As I reported last week, the Producer Review Board took action to reduce the Quota Implementation Plan (QIP) assessment on Grade A milk produced and marketed in California from 38 cents per cwt. to 32.5 cents per cwt. The reason for the big drop is that the fund that pays out the quota differential to producers who own quota has been over collecting by about a million dollars a month, and in addition, this fund received about $5.5 million that was left over from the State pooling equalization fund. The reduced assessment will deplete the surplus in the fund within about a year at which time, if nothing else happens, the assessment rate will need to be raised to equal the amount required each month to fund the quota payments.
Last week I had estimated that to be about 35 cents per cwt. I got some calls which questioned the 35- cent estimate because the QIP data we have is not a full year of production and does not include summer months when production drops. So, this week what I did was obtain solids nonfat (the QIP assessment is really based on SNF, not cwt. of milk) production data for the six months of 2018 prior to the start of the FMMO on November 1. I then ran a full-year scenario, which includes the summer months. The results of that exercise, which used the California SNF production from June of 2018 through May of 2019 shows that if production does not increase, it will require an assessment of 35.7 cents per cwt. or $.04103 per pound of SNF to fully fund the net quota payments (net because the Regional Quota Adjuster deductions also reduce the cost of the quota payments).
Geoff Vanden Heuvel
Director of Regulatory and Economic Affairs