry in jeopardy in the future," said Lynne McBride, executive director of the California Dairy Campaign.

Her organization, along with the Milk Producers Council and Western United Dairymen, has been encouraging its producer-members to testify in support of a proposal submitted by the state's three major dairy cooperatives—California Dairies Inc., Dairy Farmers of America and Land O'Lakes. Having the state join the federal order, McBride said, has been a top priority for her group and would allow California milk prices to be closer to what's paid to dairies in states already under the federal order system.

The hearing started Sept. 22 in Clovis, with the first week devoted largely to procedural matters and presentations by USDA witnesses of the agency's preliminary economic impact analysis of four proposals the department received. In addition to the cooperatives' proposal, there are proposals from the Dairy Institute of California, which represents processors; California Producer Handlers Association; and Nevada-based Ponderosa Dairy, which ships milk to California.

Last week, the hearing delved into the cooperatives' proposal, with hours-long testimony by their key witnesses: Elvin Hollon of DFA; Tom Wegner of LOL; and Eric Erba of CDI. A number of dairy farmers also took the stand. Administrative Law Judge Jill Clifton made clear that farmers who want to testify would be given priority.

Cornell Kasbergen, who owns a dairy in Tulare County and another in Wisconsin, testified that California dairies no longer enjoy some of the advantages they had years ago, when corn prices were low, their operations dominated in scale and size, and they produced the most milk per cow. Today, California dairy farmers are increasingly looking to get out of the business, he testified, noting that from talking to people in auction yards, his perception is that most California dairy cows being sold today are going to out-of-state dairies.

In his testimony, Jared Fernandes, a third-generation dairy farmer in Tulare County, talked about his frustration with trying to use risk management tools such as hedging because the state's Class 4b price, which relates to milk used to make cheese, does not track the federal equivalent Class 3 price. Hedging would be much more straightforward, he said, if California operated under a federal order.

Other farmers, such Xavier Avila of Tulare County and George Mertens of Sonoma County, testified on the importance of preserving the state's current pooling and quota programs.

Mertens entered the dairy business in 1968, a year before the Gonsalves Milk Pooling Act was implemented. He also worked for dairies before that as an artificial breeder. Because dairies are paid based on how their milk is used, with fluid milk, or Class 1, being the most lucrative, there was fierce competition for those contracts, leading to an imbalance of market power between producers and fluid-milk processors. Pooling their milk allowed producers to share in milk-sale revenue—and gave dairy farmers back their "dignity," Mertens testified—while owning quota entitles them to additional milk revenue.

"I was there. Before we passed the Gonsalves Act, it wasn't a very pleasant thing to be in the dairy business," Mertens said after his testimony.

He said even though he was "sweating bullets" before going up to testify, he saw the importance of putting his experience on the record.

Yuba County dairy farmer Sietse Tollenaar testified about his experience serving on a California Department of Food and Agriculture review committee to try to find a fix for how whey is valued under the state milk pricing system. But he noted how discouraged he was by the experience, because the group never found a solution. Farmers contend the widening gap between the state and federal whey price has led them to the current federal hearing.

"We're telling our plight; we're telling our story," said Kings County dairy farmer Joe Machado, who also testified last week. "If we're going to sustain a dairy industry in California, we need to get a better pricing structure."

He gave emotional testimony about his own financial struggles in the business and how hard it's been to witness dairy livestock being auctioned off as operations shutter their doors. He said even though farmers are not trained public speakers, they have an impact on those who are at the hearing.

"You can tell they are very riveted when dairy producers come up," he said. "There were one or two producers that actually made people in the audience cry."

As an organic dairy farmer, Scott Magneson of Merced County is not directly affected by the minimum milk prices that the state sets for conventional milk, but he said he favors California joining the federal order because "I think it's important that all the producers get equitable prices."

"We're all producers and we need the infrastructure of suppliers and people," he said. "If you lose dairy producers, even if they're conventional, it's going to make it more difficult for us to get the services that we need for our dairies too."

During his testimony, he shared a recent CDFA study on California dairies' cost of production versus the milk price they're earning, "to bring attention to the severe economic hardship that producers are going through," noting how 90 percent of them were losing money during the first quarter of this year.

Farmer Peter Olsen of Nevada, whose Hillside Dairy was a plaintiff in a 2003 Supreme Court case involving out-of-state producers who claimed California's milk pricing system unfairly discriminates against them, also testified in favor of California joining the federal order. He said the milk market in Nevada, which is not under a federal order, tracks Northern California prices and disruptions in the California milk market trickle back to him.

Of his testimony, Kings County dairy farmer Joaquin Contente said he didn't have any prepared statements but simply wanted to tell his story and his observations of the large number of dairies in his area "that are no longer here and will never come back." He said while the proceedings can be intimidating because anyone could cross-examine a witness, "this is all part of the transparency."

"I think everybody who speaks has an impact," he said.

Observers of the hearing say the proceedings are expected to continue for several weeks and possibly months.

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