California Agriculture Secretary Karen Ross announced Friday that she would permanently increase the price dairy producers are paid for 4b milk used to make cheese, effective June 1.
Producers will receive an increase in payments from processors, estimated at an average of 96 cents per hundredweight (100 pounds) over a five-year period. This change is not expected to impact retail pricing for fluid milk.
"I still believe adjustments to the pricing formulas are inadequate to address long-term structural challenges facing the dairy industry. However, we must continue to respond to changing conditions in our industry by using the only tools available through the current milk pricing system," wrote Ross in a letter released to dairy processors and producers.
"Financial conditions for producers in California and the U.S. are especially challenging right now due to declining milk prices caused by strong global milk production; high levels of dairy product inventories; and, decreased dairy product sales to key import countries. I also realize that manufacturers of California’s dairy products have made significant investments in this state and they are operating within a much more competitive environment due to weakened global demand. Milk prices and marketing conditions are not expected to recover until the balance between global supply and demand improves," she continued.
California Dairy Campaign (CDC) President Joe Augusto welcomed Ross' announcement. The CDC joined Milk Producers Council and Western United Dairymen in calling for a whey value in the 4b cheese milk price formula that reflects the whey value paid in the federal milk marketing order system. The CDFA pricing change announced Friday would increase dairy farm prices if whey prices improve.
“Dairies across the state are going out of business at an alarming rate and although we welcome the milk pricing decision that Secretary Ross announced today, it will not be enough to sustain many more dairies on the brink of closure,” said Augusto. “The grim reality is that our state dairy pricing system has underpaid California dairy farmers by more by than $2 billion since 2010.
“CDFA Secretary Ross has recognized that our prices should be closer to prices in the rest of the country, but it will not make up for the losses that dairy farmers here have endured under our state system,” he added.
Since 2006, more than 600 dairies have gone out of business throughout California leaving less than 1438 dairies across the state, according to the CDC. The cost to produce milk averages $19.74 per cwt according to CDFA while the average price paid to dairy farmers today is less than $13 per cwt leading to mounting losses and the closure of dairies across the state.
“At the recent hearing, CDFA heard testimony from dairy farmers who have grave concerns about the future of dairy farming in California,” said CDC Executive Director Lynne McBride. “Milk production in California declined by 3.3 percent last month and has been dropping each month for the last 16 months. The CDFA decision will not have an immediate impact on dairy prices because whey prices remain depressed, but it will put dairy producers here in a better position once whey prices improve.
“Prices paid to California dairy producers are routinely the lowest of any reported milk producing state in the nation,” McBride added. “We welcome the Secretary’s decision, but the only way to restore equity in the long -term is by joining the federal order system to bring our prices and process for determining prices in line with the rest of the country."