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California Permanently Adopts Dry Whey Scale Implemented Last Year
CDFA Concerned About Future Outlook For State’s Milk Production
Karen Ross, secretary of the California Department of Food and Agriculture (CDFA), last Friday ordered a permanent change to the dry whey scale in the state’s Class 4b (cheesemilk) pricing formula, effective June 1, 2016.
The dry whey scale being adopted permanently is the same dry whey scale that was implemented on a temporary basis beginning August 1, 2015, and was to have remained in effect until July 31, 2016.
This change is based on a public hearing held on April 11, 2016. However, the CDFA declined to accept the hearing panel’s decision regarding the dry whey scale in the Class 4b formula, which would have capped the whey factor at $1.55 per hundredweight when the monthly average dry whey price is above 60 cents per pound.
The CDFA said it was concerned about the future outlook for milk production in California, in light of the continuing declining trend in daily milk production observed over the last 16 months.
So the department determined that the new, permanent whey scale will cap the whey factor in the Class 4b formula at $2.0050 per hundredweight, not $1.55 per hundred, with increased whey values for the steps leading to the cap.
“Once dairy product markets improve, this adjustment will provide a needed increase in revenue to producers to promote a stable milk supply,” Ross noted in a letter to dairy industry stakeholders.
“I still believe adjustments to the pricing formulas are inadequate to address long-term structural challenges facing the dairy industry,” Ross stated. “However, we must continue to respond to changing conditions in our industry by using the only tools available through the current milk pricing system.”
Financial conditions for dairy producers in California and the US are “especially challenging” now, due to declining milk prices caused by strong global milk production, high levels of dairy product inventories, and reduced dairy product sales to key importing countries, Ross said.
“I also realize that manufacturers of California’s dairy products have made significant investments in this state and they are operating within a much more competitive environment due to weakened global demand,” Ross said. “Milk prices and marketing conditions are not expected to recover until the balance between global supply and demand improves.”
As Ross has “frequently stated, we must collaboratively work together to address the issues impacting our industry. Although there could be potential changes pending decisions at the federal level, we must not let that stall efforts now to work within the limitations of the pricing system to promote long-term growth and prosperity of the California dairy sector. Our dairy families and processors who have committed to California deserve no less.”
In its report, the hearing panel addressed three issues. The first was how to determine the whey factor in the Class 4b
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