The proposed price increases in milk for different utilizations would raise the pool price – which is currently about $4.70 below the average cost of production — about 35 cents per hundredweight.
Western United Dairymen and the California Dairy Campaign have filed a petition with the California Department of Food and Agriculture for an emergency hearing to consider increases to the state’s milk prices for a period of 12 months.
The groups are proposing temporary increases that would raise the overbase, or pool, price about 35 cents per hundredweight of milk.
“California dairy families have suffered severe economic hardship in the last three years. As a result, many have gone out of business or acquired massive debt on top of eroded equity,” the groups stated in the petition.
California lost 42 dairies between 2015 and 2016, Annie AcMoody, WUD director of economic analysis, told Capital Press.
“We don’t have data for 2017 yet, but I expect the trend will continue,” she said.
While an additional 35 cents won’t solve the problem, it might prevent some further losses of dairies, she said.
Milk prices are significantly under cost of production, and there’s a lot of concern from dairymen on where those prices are now and where they’re likely to go, said Lynne McBride, executive director of California Dairy Campaign.
“Milk prices aren’t coming close to covering milk production costs, and it’s threatening the future of dairy operations across the state,” she said.
Significant negative margins since January 2015 have placed many producers in a dire financial situation. The overbase price at the end of 2017 was at its lowest level since June 2016, and the forecast is even more concerning, the groups said.
The overbase price in December was $13.76. Current commodity prices are yielding an overbase price of $13.30 per hundredweight, with a forecasted potential to fall even lower, they stated.
“Compared to the latest cost of production of $18 per hundredweight released by CDFA, this clearly illustrates how the price of milk will be insufficient to cover costs,” the groups said.
It’s a grave economic situation. CDC members are concerned about being able to stay in the dairy business and welcome any relief, McBride said.
Establishing a federal milk marketing order for California to bring its milk prices in line with other dairy producing regions in the U.S. remains a top priority. Dairy producers have shown strong support for that process. But until that can be implemented, milk prices remain under the state system, she said.
“We as an organization felt it was critical to take any action we could to improve milk prices in the short term,” she said.
“WUD filed the petition because we cannot sit idly while prices drop and more producers go out of business. These are very difficult times that producers are struggling with,” AcMoody said.
The groups pointed out that depressed margins over the last three years have taken a toll on the state’s milk production, which has declined year over year in 32 of the past 36 months.
They are proposing to increase Classes 1, 2 and 3 by 60 cents per hundredweight, Class 4a by 10 cents and Class 4b by 40 cents.
Source: Capital Press