California producers to see temporary milk price boost
California dairy producers will see a temporary boost in their milk prices during the first quarter of 2010.
The California Department of Food and Agriculture (CDFA) will temporarily amend Class 1, 2, 3, 4a and 4b pricing formulas for the period Jan. 1-March 31, 2010. The effect of these changes will, on average, increase the monthly pool prices for the three months by approximately 15.5¢/cwt.
Under the temporary amendments, the subject of proposals considered at a Nov. 9, 2009 public hearing, CDFA will:
• increase the Class 1 price approximately 35¢/cwt. by adding 0.35¢/lb. to the milk fat price; 2.98¢/lb. to the milk solids-not-fat price; and 0.09¢/lb. to the milk fluid carrier price.
• increase the Class 2 and 3 prices approximately 25¢/cwt. by adding 2.05¢/lb. to both the milk fat and milk solids-not-fat prices.
• increase the Class 4a and 4b prices approximately 10¢/cwt. by adding 0.82¢/lb. to both the milk fat and milk solids-not-fat prices.
The adjustments will take effect for milk delivered to processing plants on or after Jan. 1, 2010.
CDFA analysis said the adjustment will add about 3¢/gallon on fluid milk products. Adjustments on other dairy product classifications will cost less than 1¢ per container in production costs, and are unlikely to have an effect on consumers at the retail level.
In 2009, the prices that dairy farmers receive plummeted, dropping by more than half from 2008 levels. In addition, dairy feed costs kept milk production costs at levels that greatly exceeded farm milk prices. As a consequence, California dairy farmers lost an estimated $1.4 billion in the first nine months of 2009.
Due to those economic factors, California’s 2009 milk production reversed its 30-year trend, and is running almost 4% lower than the total for 2008. Additionally, a growing number of California dairy farmers exited the industry in the latter part of 2008 and into 2009. For the first time in decades, the state’s milk production will be less than the total needs of its processing plants.
While the temporary price adjustment is not designed to recover the financial losses that California dairy farmers incurred over the past 12 months, it is designed to help dairy farmers sustain their operations as milk prices begin to improve to near profitability, CDFA said.
A detailed explanation of decision can be obtained on the CDFA’s Dairy Marketing website at www.cdfa.ca.gov/dairy and clicking on Hearing Matrix.