July 26, 2013 — Rob Vandenheuvel of California’s Milk Producers Council was our guest on Friday’s DairyLine. He spoke with Lee Mielke about the latest deal between producers, processors and state lawmakers.
Mielke: Rob, California dairy producers have come to an agreement over milk prices in the state. Details were spelled out in Wednesday’s DairyLine with WUD’s Michael Marsh. Processors are on board with this proposal, but Rob, haven’t California maintained that they need to pay a lower price for cheese-milk because they have to ship their cheeses greater distances?
Vandenheuvel: The discussion over proper milk pricing for milk sold to cheese plants in California has been going on for a number of years. Transportation really is not the issue. Built into our regulated formula is what they call an F.O.B. adjuster, which discounts our price to the tune of 10 to 20 cents per hundredweight to account for the transportation differences between the west and the Midwest where dairy products are being priced there in Chicago – that’s already built in.
What we’ve seen over the last three years is a huge and significant expansion of that discount, not related to any kind of transportation issue but related to some arbitrary formula decisions that the Secretary of Agriculture here in California has made.
Mielke: Is there a possible lesson here nationally on how to get dairy producers and dairy processors come together for the betterment and survival of each other?
Vandenheuvel: I think that’s probably a bit of a stretch at this point. California isn’t exactly the model that you would want to craft the rest of the industry policy discussions after. We are working on it. We as producers have been completely unified in working on this issue. Our cheese manufacturers have quite frankly got spoiled from many, many years of some of the lowest cost milk in the country. Never as big as a discount as we’ve seen in the last few years, but it’s very difficult to get the buyers of milk at the table in good faith to negotiate. We think we possibly have something here in this latest deal. But when you look at the deal, we still have a ways to go. This is a step forward, but merely a first step forward on a longer path.