Producer Review Board sends Stand-Alone Quota Program to Secretary Karen Ross

Geoff Vanden Heuvel

Geoffrey Vanden HeuvelEditor’s note:  The author, a dairyman in Chino, Calif., is a board member and economics consultant for the Milk Producers Council.  This piece appeared in the MPC newsletter dated Sept. 15 and is used here with permission

At its September 12, 2017 meeting in Modesto, the Producer Review Board (PRB) reviewed the public comment letters that were submitted on the preliminary plan for the Stand-Alone Quota Program. California Department of Food and Agriculture staff prepared a summary of the comments and their responses to them in a document you can read here. That summary was very helpful because it allowed the PRB to narrow down the issues it wanted to discuss. There were a few minor word and title changes that had everyone’s support, but the majority of the time was spent on two issues.

Section 1100 of the Quota Implementation Plan said: “The continuation of this Plan is subject to a producer survey every five years. The survey shall be conducted by an independent party selected by the Producer Review Board. The survey shall evaluate the effectiveness of the Plan, and the desire of producers to continue operation of the Plan.”

There were pretty strong objections to this section, voiced both in comment letters and in oral public comment Page 2 of 3 at the meeting. Various PRB members also voiced concerns about how this provision would be perceived. It took a while, but different language was worked out and the recommended plan Section 1100 now reads: “A producer survey shall be conducted by an independent party selected by the Producer Review Board at least every five years. The survey shall evaluate the effectiveness of the Plan.”

Not changed from the prior version was the next sentence “The results of the review will be provided to the Producer Review Board for their consideration, and recommendation to the Secretary.” This satisfied the board members and was adopted.

The other issue that took a lot of time was re-hashing the Producer Handler issue. At the June PRB meeting the Producer Handlers that are members of the PRB made a motion to allow them to exchange each pound of their exempt quota for 1.96 pounds of regular quota. That failed by a vote of 5 yes to 9 no. The board then voted 11 yes to 3 noes “that exempt quota should receive the same payout as producer quota and be funded through assessments on all grade A milk produced and marketed in California, and/or California grade A milk received by a California handler, to fund a stand-alone quota program.”

At the September 12 meeting, the Producer Handlers made one more attempt to get a reconsideration of their desire to get extra regular quota in exchange for their exempt quota. The Dairy Institute attorney spoke out against any change by explaining his view that giving the current California Producer Handlers any type of premium for their exempt quota would create legal problems in the Federal Order. Of course, the attorney for the Producer Handlers had a completely different view. The discussion was robust, but at the end of it, a motion to reconsider was not entertained due to Robert’s Rules of Order. Since a motion on the subject had already been rejected by the PRB at the June meeting, a motion to reconsider could only be made by someone who had voted no on the previous motion. None of the 9 no votes on the original motion were willing to make a motion to reconsider, so the effort to change the one for one exchange of exempt quota for regular quota died.

Obviously, the Producer Handlers think they deserve a better deal. But going from a State Order to a Federal Order means different impacts to a number of different parties, not just Producer Handlers. Under the current California state milk order these four legacy Producer Handlers are exempt from paying into the pool on a certain amount of their class 1 sales. It is worth noting that in a Federal Order Producer Handlers are also allowed to exempt their class 1 sales from paying into the pool, but the rules about who qualifies for that exemption are different in the FMMO and the four current California Producer Handlers are way too big to qualify.

As for their exempt quota, it was never worth more than regular quota because the exemption was non-transferable. In fact, these Producer Handlers have had two opportunities to convert regular quota into exempt quota. Of the 59,039 pounds of daily solids-non-fat exempt quota that currently exist, 42,700 of those pounds started out as regular quota and were converted to exempt quota on a one for one basis. For more detail on this topic, refer to an article in the June 9 MPC Friday Report which you can read here. When the Pooling Plan started in 1969 there were 49 exempt Producer Handlers. Over the years, 45 of them have converted their exempt quota to regular quota on a one for one basis. These four remain. If California producers vote to join the Federal Milk Marketing Order system, the FMMO rules on producer handlers will apply to the California dairy industry. The PRB’s job was to protect the value of quota in new system. They have done that for all producers, including the Producer Handlers.

The next step is for Secretary Ross to review the work and approve it for consideration by producers. A ballot will then be sent out to producers requiring them to vote on the Stand-Alone Quota program. Remember the Stand-Alone Quota Program will ONLY be implemented IF California producers also vote to join the Federal Milk Marketing Order system. Because the cooperatives, who are the petitioners for a California FMMO have said that they will only consider a FMMO for California IF it protects Quota value, it is very important that the Stand-Alone Quota Plan passes or we will not get a chance to consider a FMMO for California.

In order for a vote to pass, 51% of California producers need to vote and of those voting, in order for the referendum to pass, 65% of the producers representing at least 51% of the milk that is voting need to vote yes or 51% of the votes representing 65% of the voting milk need to vote yes. Watch your mailbox for the ballot which should come within the next few weeks.