USDA urged to implement FMMO in California to amend 'disparity in pricing'

09-Feb-2015 - Last updated on 09-Feb-2015 at 16:55 GMT

The US Department of Agriculture (USDA) has been urged to implement a Federal Milk Marketing Order (FMMO) in California to reduce the "disparity" between Class III and Californian Class 4b milk prices.

California's three largest dairy cooperatives - Dairy Farmers of America (DFA), California Dairies Inc (CDI) and Land O'Lakes - last week petitioned the USDA to introduce a FMMO in the Golden State.

Shifting to a FMMO in California would see dairy farmers on the West Coast "receive more equitable market-based milk prices," said DFA, CDI, and Land O’Lakes in a joint statement.

FMMOs are designed to provide "orderly marketing conditions" by establishing rules dairy processors must adhere to when purchasing milk from farmers.

Californian dairy farmers, who produce between 41bn and 42bn pounds (lbs) of milk annually, currently operate under a state milk pricing system.

Under this pricing plan, Californian milk prices have been "consistently and significantly lower than the rest of the country" for the last five years, a DFA spokesperson told DairyReporter.com.

"Disparity in pricing"

Kansas City-based DFA, which boasts 300 members and three processing facilities in California, said the greatest price "disparity" is between Californian Class 4b milk and Federal Order Class III milk, which are used to manufacture cheese and whey products.

“Since 2010, the average disparity of the California Class 4b price relative to the Federal Order Class III, which is the price of milk used for manufacturing cheese, has been $1.82 per hundredweight,” said the DFA spokesperson.

This "disparity in pricing" has driven many Californian dairy farmers to leave the state, the spokesperson claimed.

But if a FMMO is implemented in California, Class 4b milk prices could "rise to a level equal to that of most of the United States."

"Bringing California dairy producers into the same pricing system as the rest of the country's dairy farmers will put the manufacturers and dairy producers on the same market-based pricing formulas," the spokesperson said.

“DFA members in California will receive milk prices on par with the rest of the country and support their opportunities to effectively manage their on-farm margins and manage risk.”

“With the implementation of a Federal Milk Marketing Order, our processing facilities in the state will be on a level playing field with our other US dairy manufacturing entities.”

FMMO AREAS — FMMOs are already in place in 10 US regions (Image: USDA AMS).

Regulatory hearing

The USDA Agricultural Marketing Service (AMS), which oversees the implementation of FMMOs, declined to discuss the Californian case when approached by DairyReporter.com.

"USDA does not have a position regarding milk prices in California," said an AMS spokesperson.

"USDA has not made a determination regarding the request from the cooperatives for the promulgation of a new marketing order."

The "primary step" in the process for implementing a FMMO is a hearing, during which the USDA "accepts evidence supporting or opposing" the proposal.

On the back of this hearing, the USDA will produce a recommendation, which will be published for public comment before a final decision is issued.

Californian dairy farmers impacted by the final decision will then vote on it.

If approved, the USDA would implement the FMMO.