BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1910
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1910 (Agriculture Committee)
          As Amended   June 10, 2010
          Majority vote
           
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          |ASSEMBLY:  |74-0 |(April 22,      |SENATE: |33-0 |(August 2,     |
          |           |     |2010)           |        |     |2010)          |
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           Original Committee Reference:    AGRI.  

           SUMMARY  :  Authorizes repasteurized milk to be reprocessed and  
          sold under certain specified conditions and restrictions in  
          accordance with the Pasteurized Milk Ordinance (PMO);  
          automatically makes ineligible future shipments to a handler  
          once that handler satisfies specifics; requires the Secretary of  
          the California Department of Food and Agriculture (CDFA),  
          regarding a defaulting milk handler, to exhaust all  
          administrative and legal remedies before seeking payment from  
          the Milk Producers Security Trust Fund (Trust); and, makes  
          technical changes.  

           The Senate amendments  :

          1)Establish conditions under which repasteurized milk may be  
            sold as market milk and what milk cannot be repasteurized,  
            providing conformity in state statute to the national PMO.

          2)Remove CDFA's discretion to notify all producers, cooperative  
            associations, and other interested parties, when a milk  
            handler is in default or when future shipments are not covered  
            by the fund, making notification mandatory.

           AS PASSED BY THE ASSEMBLY  , this bill required the CDFA Secretary  
          to exhaust all administrative and legal remedies before seeking  
          payment from the Trust when a milk handler defaults, and made  
          technical changes. 
           
           FISCAL EFFECT  :  According to the Senate Committee on  
          Appropriations, pursuant to Senate Rule 28.8, negligible costs.

           COMMENTS  :  The Grade A PMO, published by the Food and Drug  
          Administration (FDA), outlines minimum standards and  
          requirements for Grade A Milk production and processing.  Grade  








                                                                  AB 1910
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          A standards are recommended by the National Conference on  
          Interstate Milk Shipments, which is composed of voting  
          representatives from state and local regulatory agencies and  
          nonvoting representatives from the dairy industry and FDA.  As a  
          general rule, FDA accepts the conference recommendations and  
          incorporates them into the revised PMO.  Conformity to PMO is  
          required for products to be shipped interstate.

          The Trust was created in 1987 in response to the bankruptcy by  
          Knudsen Foremost, at the time, the state's largest milk  
          processor.  That bankruptcy caused California dairy farmers to  
          lose approximately $36 million.  The purpose of the Trust is to  
          cover milk producer payments in the event of a processor payment  
          default.  While the Trust has been successful with a minimum of  
          loss to farmers, adding increased vigilance over producers since  
          its creation 33 years ago, it has needed some updating in recent  
          years.  California's dairy producers are paid through the Pool  
          Equalization Fund (Pool) that the processors pay into, based  
          upon the products they produce, i.e., fluid milk, soft cheeses  
          and yogurts, manufactured products (ice creams and novelties),  
          and hard cheese, powder and butter.

          Due to the significant increase of the Class 4 (hard cheese,  
          powder and butter) milk processors since  the creation of the  
          Trust, legislation was put forward in 2007 to include them into  
          the Trust, and related changes were made in order to ensure  
          payment, should a large processor default.  As of January 1,  
          2007, payments to the Trust were halted, until such time that  
          the Trust falls below the statutory threshold.  In 2008, further  
          modifications were legislated to ensure that securities provided  
          to CDFA are valid and verified.

          Prior to the recent bankruptcy of Humboldt Creamery, CDFA did  
          not inform anyone of the Creamery's failure to pay the pool for  
          shipments of milk, thereby allowing the continuation of  
          deliveries that were not paid for.  The required notification  
          should prevent this from occurring in the future.

          AB 1910 is intended to continue to clarify the role and duty of  
          CDFA regarding taking action against the Trust.  The industry  
          states their intention that the Trust be a fail-safe for  
          producer's payments, but not a catch-all for them.  A processor  
          may not pay the Milk Pool for reasons other than bankruptcy or  
          default.  CDFA has other alternative means for seeking  
          collection of such revenues and penalties.  The creation of the  








                                                                  AB 1910
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          Trust was not intended to replace those options by CDFA.  This  
          bill is intended to clarify that intent.

           Related legislation  :  AB 2284 (Committee on Agriculture),  
          Chapter 236, Statutes of 2008, required specific temperature for  
          market milk at specific times; deleted specific frozen yogurt  
          requirements; provided that any instrument used as acceptable  
          security for the Trust be subject to revised requirements;  
          modified the circumstances under which CDFA may release the  
          issuer of an acceptable security from liability; and, made other  
          technical changes.

          AB 2343 (Committee on Agriculture), Chapter 505, Statutes of  
          2006, required cheese, butter and powdered milk processors  
          (including specified cooperatives) to remit security charges to  
          CDFA for the Trust; established a $30 million account threshold;  
          provided that payments be halted by January 1, 2007, until such  
          time that the fund falls below that threshold; required the CDFA  
          Secretary to consult with the fund board prior to transferring  
          the fund surplus to the Dairy Marketing Branch; and, provided  
          for enhanced security charges, to be collected from processors  
          who conduct milk transfers that exceed the amount of the total  
          fund balance.

           
          Analysis Prepared by  :    Jim Collin / AGRI. / (916) 319-2084 


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