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CDFA calls hearing to discuss proposed milk amendments

Just as California debates the merits of joining the Federal Milk Marketing order program, comes word that the California Department of Food and Agriculture (CDFA), on its own motion, is calling a milk pricing hearing June 3 to consider proposed amendments to the Class 4b pricing formula.

Western United Dairymen (WUD), praised the call and stated in a press release that it, "in joint effort with other dairy trade associations, has been committed to finding a way to bring change to the California milk pricing system that creates a fair pricing structure for the state's dairy producers."

Rob Vandenheuvel, General Manager of California's Milk Producers Council, talked about it and the first public outreach meeting on creating a Federal order held Monday in Fresno in Friday's DairyLine. He said that proponents of the proposals that have been submitted were given the opportunity to defend their plan to USDA officials and attendees. The proposals include those offered by three of the major dairy cooperatives, the Dairy Institute of California, representing the state's dairy processors, plus two others.

He said the meeting in Fresno was very well attended and that there was a lot of producer participation and interest in what's in these proposals but are united in the plan offered by the three dairy cooperatives.

"We see some real challenges and problems with the way the processors of the Dairy Institute has crafted their alternative proposal but that's why we have a hearing process and USDA staff acts as the judge and jury in weighing the facts and the merits of the various proposals and we'll go through that process, hopefully, later this year if USDA does deem a hear necessary."

With regard to CDFA's call for a public hearing on amending the 4b pricing formula, Vandenheuvel agreed that we had been there and done that in "trying to get long term reform through our state order." "What this hearing very clearly is and is stated in the notice," he said, "Is that it's a temporary measure."

He said "There's recognition that producers are moving toward the Federal order as a long term option for how to regulate our milk pricing going forward, but between now and a Federal order, perhaps up to two years of hearings, recommended decisions, voting, and final decisions, Secretary Ross is providing a hearing for us to make a case why a, up to 24 month, adjustment to the Class 4b price calculation is warranted."

The Dairy Institute's Executive Director, Rachel Kaldor, told DairyBusiness Update that "Dairy Institute appreciates Secretary Ross' commitment to our industry. After finding some common ground during last summer's legislative push, we had hoped to make progress with our industry partners to formulate both short term remedies and long term reform. Our efforts were eclipsed by the pressure of price declines and drought, which are understandable reasons to call a hearing. We plan to fully participate. The subject of appropriate valuation of whey in regulated prices is of great concern to our members."

Meanwhile; Tuesday's Global Dairy Trade (GDT) auction saw the weighted average for all products offered drop 3.5 percent, following a 3.6 percent decline in the April 15 event and a 10.8 percent drop April 1. This is the fourth consecutive session of loss and the lowest level since 2009. Only one product offered saw a gain. Cheddar cheese was up 9.1 percent, which followed a 2.7 percent jump last time.

Leading the declines was buttermilk powder, down 14 percent, which was up 2.1 percent in the last event. Rennet casein was next, down 11 percent, following a 0.6 percent slip last time, then skim milk powder, down 7.5 percent, following a 7.8 percent drop last time. Anhydrous milkfat was down 6.3 percent, following a 2.3 percent gain last time. Next was whole milk powder, down 1.8 percent, following a 4.3 percent loss last time, and butter rounded up the losses, down 0.8 percent, following a 6.6 percent drop last time.

FC Stone reports the average GDT butter price equated to about $1.36 per pound U.S., down from $1.3727 in the April 15 event. Contrast that to CME butter which closed Friday morning at $1.9850 per pound. The GDT Cheddar cheese average was $1.37 per pound U.S., up from $1.3099. The U.S. block Cheddar CME price closed Friday at $1.6125. GDT skim milk powder, at 93 cents per pound U.S., is down from $1.0221, and the whole milk powder average at $1.08 per pound U.S., is down from $1.1093 in the last event. The CME Grade A nonfat dry milk price closed Friday at 95 3/4-cents per pound.

U.S. Dairy Exports Grow to 9 Month High, according to the U.S. Dairy Export Council's (USDEC) Alan Levitt in his latest blog posting. Levitt states: "In March, U.S. dairy export volumes reached their highest level in nine months, led by record-high shipments of nonfat dry milk/skim milk powder (NDM/SMP) to Mexico and cheese to South Korea. In addition, global shipments of lactose and whey protein isolate (WPI) topped previous highs.

