Sec. Ross orders temporary change to Class 4b pricing formula

On Friday, CDFA Secretary Karen Ross announced she has ordered a temporary change to the dry whey scale of the Class 4b pricing formula, effective August 1, 2015 through July 31, 2016. The decision comes after a milk price hearing on June 3 in Sacramento where Western United Dairymen and dairy producers voiced the desired direction the industry hoped CDFA would take.

“Western United Dairymen is encouraged by the Secretary’s actions today on milk pricing.  We are appreciative of the intensive effort by the CDFA to listen and respond to the industry and act accordingly,” said WUD President Frank Mendonsa. “While we had hoped for more, we will continue to work closely with the Department to be more consistent with the Federal order.”

If the announced adjustments to the Class 4b formula had been in place for the past five years, it would have resulted in a Class 4b price that would have been $1.01/cwt higher. This represents 46 cents on the overbase price. While this does not bring the Class 4b whey value exactly in line with the Class III whey value like the CDC/MPC/WUD proposal requested, it would have brought the two closer if this change had been implemented at the beginning of this year. In her letter, the Secretary said she believes California’s system of regulated milk pricing is antiquated and outdated. The industry competes within national and international markets that have dramatically changed since the pricing system was established. She added the pricing system needs to be updated to provide the opportunity for our dairy families and processors to achieve long-term growth and prosperity. “I believe this adjustment will provide a needed increase in revenue to producers to ensure a stable milk supply. I have taken this action even though I believe there are long term structural challenges within the dairy industry that the Department cannot address through changes in the class pricing formulas,” Secretary Ross said in her announcement.

July 17, 2015 WUD Friday Update