Hearing begins on federal milk marketing order

After more than two years, the state’s three main dairy cooperatives are finally going to make their case in a public hearing that dairy farmers be allowed to establish a federal milk marketing order for California.

Held by the U.S. Department of Agriculture, the hearing started Tuesday in Clovis and is expected to last several weeks. During the hearing, USDA will consider and take evidence on a proposal by the three cooperatives—California Dairies Inc., Dairy Farmers of America and Land O’Lakes. It will also consider additional proposals from the Dairy Institute of California, which represents the state’s processors; the California Producer Handler Association, which represents four dairy producers that also process milk; and Ponderosa Dairy, a farm in Nevada that ships milk to California.

The state’s dairy organizations—Western United Dairymen, Milk Producers Council and California Dairy Campaign—have all said they support the cooperatives’ proposal and are mobilizing their members to participate in the hearing.

"We’re very excited to get this process underway," said Frank Mendonsa, a Tulare County dairy farmer and president of Western United Dairymen.

He said the organization considers efforts to have California join the federal order as an opportunity to raise milk prices for farmers, who have long contended that the existing state milk pricing system underpays them—particularly on milk used to manufacture cheese—compared to prices paid under the federal order.

The hearing is open to the public, but dairy farmers are given priority to testify, according to USDA. Similar to a courtroom setting, the hearing is presided over by an administrative law judge, with witnesses presenting data and testimony on the proposals under oath. All witnesses are subject to cross-examination by anyone in attendance in connection with their testimony. Those who want to participate need to physically be at the hearing and inform USDA staff they wish to testify. Those in attendance may also ask any witness questions about his or her testimony.

The first week of the hearing may be more procedural, however, with USDA witnesses entering documents and data into evidence and answering questions about the department’s preliminary economic impact analysis. Given the volume of material, USDA said this part of the proceeding may take several days. Once government witnesses conclude testifying, the judge will begin hearing testimony from proponents on their proposals.

Because the federal order hearing process is uncharted territory for California producers, Rob Vandenheuvel, general manager of the Milk Producers Council, said he has been consulting with representatives of DFA and Land O’Lakes who have more experience in the process and have been through it in other states.

All three dairy groups, he said, will be keeping their members up to speed on the progress of the hearing so that dairy farmers may participate once the policy discussions begin, noting that USDA has set no time limit for the hearing.

"Producers may not want to just show up and immediately testify," Vandenheuvel said. "They may want to come check it out a little bit, see how the process works before they get up there."

Mendonsa said his group will be helping members prepare for their testimony with the goal to "help unify all producers, no matter where they ship their milk or what trade organization they belong to."

"The federal order is very complicated," he said. "If you’re going to present testimony and know that you can be cross-examined, you need to make sure that you have facts straight and that you do a good job laying those facts out, so that you can defend them if called upon."

One message that producers plan to emphasize, he said, is the importance of maintaining the state’s current quota program and pooling rules.

Lynne McBride, executive director of the California Dairy Campaign, said her group has been a strong supporter of the cooperatives’ proposal, noting that one of the founding principles of the organization is that California should join the federal order system.

"We’ve long thought that we need to have a method for calculating prices that’s in line with what’s happening in the rest of the country," she said. "But it’s been particularly critical in the last five years, since we’ve seen this big gap in the (state) 4b price compared to the federal order Class 3."

One region having significantly lower prices puts downward pressure on all prices nationally, she added, particularly if that region is California, which produces more than 20 percent of the nation’s milk supply.

Leslie "Bees" Butler, a dairy economist at the University of California, Davis, said some people do believe that leaving California out of the federal milk marketing order disrupts the national pricing system, but he also said it’s difficult to say whether California’s lower prices actually drag down national milk prices. Others, he said, argue that California joining the federal order would temporarily disrupt the market.

The only argument that "really makes sense," Butler said, is the one from the Dairy Institute, which says there is no disorderly marketing of milk in California and therefore no reason for the state to join the federal order. But he said he thinks USDA will take into consideration any hardships the marketing order would impose on processors and adjust it slightly from what the cooperatives have proposed before putting the final version up for a vote. A two-thirds majority by California producers is required to approve it.

One question Butler said producers should ask themselves before voting on the proposal is whether they want to relinquish control of the state marketing order and allow USDA to set their milk prices. A disadvantage of being in a federal order, he noted, is that making pricing adjustments under the federal system is a much lengthier process than under the current state system.

"That’s what producers need to recognize—that they’re losing something out of this," he said. "Most of them are indulging their eyes about a higher milk price, but do we really want to lose control of our own system?"

To find information about the hearing or listen to an audio feed, go to www.ams.usda.gov/caorder. USDA will also be posting updates to that link and via the Twitter feed @USDA_AMS.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at cleecfbf.com