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Significant Quota Hearing Next Wednesday and Thursday

A two-day virtual hearing will be held on Wednesday, September 30 and Thursday, October 1 to consider the petition by the United Dairy Families of California (UDFC) to hold a California producer referendum to change, and eventually terminate, the Quota Implementation Program (QIP).

This hearing is the next step in a process that started back in early 2019. The United Dairy Families of California effort started as a response to the formation of the STOP QIP group whose efforts were focused on getting a producer referendum to immediately terminate the QIP program. UDFC organized a process which engaged the assistance of Dr. Marin Bozic, a University of Minnesota dairy economist, and Matt Gould, a private sector dairy analyst, and sought to solicit and evaluate ideas for how to address the issue of quota, which had become a contentious issue among the California dairy producer community.

UDFC carried out a deliberate phased process where ideas and input from producers were solicited and then organized and evaluated by the experts. The first phase in the UDFC process was what they called a “Think Tank” phase where they said all ideas were welcomed. The next phase they called the “Shark Tank” phase, where the various ideas and proposals were analyzed and presented to the producer community for feedback. The feedback sessions narrowed the options down for a phase three process where producers were able to weigh in on three specific ideas:

A. Quota sunset

B. Quota buyout through a bond or loan

C. Keeping the program in force indefinitely by tying quota payments to Class I sales in California.

At a series of meetings held at the end of October last year, these specific ideas were submitted to producers for their evaluation. Based on the responses received from producers, Dr. Bozic and Mr. Gould identified and recommended a specific plan to deal with the QIP that they believed could earn the support from a significant majority of California producers. At a public event held in February at the Tulare Farm Show, that plan was put forward for producers to consider.

It is a relatively simple plan with two main points. It changes the Regional Quota Adjuster right away, which would have the impact of equalizing the quota differential to $1.43 per cwt. statewide and it sets a termination date for the QIP of March 1, 2025. Adjusting the RQA would reduce the QIP assessment by about 2.5 cents per cwt. After the RQA adjustment, each pound of quota solids would generate $5 per month in revenue. March 1 of 2025 is 53 months from now. 53 times $5 is $265, which is the amount of revenue each quota solids pound would generate if there is a referendum on the UDFC plan and if that referendum passes.

After presenting this proposal to the producer community, UDFC began to circulate a petition seeking signatures to request a referendum to have producers vote on this plan. Meanwhile, the STOP QIP organization was able to submit sufficient signatures on their termination plan to receive a hearing on that plan which took place in June. It took until June for UDFC to acquire sufficient signatures to submit their plan to CDFA for consideration. The STOP QIP hearing resulted in a decision by California Secretary of Food and Agriculture Karen Ross to not hold a referendum on that petition. And a hearing on the UDFC petition will be held this next week.

Interestingly it will be the same person, Judge Timothy Aspinwall, who will preside at next week’s hearing. It is expected that he will render a recommendation based on the hearing record and the law for Secretary Ross to consider. The ultimate decision does rest with the Secretary. Over the past months, various letters and reports by CDFA officials seem to specify that a petition seeking a referendum submitted according to Chapter 3 of the Food and Agriculture Code is entitled to a referendum and the referendum needs to be held on the specific proposal contained in the petition that producers signed. This seems to indicate that barring some unexpected twist, there will likely be a referendum held on the UDFC proposal. In order for a proposal to be adopted as a result of a referendum, 51% of the eligible producers will have to vote in the referendum and of those who vote, 51% of the producers producing 65% of the milk will have to vote yes, or 65% of the producers representing 51% of the voting milk will have to vote yes in order for the plan to pass. If there are insufficient voters, or there are insufficient yes votes, then the referendum fails, and the status quo continues.

Anyone can participate in the hearing. The hearing runs from 9 a.m. to 4 p.m. on both days, but as a practical matter, it may go less than that on the second day if there are no more witnesses. You can testify live, or you can submit written testimony before the hearing. All the details about how to access the hearing are in the official hearing notice which you can access here.

Geoff Vanden Heuvel

Director of Regulatory and Economic Affairs

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