WASHINGTON, Feb. 10, 2017 - California dairy farmers will be closely examining the Agricultural Marketing Service’s newly announced proposal to establish a Federal Milk Marketing Order (FMMO) in their state.

“We’re excited to see it hit the street and have started reviewing it,” said Kevin Abernathy, director of regulatory affairs for the Milk Producers Council, which represents California dairies. But he noted, “It’s a long process.”

California is the largest milk-producing state, accounting for about 20 percent of milk in the nation, AMS said. But it’s alone among large dairy producing states in not being part of a FMMO.

AMS announced the proposal, which will be published in the Feb. 14 Federal Register. A hearing is set for Feb. 22 in Clovis, Calif.

In the proposal, AMS said the FMMO “would promote more orderly marketing of milk in interstate commerce.”

Milk prices under the recommended order “would reflect national prices for manufactured products and local prices for fluid milk products, fostering greater equality for California producers and handlers in the markets where they compete,” the AMS proposal says. “Under the recommended order, handlers would be assured a uniform cost for raw milk, and producers would receive uniform payments for raw milk, regardless of its use.”

A key feature of the proposal is the retention of California’s quota on the amount of the milk produced in the state. “The California quota program should remain a function of (California Department of Food and Agriculture) in whatever manner CDFA deems appropriate,” the proposal says.

While the California State Order and FMMOs operate differently, “they both maintain similar classified pricing and marketwide pooling functions,” AMS said in the proposal, concluding that the FMMO would not “have a significant impact on California small businesses.”

In addition, AMS said that while the program “is likely to impose some costs on the regulated parties, those costs would be outweighed by the benefits expected to accrue to the California dairy industry.”

“FMMOs are legal instruments that regulate the purchase of milk between dairy farmers and the first buyer,” AMS said in its news release. “Where appropriate, the recommended California FMMO proposes adoption of uniform order provisions contained in the 10 current FMMOs. These uniform provisions include, but are not limited to, dairy product classification, end-product price formulas and the producer-handler definition.” 

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The proposal says that under the newly recommended FMMO, “uniform FMMO end-product price formulas would replace the CDFA price formulas currently used to calculate handler milk prices. FMMO end-product price formulas incorporate component prices derived from national end-product sales surveys conducted by AMS.”

AMS also noted that “regulated minimum prices, especially for milk used in cheese manufacturing, are likely to be higher than what handlers would pay under the CSO. However, pooling regulations under the proposed FMMO would allow handlers to elect not to pool milk used in manufacturing.”

The road to the proposal has indeed been a long one, as Abernathy noted. In 2013, “California Dairies of Visalia began working with Land O’Lakes and Dairy Farmers of America on draft language to petition for a federal order,” according to an article in The Business Journal. “The three dairy cooperatives account for 80 percent of the milk produced in the state.”

The co-ops submitted their request in early 2015. That fall, AMS held 40 days of hearings.