As I reported last month, the Producer Review Board (PRB) has been reviewing the Class I revenue generated into the California Federal Order pool and comparing that income to the payouts to quota holders, which was fixed at $1.70 per cwt. back in 1994, some thirty years ago.
What those numbers show is steadily declining revenue from Class I, compared to a very stable quota payout. For example, in April 2024, the CA FMMO reported 395,561,655 pounds of Class I sales. Multiplying that number by the average CA FMMO Class I differential of $1.89 per cwt. yielded $7,480,070 in Class I revenue for April. Net quota payouts to quota holders for April have not yet been reported, but they really don’t change because the pounds of quota SNF that exists doesn’t change and that quota payout should be in the range of $11,700,000.
About 2,213,000 pounds of quota SNF exist. If you took April’s Class I revenue of $7,480,070 and divided it by 30 days and then divide that by 2,213,000, you get a daily value per pound of $0.1127. The standard differential is based on 8.7 pounds of SNF in a cwt. of milk: 8.7 multiplied by $0.1127 equals $0.98 per cwt.
This situation has been going on for a long time. PRB member Frank Konyn presented all of this information to the PRB over the past several meetings. (You can read my articles on this issue here.) On May 1, the PRB debated and passed a recommendation to California Agriculture Secretary Karen Ross that a producer referendum be held to vote on whether to reduce the quota differential from the current $0.195 per pound of SNF ($1.70 per cwt.) to $0.115 per pound of SNF ($1.00 per cwt) and to eliminate the Regional Quota Adjusters. The net effect of the change, if it is passed, will be to lower the quota payment to a flat $1.00 per cwt. to quota holders everywhere in the state. That would lower the QIP assessment needed to fund the quota payments from the current $0.348 per cwt. to about $0.23 per cwt.
CDFA announced that they are planning a series of public meetings in July to give the industry the opportunity to learn about the proposal. They anticipate sending out ballots to producers in late August.
Here are the rules for the referendum from Section 62717 of the California Food and Agriculture Code:
51% or more of the eligible producers need to vote; of the votes cast, the referendum passes if 65% of the voting producers producing at least 51% of the voting milk vote yes; Or 51% of the voting producers producing at least 65% of the voting milk vote yes.
Milk Producers Council has no official position on this issue, but I am available to answer questions about this proposal if you have them.
Geoff Vanden Heuvel
Director of Regulatory and Economic Affairs