On March 4, the California Department of Food and Agriculture (CDFA) mailed ballots to all eligible California dairy producers, giving them the opportunity to vote in a referendum to approve or disapprove of what is called the “Quota Sunset” plan. This plan was developed through nearly a year-long process that was organized by a group called United Dairy Families of California (UDFC) and sponsored by cooperatives California Dairies, Inc., Dairy Farmers of America, Land O’ Lakes and by trade associations California Dairy Campaign, Milk Producers Council and Western United Dairies. The advocacy group STOP QIP was also part of the sponsoring group.
Throughout the process, many different opinions and ideas about Quota were shared and several specific options and proposals were analyzed and debated. In the end, a single option was identified as the most likely to gain the support of the super-majority of California producers that would be required to make a change in the current system. That proposal is quite simple. It immediately changes the Regional Quota Adjuster in the current Quota payment to equalize the payment at $1.43 per cwt. This change would reduce the Quota assessment by a little over 2 cents per cwt. The second part of the plan is that the payments to Quota holders would continue until March 1, 2025, at which time, the program would cease to exist.
At $1.43 per cwt., each pound of Quota solids earns $5 per month, so if you count the months until March 1, 2025 you can calculate how much remaining revenue would be earned by each pound of Quota solids. March 1, 2025 was chosen as the termination date because when the plan was officially announced at the Tulare Farm Show in February of 2020, the intent was to give Quota holders five years of revenue in exchange for the ultimate termination of the program. It has taken from February of 2020 until now for petitions from producers to be gathered, for CDFA to verify the validity of the petition, for a meeting of the Producer Review Board to consider the petition to take place, for a hearing to be held on the petition, for the Judge to render a decision on the petition, for the Secretary to accept the decision of the Judge, and for a referendum to be scheduled. Much has been written about this process in the Friday Report and you can find a compilation of those article here.
It is now decision time. Producers have three choices. They can vote yes. They can vote no. Or they cannot vote. CDFA mailed 931 ballots this week. 51% of those ballots must be returned correctly to have a valid referendum. That is, 475 ballots must be returned for the results of the referendum to take effect. Each individual ballot has a number. The ballot will also include the pooling number and the name and address of the producer. January’s milk production for the dairy will also be on the ballot. A pre-addressed, postage-paid return envelope will be provided. The voting period will run from March 4 until June 1, 2021 with no extensions. CDFA will not be opening any ballots until June 11 – 10 days after the mailing deadline. They will not be monitoring, reporting, or publishing percentages of ballots received. But if a producer calls, they will confirm for that producer if their ballot has been received.
This is a very personal decision for each producer. For those who own little or no Quota, this decision does put an end date on the program, that for the most part, is a cost to them. But it does mean the assessments will continue for another nearly four years. For producers who have invested in Quota, this program has been an important part of their operation and represents the starting of a clock on the termination of a valuable asset. Many producers are somewhere in the middle and could probably go either way. The Sunset Proposal is a compromise which means neither side is exactly happy with its terms. But one thing we can all acknowledge is that Quota is a controversial issue and will continue to be a source of conflict in our industry until there is a permanent resolution. If it is not the Sunset Proposal, then what will the solution be? Each producer has the right to weigh in on the answer. Getting that ballot filled out correctly and mailed back to CDFA soon, before it gets buried on your desk, is probably a good idea. Milk Producers Council has remained committed to not taking sides during this process, but our commitment has been to serve as a conduit for useful information about the Quota issue to the industry. The issue is now in the hands of producers where it belongs.
Geoff Vanden Heuvel
Director of Regulatory and Economic Affairs