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Prevention Services Division. During the quarantine, crops that host the Oriental fruit fly—including more than 300 varieties of tree fruits, nuts, vegetables and berries—were not allowed to be moved from the properties where they were grown. Commercial crops were required to meet treatment or processing standards before being harvested or moved. Parts of San Bernardino and Riverside counties remain under quarantine for the Oriental fruit fly. Other current fruit fly quarantines include parts of Los Angeles County for the Mediterranean fruit fly and parts of Ventura and Los Angeles counties for the Queensland fruit fly. director of regulatory and economic affairs for Milk Producers Council, said “it’s very hard to make the argument” that manu- facturing costs haven’t gone up during the past 16 years and that processors should not be entitled to an increase. In its proposal, National Milk Producers Federation, which represents dairy-farmer cooperatives, asked for increases of about 55 to 60 cents per cwt. for Class 3 and Class 4 milk, while processors called for increas- es of about $1.35 to $1.55 per cwt. Vanden Heuvel said USDA’s proposed increases were bigger than he expected, but the decision spelled out how the de- partment arrived at its numbers, and “I cannot argue with their approach.” “It could have been worse,” he said. “(The increases) could have gone up much higher, and they didn’t.” In California, most of the butter and milk powder is made by producer-owned co- operatives. While raising the make allow- ance on these products lowers the price the cooperatives pay for the milk, they’re essentially buying their own milk, Vanden Heuvel said. “It really is just shifting the money from one pocket to the other,” he said, noting the cooperatives have been losing money on manufacturing butter and powder. For cheese manufacturers such as Leprino Foods and Hilmar Cheese Co., the increases to the make allowance would al- low them to buy their milk at a lower price, “and that’s going to hurt the people that sell them milk,” Vanden Heuvel said. Looking at USDA’s entire decision, Vanden Heuvel said he doesn’t think the proposed changes would necessarily result in “a huge negative” for California produc- ers, as “there’s some positives, too.” One of those positives is on the pricing survey, he said. USDA has proposed drop- ping the use of 500-pound barrel cheddar cheese prices in the formula and relying solely on the 40-pound block cheddar cheese price to determine the monthly av- erage cheese price. Vanden Heuvel noted barrel cheese prices during the past several years have at times been 30 to 40 cents a pound less than block cheese prices, re- sulting in “a huge discounted factor on the Class 3 price.”
In a letter to its members, Rob Vandenheuvel of California Dairies Inc., the state’s largest dairy cooperative, said member-owners of the co-op should view USDA’s decision “as a critical improvement to the FMMO system.” He noted CDI was “heavily involved” in the work done by National Milk Producers Federation, which submitted a proposal to USDA that initiated the hearing. That pro- cess involved cooperatives with and with- out significant manufacturing infrastruc- ture investment, he said, with CDI being the former. The federation’s proposal took a balanced approach, he added, and USDA “clearly saw value in” it, as many elements of NMPF’s proposal were reflected in the department’s recommended decision. Kings County dairy farmer Joaquin Contente, who serves as president of California Dairy Campaign, agreed that USDA’s decision tried to balance the con- cerns of producers and processors, though he stopped short of saying the department was “fair.” He characterized the draft decision to return to the “higher-of” formula as “the bone they threw back at the producers.” He said he was disappointed USDA re- jected CDC’s proposal to add mozzarella prices to the cheese-pricing formula, as doing so would more accurately reflect the value of the current cheese market. USDA said CDC’s proposal lacked data to sup- port adoption.
CDC’s Lynne McBride said such data would need to come from mozzarella cheese makers, and to get it, there would need to be a legislative mandate. Producer groups including AFBF and CDC have also called for mandatory, au- dited surveys of processors’ costs before make allowances are raised. Current cost surveys are voluntary and unaudited. In a statement, AFBF President Zippy Duvall said, “dairy farmers deserve fairness in their milk checks and transparency in the for- mula, but the milk marketing order system can’t deliver that unless make allowances are based on accurate and unbiased data.” Even with more reliable data, McBride said her group does not agree that farmers should be required to shoulder increased processing costs, because unlike proces- sors, farmers can’t pass on their costs. In its decision, USDA maintains that it’s inappropriate to consider producer income in determining make-allowance levels. The department said even though “many stakeholders look to the FMMO program to provide stability,” its formu- las are market-oriented and reflect sup- ply-and-demand conditions. “Time will tell how it works out, but the market will adjust,” Geoff Vanden Heuvel of Milk Producers Council said, “and I ex- pect it will be many years before we have another make-allowance hearing.” (Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)
the formula historically, but it changed in 2018 to one that uses the average price of Class 3 and Class 4, plus 74 cents for every hundred pounds of milk. Producers say the current formula caused them to miss out on an estimated $1 billion of revenue in recent years, es- pecially during the pandemic, when the price of milk used to make cheese soared but milk used to make butter and nonfat dry milk did not. Restoration of the so-called “higher-of” formula should raise producer prices on fluid milk, analysts say. But the gains are offset by USDA’s proposal to raise make allowances, or what dairy farmers pay manufacturers to process their milk into the various dairy products. The proposed increases are particular- ly concerning to California dairy farmers because only about 20% of their milk is bottled, with nearly 74% of it used to make cheese, butter and powder. Under the proposal, producers would see the make allowance for cheese go up by nearly 90 cents per hundredweight and about 75 cents per cwt. for butter and powder. “For California, it’s pretty clear that the losses are greater,” said Lynne McBride, executive director of California Dairy Campaign, pointing to USDA’s economic impact analysis on the proposed changes. Under the proposal, the pricing formula for Class 1 milk used to make shelf-stable milk and other extended shelf-life prod- ucts won’t be based on the “higher-off” for- mula, however. Instead, USDA proposed a 24-month rolling adjuster that incorpo- rates the “averaging” method. Groups such as Wisconsin-based American Dairy Coalition questioned the approach, say- ing it’s unclear how the split pricing within Class 1 would affect competition. McBride said even though her group supported returning to the “higher-of” formula, there was not enough benefit “to merit opening up this whole process and seeing these unprecedented increases in the make allowance,” which would dent California dairy farmer milk checks. Noting that USDA last adjusted make allowances in 2008, Geoff Vanden Heuvel,
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State lifts more quarantines Contra Costa County has ended its quar- antine for the Oriental fruit fly, marking the third one the state has lifted this month, the California Department of Food and Agriculture announced last week.
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The region was placed under quarantine for nearly 10 months after populations of the invasive pest were detected. Parts of Brentwood, Oakley, Antioch, Bethel Island and Discovery Bay were affected. “These recent successes prove that through the cooperation of residents across the state and our partners, eradication of invasive species is pos- sible,” said Victoria Hornbaker, CDFA director of the Plant Health and Pest
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8 Ag Alert July 17, 2024
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