BILL ANALYSIS Ó
AB 629
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON AGRICULTURE
Henry T. Perea, Chair
AB 629
(Perea) - As Amended April 9, 2015
SUBJECT: Market milk: stabilization and marketing plans:
minimum prices.
SUMMARY: Requires the Secretary of the California Department of
Food and Agriculture (CDFA) to inform producers and handlers on
a monthly basis, the minimum prices for the various components
of market milk, as described; and, makes technical corrections.
Specifically, this bill:
1)Corrects misspellings, updates code references, and makes
other technical non-substantive changes.
2)Requires CDFA to inform producers and handlers in writing, and
by posting on CDFA's web site, or by other means determined
appropriate by CDFA, the monthly price of each specified
market milk component below:
a) The milk fat contained in the milk;
b) The solids-not-fat or subcomponents thereof contained in
the milk;
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c) The fluid contained in the milk; and,
d) Any combination of the milk fat contained in the milk,
the solids-not-fat or subcomponents thereof contained in
the milk, or the fluid contained in the milk.
EXISTING LAW authorizes the Stabilization and Marketing of
Market Milk Act (Act) which provides an array of requirements
for CDFA to follow in setting market milk prices; it establishes
the development of market milk pricing formulas based upon the
milk's components, as specified; the formulas can be modified
through a public hearing process by the producers or processors
petitioning CDFA, or by CDFA calling a hearing; requires the use
of specified market data in order to keep California milk prices
in "reasonable relationship to neighboring state prices." The
Act requires processors to pay a minimum price, established by
CDFA, for all milk into the stabilization pool based upon what
products were made from the milk; the blended value of the pool
is then paid to the producers, after a premium known as quota is
paid to those holding quota.
FISCAL EFFECT: Unknown. Legislative Counsel has keyed this
bill fiscal.
COMMENTS: California milk producers have been on an economic
roller coaster over the last decade, but have consistently been
receiving lower overall milk prices than neighboring states and
federal milk market orders (FMMO). This has caused much tension
in the industry and consolidation, as many producers went out of
business; however, the overall milking cow numbers remained
fairly steady. Between 2005 and late into 2013, milk prices
were marginal to breakeven. Late in 2013 through most of 2014,
the prices were some of the highest received by producers. In
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late 2014 to date, the prices have fallen dramatically and are
at or below cost of production. CDFA has been petitioned for
several price hearings over the decade but the outcomes have
left producers unsatisfied with their milk prices.
California processors pay on five classes of milk - 1, 2, 3, 4a,
and 4b. Federal milk pools pay on four classes of milk - 1, 2,
3, and 4. The main issue for California producers has been the
prices paid on the cheese class (4b) of milk products which has
significantly lagged behind the federal comparable cheese class
(3) prices. To this end, California's three milk cooperatives,
supported by the producers trade associations, have petitioned
the United States Department of Agriculture (USDA) to create a
FMMO. USDA has accepted the petition and will begin
informational hearings next month. The process of creating a
FMMO can be lengthy, from two to four years, to complete. Once
USDA formulates a FMMO, then the producers have a straight up or
down vote to accept it. Once accepted, a FMMO can be petitioned
for changes, which may take as long as its creation to occur.
Changing the state Act is much faster, typically within 180 days
or less.
Dairymen use various business strategies to manage their
operations, including forward contracting of feed and other
operational inputs. This bill will provide producers and
processors with important information on the component pricing
of market milk and enable them to track their revenues for
better operational management.
REGISTERED SUPPORT / OPPOSITION:
Support
AB 629
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Western United Dairymen
Opposition
None on file
Analysis Prepared by:Jim Collin / AGRI. / (916) 319-2084