BILL ANALYSIS �
AB 31
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 31 (Pan) - As Amended: May 7, 2013
Policy Committee: AgricultureVote:6
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill states uncodified findings and declarations as it
pertains to the pricing of milk in the state. Specifically, this
bill finds and declares:
1)The dairy industry has been confronted with challenges in the
past several years.
2)There has been a dramatic increase in the cost of corn and
other grains used to feed livestock.
3)It is the intent of the Legislature to provide the Department
of Food and Agriculture (CDFA) with the authority to consider
an emergency milk price adjustment.
4)It is the intent of the Legislature that the CDFA Secretary
engage the Dairy Future Task Force to develop a long-term plan
that ensures sustainability.
5)It is the intent of the Legislature to address establishing a
dry whey value factor in the computation of class 4b milk
products (cheese and whey).
FISCAL EFFECT
If CDFA considers an emergency milk price adjustment, develops a
long-term plan and adjusts the pricing for 4b milk to use a dry
whey value factor, as this language intends, costs to CDFA would
likely be between $2 million and $3 million (Food and
Agriculture Fund or GF). The majority of the costs result from
the requirement to engage a Dairy Future Task Force that
AB 31
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comprises both producers and processors to develop a long-term
plan for milk pricing. The last milk pricing report commissioned
by the Milk Advisory Board cost approximately $3 million.
COMMENTS
1)Purpose . As originally drafted, this bill required CDFA to
increase the price of 4b market milk, using a dry whey value
factor that is no less than 80% of the federal milk marketing
order dry whey factor. This change in formula would have
likely increased the price of milk and other dairy products
significantly. In the Agriculture committee, the contents of
the bill were removed.
The bill passed out of the Agriculture committee with
amendments making it a spot/intent bill with an agreement the
author work with the sponsors and opposition to craft an
acceptable bill.
2)Milk Pricing . Current law authorizes CDFA to formulate milk
pooling plans that establish, through regulation, the minimum
prices to be paid by milk handlers for specified utilization
(classes) of market milk. The Secretary is required to take
relevant economic factors and other described considerations
in establishing the price to be paid for each class of market
milk. Current law permits the Secretary to call for a hearing
or be petitioned by producers or processors, to adjust a
pricing formula(s) or other factors involved in a pricing
formula(s).
California milk pooling rules establish price formulas for
each of the five classes of market milk and require handlers
to pay a minimum price based upon usage by class. The five
classes are as follows:
Class 1: Fluid milk products
Class 2: Yogurt, cottage cheese, sour cream
Class 3: Frozen Products
Class 4a: Butter, nonfat dry milk
Class 4b: Cheese, whey products
3)Background . Milk pricing has been regulated in some form since
1935. The California Milk Pooling Act was created in 1967 in
an effort to stabilize milk pricing and end bidding wars
between producers. California is the only state milk pool.
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The majority of states belong to federal milk pools, which
were authorized in 1937.
The act was created to spread the revenue from all milk
products to all producers, regardless of how their milk was
used. The state policy has been that revenue from all milk
products are shared with producers, and incentives were
created for processors for doing business in California. The
structure allows the Secretary to address usage price changes
through regulation, not statute, in a more timely fashion than
under federal milk pooling. California can change price
formulas within a 90 day period, whereas, the federal price
changes can take 18 months to three years.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081