Overall volume and value improved from previous months, though sales lagged year-ago levels. On a daily-average basis, exports were up 19 percent by volume and 14 percent by value from February. However, compared with last March, exports were down 9 percent by volume and 24 percent by value. Comparisons with March 2014 look less favorable in part because U.S. exports last March were the most ever.

Shipments of NDM/SMP were 55,022 tons, up 40 percent from February (daily average) and up 7 percent from last year. Sales to Mexico were 26,213 tons, the most ever and 68 percent more than a year ago.

Cheese exports in March were 34,302 tons, up 5 percent from February (daily average) but down 5 percent from a year ago. Suppliers sold 8,410 tons to South Korea, up 48 percent from last year and a new high.

Cash dairy prices in Chicago seem unfazed by what's going on in the rest of the world. The block Cheddar held at $1.61 for 11 consecutive sessions before it inched up a quarter-cent Friday and closed at $1.6125 per pound, up a quarter-cent on the week but 43 1/4-cents below a year ago. It sets a new high for 2015 and is at the highest level since December 22, 2014. The Cheddar barrels had an interesting week, jumping 6 cents Monday and dropping 6 1/4 the next day but closed Friday at $1.62, up a quarter-cent on the week, 40 cents below a year ago, and three-quarter cents above the blocks, a spread that typically runs 3-5 cents below the blocks. Eleven cars of each traded hands on the week. The NDPSR-surveyed U.S. average block price climbed to $1.6055 per pound, up 1.3 cents. The barrels averaged $1.6655, up 0.8 cent.

FC Stone dairy broker, Dave Kurzawski, commented in Wednesday's Early Morning Update on Tuesday's cheese sales: "The volume of 8 trades was the largest single day volume going back to the last week of 2014. On December 26th we traded 9 loads of barrels. You've got to go all the way back to July to find a single day volume greater than 8 for the blocks."

Dairy Market News (DMN) states that "Although block cheese market prices have been extremely stable, unchanged for 11 trading days at the CME, this week's sharp up and down movement in barrel prices reflects the apparent continuing general tightness of barrel supplies contrasted with the ability of sellers to quickly respond to price opportunity, notwithstanding overall supply tightness."

Far fewer cheese plants manufacture barrels than blocks, so the ongoing discussion of cheese manufacturing often focuses less on barrels than blocks. Of the barrel manufacturers, many use much of their production for their own purposes but make occasional or low volume sales to customers. A smaller number manufacture barrels primarily for sales to external customers. Most of them have committed production for weeks into the future. With demand for barrels being seasonally strong, even plentiful milk supplies and full production schedules leave uncommitted supplies in short supply.

While barrel seasonal demand is often ascribed to demand for process cheese used in grilling, a factor sometimes overlooked is the upward trend in demand for cheese curds from retail customers, restaurants, and farmer's market sales. Cheese curds are more profitable to manufacturers than barrels. Meeting the rising demand for cheese curds reduces the output of barrels for plants in the cheese curd business, says DMN.

Cash butter appears to be closing in on $2 per pound. It finished Friday at $1.9850, up 13 1/2-cents on the week but still 35 cents below a year ago. Friday's spot price sets a new high for 2015 and is the highest level since December 12, 2014. NDPSR butter averaged $1.8049, up 4.7 cents.

Butter demand is remaining steady, according to DMN. Some manufacturers still want to build inventory levels, but are unable to with the current demand levels. This has some manufacturers concerned about Third Quarter obligations. Churning remains active. Some reports say surplus cream is going into butter manufacturing. The Foreign Agricultural Service reports that U.S. butter exports in the January to March 2015 period, totaled 17.1 million pounds, down 75 percent from the same period in 2014.

Butter manufacturing remains a mixed picture in the West. Cream availability appears to be long in some areas, and tight in others. Some plants have eased back on butter production and are selling more cream.

Cash Grade A nonfat dry milk closed the week at 95 3/4-cents per pound, up 2 cents but 83 cents below a year ago. Fourteen cars traded hands this week at the CME. NDPSR powder averaged 95.06 cents per pound, down 0.1 cent, and dry whey averaged 46.49 cents per pound, up 0.8 cent.

Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He's formerly the voice of the radio show "DairyLine," and his column appears in agricultural papers across the U.S. Contact him at