Agriculture

Fresno dairy can't escape 'milk pool'

SACRAMENTO -- A Fresno dairy this week lost a bid to escape the state's milk pricing system, which it says hurts its business.

Producers Dairy and four other California companies that bottle milk from their own cows wanted out of the state's "milk pool," saying they can't compete with processors that use out-of-state milk. Sen. Dean Florez, D-Shafter, proposed an exemption for the companies as well as the state's two raw-milk dairies.

But Florez's bill faced strong opposition from dairy trade groups, forcing him to narrow the proposal to only apply to the raw-milk dairies. Even so, the amended version drew significant resistance by dairy farmers and was defeated Wednesday by the Assembly Agriculture Committee.

Senate Bill 362 targeted the complicated system that determines how much dairies are paid for milk sold to processors. The milk pool ensures that dairies are paid similar prices no matter if the milk is bottled or turned into cheese, yogurt, butter or other products.

The state's five big "producer-handlers" -- which own both cows and bottling plants -- wanted the exemption to better compete with bottlers that bring in out-of-state milk. This milk cannot be regulated by California and producer-handlers say it is sometimes cheaper.

But stand-alone dairies in California feared that if producer-handler milk were exempted, the pooled price they received for milk would go down. Prices are already sliding as a result of an oversupply and weak global demand.

Opposition came from Modesto-based Western United Dairymen, whose 1,000 members include Valley dairies, and the Dairy Institute of California, which represents the state's eight bottlers that don't own cows.

The last-minute amendment changed the bill to apply only to producer-handlers that bottle at least 1,500 gallons of milk a day from their own cows. In essence, the bill would only apply to Organic Pastures, a raw-milk dairy in Kerman.

But the measure still failed in the committee by a 4-3 vote, as one Democrat joined Republicans in voting no. Assembly Member Mariko Yamada, D-Davis, voted no because "the last-minute amendment for me did not meet the threshold for a deliberate public policy debate."

Richard Shehadey, president of Producers Dairy, said he was disappointed because the bill's original version would have "been an opportunity for us to compete on more of a level playing field."

The Dairy Institute said the producer-handlers are going just fine under the pool and would have enjoyed an unfair advantage if allowed to operate outside of the system.

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