Another one of the challenges in 2009 is in California where dairy producers and their organizations are agonizing over the decision whether to become a federal order in view of the recent decision by the California Department of Food and Agriculture to reduce the state’s Class I milk prices.
“California is no longer isolated,” explained Jeff VandenHeuvel, Vice Chairman of Chino-based Milk Producers Council in Wednesday’s DairyLine. “For many decades we were able to do our own thing,” he said. “We had a low cost of production relative to the rest of the country and we had a Class I market that nobody else could reach because we were isolated from the rest of the country.”
The barriers have been broken down the last 10-15 years, according to VandenHeuvel, and plants and dairies have been built just over the border “for the specific reason of exploiting the fact that the state order cannot regulate interstate commerce.” He said that officials who run the state order have decided to “keep discounting the California Class I price to a point where it makes no economic sense to bring any milk in here.”
For California dairy producers, that means that the amount of revenue they would normally expect to come in from Class I sales is not going to be there, VandenHeuvel warned, amounts to millions of dollars and “happens at a time when the cost of production advantage that California historically has had, has evaporated as well.”
VandenHeuvel said it has become very expensive to produce milk in California and competitors like Texas, New Mexico, and Idaho “can fully match us in cost of production so something absolutely has to change and a federal order is a very viable option for California and we need to take a hard look at how to do that.”
“We could continue to sell our milk cheap,” he concluded, “It would be foolish to do that but we’ll see whether the leadership of California is willing to step up and take a serious look at a federal order. They have not been willing to do that so far but there’s nothing so powerful, as an idea whose time has come. This is clear.”
Western United Dairymen has notified DairyLine that they will hold industry wide meetings for California dairy producers and processors in February to present an in depth analysis of the federal order issue. Milk Producers Council newsletter has more here.