The Producer Review Board met on Thursday June 20, 2019 in Sacramento and reviewed the first seven months of operation of the Quota Implementation Plan (QIP). The QIP is the mechanism that enables California to be able to continue to operate the State quota program concurrently with the Federal Milk Marketing Order. The money needed to fund the payments to quota holders is collected as an assessment on all Grade A milk produced and marketed in California.
The initial assessment rate was established at the equivalent of 38 cents per hundredweight. As it has turned out, the assessment has been collecting about $1 million more per month than is necessary to cover the quota payments. In addition, there was about $5.5 million of producer money left over in the Pooling Equalization Fund that was transferred into QIP fund. What this means is that there is now about $12 million worth of excess funds in the QIP account. The QIP administrator, Donald Shippelhoute, indicated that a $2 million cash reserve was all the liquidity that was necessary to keep the QIP functioning. Therefore, any funds in excess of $2 million could be distributed to producers. The PRB adopted his recommendation that the QIP assessment rate be reduced to 32.5 cents per hundredweight which should, absent any other changes, within 12 months bring the fund balance down to $2 million. At that time the PRB can reevaluate the assessment rate. The current quota payout would require an assessment rate of about 35 cents per cwt. to be in balance. The lower rate should start with September milk.
Geoff Vanden Heuvel
Director of Regulatory and Economic Affairs