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
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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
FN: 0005104