California-based dairy producers have called for an increase in the price paid to them for raw milk by cheese processors, in an effort to collect a greater share of the market value of whey protein.
A coalition of organisations representing dairy producers in the state has called upon the California Department of Food and Agriculture (CDFA) to make amendments to its Class 4b milk pricing formula to incorporate the market value of whey – a by-product of cheese production used as an ingredient in a wide variety of popular products.
California Dairies, the Dairy Farmers of America - Western Area Council, Land O’ Lakes, the Security Milk Producers Association, the Milk Producers Council, the California Dairy Campaign and the Alliance of Western Milk Producers - which are known collectively as the 'coalition’ - represent approximately 78% of the state’s total raw milk production.
The Federal Milk Marketing Orders (FMMO) system decides the minimum price processors pay for milk across many US states. However, the minimum price that processors pay in California pay for milk is set by the state’s Department of Food and Agriculture
Executive director of the California Dairy Campaign (CDC) Lynne McBride testified on behalf of the ‘Coalition’ before a CDFA panel, calling for improvements to “producer prices so that they are equitable with those paid in surrounding states.”
Fairer pricing formula
According to McBride, adoption of the coalition’s petition will be a good first step towards making the pricing formula fairer for producers, who up-to-now have been paid significantly less than dairy producers in surrounding states.
“Currently, the value of whey in the California formula is capped at 65 cents per hundredweight, while the sliding scale in the proposal would not have a cap and would adjust based on the value of whey in the market,” she told DairyReporter.com.
“In 2011 there was an $11 disparity in the whey value between the California price and FMMO price leading to a revenue shortfall for coalition families of $26m per month or $300m per year.”
“The increase will not offset the effect of high feed prices and substantial disparity between the farm price and the producer prices, but it will enable dairy producers to capture a greater share of the value of whey in the market today,” said McBride.
“Certain processor interests are opposed to the higher 4b or cheese price. Processors in other states are paying the higher whey value and continue to be profitable. Cheese processing plants are being built in states where the 4b price is higher,” McBride added.
Canada-based dairy giant Saputo, which processes cheese in the US, has openly opposed the petition .
“The USDA Dairy Products Sector, along with other cheese manufacturers, is strongly opposing the petition. The Sector will continue to monitor dairy markets and take appropriate decisions to mitigate the impact on its operations,” the company said in its fiscal year 2013 outlook.
A panel of judges heard arguments from both processors and farmers on the proposed changes on 31 May and 1 June 2012. A CFDA decision is due within 52 days of the hearing.