USDA’s Agricultural Marketing Service (AMS) is seeking public comments regarding both the proposed California Federal Milk Marketing Order (FMMO), and procedures to be used if the proposal goes to a producer referendum.

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Dave Natzke
Editor / Progressive Dairy

Comments on the USDA “recommended decision” for a California FMMO – published in the Feb. 14, 2017 Federal Register – are due by May 15. Read: Decision time: USDA ‘recommends’ California join FMMO

Following a review of comments, USDA will publish a “final decision” and, if USDA continues to recommend a California FMMO, will conduct a referendum among affected California dairy producers.

Comment deadline on the ballot and voting procedures, published in the April 21, 2017 Federal Register, is June 20.

Among other referendum procedural details, the USDA regulations cover who may vote and the schedule for voting.

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As proposed, the California FMMO referendum would allow cooperative associations the option of bloc voting on behalf of their members. Co-ops must submit a form indicating their intent to bloc vote.

Cooperative associations that either check “no” or who do not return an “Intent to bloc vote” form to AMS promptly will be designated as not bloc voting on behalf of their members. In this case, a Milk Producer's Ballot would be sent to each producer associated with that cooperative. Producers who are not associated with a cooperative will be sent a Milk Producer's Ballot to indicate their support for or against the promulgation of the proposed California FMMO.

According to USDA estimates, about 1,443 producers are eligible to vote, either through individual or bloc voting. Two-thirds of California dairy producers, or those producing two-thirds of the state’s milk, must approve the FMMO for it to be implemented.

Approval expected

The effort to bring the California dairy market under the FMMO umbrella started in 2015. Based on current projections, the final proposal will be accepted, according to John Geuss of John Geuss Consulting.

“California producers are the ones who will approve or reject the change to an FMMO,” Geuss said. “There seems to be no reason for producer rejection based on the AMS analysis. There is also no reason for dairy producers in the existing FMMOs to lobby against this change. For these reasons, it is very likely that approval will be given.”

AMS released a report titled “Regulatory Economic Impact Analysis of the Recommended California Federal Milk Marketing Order.” That analysis projects the impact the creation of a California FMMO will have not only in the state, but also in all other existing FMMOs across the country.

Based on the AMS analysis, if California become an FMMO, there will be higher prices for cheese and dry whey, but lower prices for butter and nonfat dry milk.

The AMS model calculates an increase of 66 cents per hundredweight (cwt) for all Class III milk. This has a 47-cent-per-cwt positive impact on the all milk price in the Upper Midwest order, where the vast majority of milk goes to cheese manufacturing. California producers would be delivering less Class III (or equivalent) milk, but would receive a higher price for the Class III milk they do deliver. Because of the higher cheese prices, less will be exported and more will be imported, Geuss said.

With California delivering less Class III milk, more will be delivered for Class IV production of butter and powdered nonfat dry milk. This will cause the price of Class IV milk to decrease by an estimated 96 cents per cwt. This will drive down butter prices by 21 cents per pound, and butterfat prices by 26 cents per pound. More butter will be exported; less butter will be imported, Geuss said.

Geuss will provide a summary of the AMS economic analysis in the May 25 issue of Progressive Dairyman.

One other deadline regarding the California FMMO has passed. The California Department of Food and Agriculture (CDFA) accepted nominations for individuals to fill vacant positions on the Milk Pooling Producer Review Board. CDFA anticipates naming board members on May 10.

A primary duty of the board will be to advise CDFA on a program to manage the state’s quota program, which will operate separately from a new California FMMO. The first meeting could be held at the end of May.  end mark

Dave Natzke