Thursday, October 18, 2018
 California Raises Cap on Whey Price  

The California Department of Food and Agriculture (CDFA) has announced that, effective Aug. 1, 2012, it will raise the cap on the whey factor used to value the California Class 4b milk price, from 65¢ per hundredweight to 75¢, but will leave the minimum price of 25¢ unchanged.

This change will allow a corresponding 10¢ increase in the Class 4b price when the dry whey commodity market is at the high end of the new range. California dairy producers will thus receive a higher milk check when dry whey prices exceed the previous cap than they would have before the change, and processors will have to pay more for raw milk used to make cheese and whey.

In a letter explaining the decision, CDFA Secretary Karen Ross noted that her department’s dairy experts and economists recommended that the whey factor remain unchanged. However, Ross was concerned about “the uncertain situation facing many dairy families who must buy feed in the open market,” because “feed costs, which were already high, have been exacerbated by a drought.”

Class 4b milk is used in cheese and dry whey products in California, which operates under a state marketing order distinct from the Federal Milk Marketing Order (FMMO) program. CDFA made changes to the Class 4b formula, which took effect last September. Groups representing dairy producers have been petitioning CDFA since March for additional changes to the whey factor, noting that it has significantly underperformed relative to FMMO Class III, which is based on butterfat, protein, and other solids prices and is heavily influenced by cheese and whey prices, much like the California 4b price. The California 4b milk price averaged $2.30/cwt. less than the FMMO Class III price between September 2011 and June 2012.

While the adjustment to the California whey factor is much smaller than dairy producers and cooperatives had requested, CDFA acknowledged the whey pricing factor is a minor issue in a significantly larger problem: the pricing structure for all milk and dairy products produced in California. CDFA created the California Dairy Future Task Force to begin discussions and propose solutions for dairy pricing formulas and market regulations.

Posted on Thursday, July 26, 2012 (Archive on Thursday, August 02, 2012)
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