Since November 1, 2018, California dairy farmers have been following a Federal Milk Marketing Order (FMMO). Geoff Vanden Heuvel, who is the Director of Regulatory and Economic Affairs for the California Milk Producers Council, looked into how the new federal order compares to the old state system from an economic point of view. Vanden Heuvel looked at 40 months of data and compared state and federal “All-Milk” prices. He found that California dairy farmers do better with the federal order than with the state order.
Dairy farmers in California
“The average price of a mailbox across the country during those 40 months was $17.99. California’s average price for milk in the mail was $17.93. “There was a difference of $.06,” Vanden Heuvel said. “I looked at the last 40 months of the state order, which was the same time period as the federal order, and found that the price difference between the California mailbox price and the federal mailbox price was $1.07. So, my conclusion is that the federal order has made California dairy farmers’ milk prices $1/cwt higher.
Producers will have different experiences depending on the month and whether or not they ship mostly to cheese plants or butter powder plants. But Vanden Heuvel says that “all things considered, it has been a good thing.”
FMMO COULD DO WITH SOME UPDATING
Even though the FMMO has helped California dairy farmers in many ways, there are still some parts of it that could be better. Vanden Heuvel said that the U.S. Department of Agriculture could use more power when it comes to studies on how things are processed. Under the state order, the California Department of Agriculture had the power to audit manufacturers to get accurate cost accounting for important conversion formulas. Vanden Heuvel says that the issue is “fairly important” to the way the FMMO is run as a whole.
“In the case of butter powder, we’re talking about a couple of dollars per hundredweight, and in the case of cheese, we’re talking about almost $3/cwt.” So, if that goes wrong, either the processor or the producer loses. In either case, it makes me wonder if that formula is correct,” Vanden Heuvel said. “If we’re going to keep a federal order program, which we think is good for farmers, it’s important that the USDA has the skills to run it in a trustworthy way over the long term. So, what’s missing is the ability to get a good estimate of how much it costs to make something.”
