Modesto, Calif., (January 19, 2018) – WUD and CDC filed a petition with the California Department of Food and Agriculture (CDFA) today requesting the call of an emergency hearing to consider increases to Class1,2,3,4a and 4b prices for a period of twelve months. The requested increase would add approximately $0.35/cwt to the over base price.
California dairy families have suffered severe economic hardship in the past three years. Many have gone out of business or acquired massive debt on top of eroded equity. The significant negative margins witnessed every quarter since January 2015 have placed many producers in a dire financial situation. 2017 displayed a modest recovery in the markets but the improvements were short lived and not significant enough to allow for positive margins. According to CDFA’s cost of production data, the smallest loss recorded these past three years was $0.23/cwt of milk produced during the first quarter of 2017.
You have likely read this newsletter’s milk price forecast with concern. WUD and
CDC’s boards had the same reaction and decided action must be taken against those spiraling prices. 2017 ended on a sour note, with the estimated over base price reaching the lowest level since June 2016. As we start 2018, producers are facing an even lower over base price, with current commodity prices yielding an over base of $13.29/cwt for January. Looking down the following few months is even less pleasant, with potential for prices to fall below $13/cwt. The first quarter of 2018 price forecast is set to be 12% below the last quarter of 2017. Compared to the latest cost of production of $18 per hundred weight released by CDFA (third quarter of 2017), this clearly illustrates how the price of milk will be insufficient to cover costs.
While the FMMO hearing is behind us, the process is not over. USDA still has not released its final decision for a California FMMO. Even when it does, there will be a referendum process (likely a few months) and an implementation period if the vote is a yes. Until then, we cannot sit idly while more dairy farms go out of business in the state. California’s milk production pattern relative to the rest of the country is concerning, with year-over-year milk production down 1.1% in November (the U.S. was up 1%). This is not a recent pattern: California’s milk production declined in 32 of the past 36 months. California dairy families clearly need additional revenues and we believe the CDFA
should provide pricing assistance while we await USDA’s final decision. If you are also
concerned with milk prices, you can call CDFA at 916-654-0462 or submit a letter to dairy@cdfa.ca.gov to voice your opinion on this matter.
CDFA has 15 days to grant or deny a hearing, so stay tuned for more details as we await the Secretary’s decision!
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