August 25, 2014

Dairy industry debates milk pricing bill

Dairy farmers are taking a skeptical look at Assembly Bill 2730, which would allow processors and farmers to enter into agreements outside the complex 1960s-era formula for setting minimum milk prices.

Dairy farmers are taking a skeptical look at a new bill that would change how California sets prices for its milk.

The measure, Assembly Bill 2730, would allow processors and farmers to enter into agreements outside the complex 1960s-era formula for setting minimum prices. The change would apply to milk bound for cheese and butter plants, about 80 percent of the total.

The bill was introduced by Assemblywoman Susan Talamantes Eggman, and the chief co-sponsor is state Sen. Cathleen Galgiani. Both are Democrats based in Stockton; Galgiani also represents Modesto.

The bill would provide for “mutually agreeable” contracts between processors and farmers and help the state “transition the dairy industry to self-regulating marketing practices,” according to the text.

Farmers have complained that milk prices sometimes fall short of their production costs, mainly feed. They had an especially rough time from 2008 to 2013, but the outlook has improved with reduced feed prices and a strong export market for dairy products.

Western United Dairymen welcomes the effort to reform the system but is concerned about bill provisions that favor processors, said Michael Marsh, chief executive officer of the Modesto-based group.

He said a single farmer could be at a disadvantage in negotiating with a large processor, and the latter could go in and out of the alternative pricing system to suit its needs.

“We’ve asked that the Legislature include restrictions on the processors’ ability to game the system,” Marsh said.

The California Dairy Campaign, a farmer group based in Turlock, blasted the bill in a news release. President Joe Augusto, a Tulare County farmer, said it “would eliminate milk pricing regulations that dairy producers rely upon as a lifeline when prices drop.”

Milk was long the top-grossing farm product in Stanislaus County, but almonds claimed the No. 1 rank in the 2013 report. Merced and San Joaquin also are major dairy counties.

Several thousand people work at dairy processing plants in the Northern San Joaquin Valley. Processors contend that farm milk prices have to stay in line if California is to compete with the industries in other states.

The farm prices are a small part of what consumers pay for dairy products. The costs include processing, transportation and retailing.

The bill would apply to milk sold to plants that make cheese, butter and their powdered byproducts. It would not affect milk sold in fluid form or items such as yogurt, sour cream or ice cream.

The California Department of Food and Agriculture sets minimum prices for all classes each month.

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