Discussions on how to advance a producer friendly bill through the California legislature continued this week with advocates, principals and legislators engaged.
Last week the author of AB 31, Dr. Richard Pan (D-Sacramento) reiterated his support for finding a path forward to assist California dairy families in their economic struggle. California dairy families have been whipsawed by a combination of a milk price for cheese disconnected from the marketplace and feed costs exploded by domestic ethanol policy.
A value for whey was initially implemented in the California pricing formula by CDFA Secretary Bill Lyons who recognized the need to tie California’s cheese price to the marketplace. Secretary Lyons’ solution provided a whey price that tracked the market – when prices went up, values went up and when prices went down, values declined.
Secretary Lyons’ market based solution became a big target for the state’s cheesemakers. When Governor Schwarzenegger replaced Lyons with his own Secretary, A. G. Kawamura, California’s cheesemakers seized the opportunity to try and eliminate Lyons’ market based approach from California's 4b formula for milk going into cheese and petitioned CDFA to eliminate the whey value shared with the state’s dairy families.
Kawamura largely acquiesced to the cheesemakers’ demand and agreed to completely disconnect California’s whey value from the marketplace. Kawamura implemented a fixed whey value at $0.25 per hundred-weight that ignored market fundamentals. Consequently, when whey values shot up in the market with increased global demand, California farmers received $0.25. When whey values slumped due to global recession, Californians received $0.25. If the value of whey had soared to $10.00, California farmers would have received $0.25.
California dairy families have been struggling to reconnect their price to the market-place ever since.
“We greatly appreciate Dr. Pan’s continued commitment to fighting to eliminate the inequity in our pricing system that has caused so many of our family businesses to close – over 400 family farms since our price was severed from the market in 2007,” noted Tom Barcellos, board president of Western United Dairymen. “We have been working to right this wrong since then. As we continue to work through the department, we also felt it necessary to try and work through the legislative process to help correct this inequity and stem the closure of more California family dairy farms. We thank Dr. Pan for standing shoulder to shoulder with our farmers in this fight.” June 7, 2013 WUD Friday Update