In February, three dairy cooperatives filed a request with the U.S. Department of Agriculture to ask for a formal hearing on establishing a Federal Milk Marketing Order for the state of California. After conducting an internal analysis, USDA opted to request additional proposals before deciding whether to hold a public hearing. In response, the Dairy Institute of California, the California Producer Handlers Association and Ponderosa Dairy filed alternative proposals before last Friday’s deadline.

Dairy Institute of California

In its proposal, the Dairy Institute of California, a trade association that represents processors, said there are no disorderly marketing conditions that would warrant either a hearing or the need to establish a marketing order for California. The Dairy Institute’s members account for 70 percent of the fluid milk products, 85 percent of the cultured and frozen products, and 90 percent of the cheese products processed and manufactured in the state.

Ponderosa Dairy

The proposal from Ponderosa Dairy, a dairy farm located in Nevada that historically has shipped its milk into California for processing, noted that the cooperatives’ proposal would significantly change how milk from a farm located outside of California is priced compared to current California regulations. Ponderosa Dairy specifically asked USDA to use the same rules that apply to farm milk crossing a state line under all 10 current Federal Milk Marketing Orders.

The proposals filed by the Dairy Institute of California and Ponderosa Dairy criticized the original cooperatives’ proposal for failing to demonstrate that disorderly marketing conditions currently exist or have ever existed under current California milk regulations. The alternative proposals said this determination would be required by USDA before granting a request for a public hearing. They also noted that the hearing would be lengthy and costly for the dairy industry.

California Producer Handlers Association

The California Producer Handlers Association, representing four businesses with both a dairy farm operation and a milk processing facility, filed the third alternative proposal. This proposal specifically requested that the current California regulations governing producer handlers be continued should USDA adopt the cooperatives’ proposal to make California part of the federal order system. The initial proposal from the cooperatives would significantly change the way producer handlers are treated under state regulations.

California currently operates under a state marketing order with a two-tier pricing system, which includes a quota that allows producers to gain a higher price for beverage milk. Under the Farm Bill, the state has the option to enter the federal marketing system, so three co-ops – Dairy Farmers of America, Land O’Lakes and California Dairies, Inc. – filed in February their request for a public hearing.

For more information, contact Bob Yonkers, IDFA vice president and chief economist, at byonkers@idfa.org.