October 23, 2013

State extends price break for dairy processors

Dairy farmers said they will get little help from a state official's decision to continue a small increase in minimum milk prices through June 2014. A processor group said it could live with it.

Dairy farmers said they will get little help from the state’s latest ruling on milk prices, while processors said it was the right move.

Food and Agriculture Secretary Karen Ross decided to continue a surcharge of 12.5 cents per 100 pounds of milk on top of the monthly minimums that processors must pay to farmers.

The surcharge, which is much less than what farmers have been seeking, started July 1 and was supposed to expire Dec. 31. Ross extended it through June 2014.

In a phone interview Wednesday, she said the “continued fragility” of the economy prompted her to approve the temporary extension, but she would like to see long-term reform of the state’s milk pricing system. It dates to the 1960s, when most of the milk was sold as liquid to consumers in California, but dairy products are now a global market, Ross said.

“It’s just a clear indication that the system is broken,” she said.

The ruling is one more twist in a half-decade-old conflict between the farmers – who claim that their income often has fallen below feed and other production costs – and the companies that process the milk.

It is the top-grossing farm product in the Northern San Joaquin Valley and statewide, but net income is another matter.

“It has been a struggle for many (farmers), and we were hoping for a better response,” Lynn McBride, executive director of the Turlock-based California Dairy Campaign, told The Fresno Bee. “This was a minimal increase. And right now, we don’t have a lot of confidence in the state’s system.”

The Dairy Institute of California, a processor group based in Sacramento, contends that the minimum prices must be kept under control if the state is to compete with other dairy regions.

“The data show very clearly that economic conditions for dairy farmers have improved substantially since last year,” Executive Director Rachel Kaldor said in a news release. “In addition to significantly lower feed costs, dairy farmers are also benefiting substantially from an increased demand for cheese and other products.”

Ross held a hearing on the matter last month and issued a letter to interested parties Tuesday. “I believe this will provide a consistent level of revenue to producers to ensure a stable milk supply,” she wrote.

Farmer groups say the state pricing formula means less income than in states that are part of the federal pricing system.

Ross said a reformed system would allow the California industry to respond more quickly to global conditions and help with efforts to introduce new dairy products.

The California Department of Food and Agriculture sets minimum prices each month for various classes of milk, including the portion bound for the fluid market and others that go to cheese, butter, ice cream, powder and other products.

This month, the minimum in Northern California for the fluid market, including the surcharge, is $20.79 per 100 pounds of milk, about 11.6 gallons. That is much higher than the $13.75 in October 2009, but farmers say high feed costs have absorbed much of their income.

The feed costs have eased this fall, thanks mainly to a bumper U.S. corn crop, but dairy farmers say they have a long way to go in recovering from the trouble that started in 2008.

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