FMMO meeting in California

Nothing remotely close to decisions were made at the three-stop series of public outreach meetings held across California last week by USDA to review proposals submitted for a Federal Milk Marketing Order (FMMO) in the nation's largest dairy state.

But several strong impressions did come through.

I attended the first meeting held in Chico (northern California) on May 5 (pictured above). Meetings were also held in Tulare (central California) on May 6, and in Palmdale (southern California) on May 7.

The 55 people who attended the Chico event exceeded expectations, about 15 of which were dairy producers. The rest were USDA personnel, cooperative and processing leaders, lawyers, and officials from the California Department of Food and Agriculture (CDFA).

The atmosphere was informal and friendly. Things ran smoothly and ended ahead of time. There were no fireworks. There weren't even sparklers. My takeaway impressions were:
  • This is probably the highest level "us versus them" (milk producers and processors) battle seen in California since the statewide pooling program was created in 1967.

  • Producers have reached a point of being mad as heck and aren't going to take CDFA-computed farm milk prices anymore that are consistently lower than those in federal orders.

  • The FMMO proposal submitted by the state's three largest cooperatives clearly focuses on producers' needs, and their summary was clear and straightforward.

  • Processors are determined to hang on to as much of the favorable price playing field they have enjoyed for decades. Its proposal summary was complex and focused on plants, handlers, pooling, payments and definitions. USDA had several questions afterward.

  • The four remaining producer-handlers in California look to be at great risk of being crushed in this battle of titans. Their main request is to be grandfathered into the FMMO under the same terms they negotiated with CDFA nearly 50 years ago.

  • Also at risk is a large Nevada dairy that has shipped mainly to California since opening and wants to continue receiving plant blend prices rather than something less.

  • I got a distinct sense that USDA is more farmer-oriented than processor-oriented.
There is one final note to share from the meeting, and it is a monster: The alternate FMMO plan submitted by the Dairy Institute of California proposes that individual dairy farmers choose between either a quota/overbase pricing structure, as is currently the case under the CDFA-run pooling program, or an FMMO blend price structure.

The catch there is that once a farmer chooses, they would never get to change. And the Institute's spokesman said he envisions that producers who opt into the FMMO system would give up their quota to the state.

The $64,000 question from the audience came from a dairy producer, who asked both the co-op and processor spokespersons what they thought the net bottom line effect of their proposals would be to producers compared to the current state pricing program.

Both said they thought it would be higher under an FMMO. A co-op spokesman estimated around 80 cents per hundredweight. The Institute spokesman said he is a believer of markets adjusting, and thinks producer prices would ultimately revert to an equilibrium level.

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(c) Hoard's Dairyman Intel 2015
May 11, 2015
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