On May 25, ten members of the Producer Review Board (PRB) got together with California Department of Food and Agriculture (CDFA) staff and interested members of the public to have an in-person meeting at the Stanislaus County Ag Commissioner’s office in Modesto. The Board worked through a full agenda. These days, even approving minutes generates discussion. The minutes from a meeting last June had not yet been approved because of concerns by a PRB member about how discussions then were characterized in the original department staff-generated version of those minutes. Subsequent offers of suggested changes were not yet acceptable and for this meeting, the approval of the June 2022 minutes was not on the agenda. Furthermore, the date of the October 2022, PRB meeting was wrong on the agenda, so those minutes couldn’t be approved either. Fortunately, the date on the agenda of the December 5, 2022, minutes was correct and those minutes were passed.
The financial update of the Quota Implementation Plan (QIP) operations was presented. CDFA staff has been auditing and finding that, other than very minor clerical type issues, the collections of the QIP funds from processors has been going on without a hitch. The other major report was on the legacy funds left over from the Dairy Marketing and Milk Pooling branches under the old program. There is approximately $3.5 million in left over from the Milk Marketing Branch, and $3.2 million left over from the Milk Pooling Branch administrative fund. Apparently, it will take legislation to dispose of these funds. The PRB passed a motion asking the CDFA Secretary to solicit suggestions from the dairy industry on how these funds should be directed back to the industry.
On the issue of the 5-year QIP Plan Survey of producers, a formal Request for Proposals (RFP) is currently active. The deadline is June 6 for companies with expertise in this area to submit proposals for how they would conduct this producer survey and how much it would cost. The PRB has scheduled a zoom meeting for June 12 to review those RFP’s and make a recommendation to the Secretary. A follow up in-person PRB meeting in July is expected where they would review the questions, methodology and budget of the survey with the firm that is awarded the contract.
There was a legal report that covered a number of lawsuits involving CDFA regarding the QIP. One that was filed by STOP QIP was dismissed by the Appeals Court in April. Another with a processor/producer that did not pay a QIP assessment was decided by the court in the favor of CDFA and the QIP program. It involves $363,000 in assessments, and collection efforts are on-going. The third case was filed last October and involves a claim that the QIP assessment is unconstitutional. That case is in process with a court hearing scheduled for August 4, 2023.
There were six hardship requests generated by the fact that the QIP assessment had collected significantly more money than was needed for the monthly quota payments to producers. The PRB had recommended that this excess be reduced by lowering the assessment rate for a period of time to draw down the nearly $20 million excess. This has happened, but these six producers were unable to fully benefit from the reduction in the assessment either because they were no longer in business or because their herds were much smaller now than when the excess assessments were collected. CDFA denied the requests from the four dairies that are no longer in business in California on the grounds that a hardship request can only be made by an existing producer. The PRB, after a robust discussion, voted to deny the other two requests.
A new discussion was then held on what the assessment rate should be going forward. The amount in the fund was drawn down from over $20 million in July of 2022 to $4.3 million in February of 2023 when the assessment rate was raised back up. The fund creeped back up to $5.7 million in April, so the current rate is again collecting too much money. CDFA staff recommended lowering the assessment to .034 per pound of solids or 29.6 cents per cwt. But the PRB after a long discussion voted to recommend an assessment of .033 per pound of solids or 28.7 cents per cwt. More to come on this subject in future meetings.
Finally, the PRB turned their attention to a presentation from PRB board member Frank Konyn titled, “Does Class I Fund Cover Quota Payments.” The main point of the presentation is that the fixed differential of $1.70 per cwt. was set in 1994, which approximated the historical relationship between quota payments and overbase payments. Prior to the fixed differential, quota payments were exclusively based on having Class I and the other higher class milk revenues allocated to quota holders. The fixed differential severed that direct relationship. Since 1994, Class I revenues have dropped steadily and significantly. The presentation by Frank Konyn shows how much Class I revenue is being collected by the FMMO for the benefit of producers in the California federal order since the FMMO started in late 2018 and compares it to the payouts to the quota holders during that same time frame. It varies by month and year, but Class I clearly is generating a lot less revenue to producers than the quota payments. The PRB took no action but seemed quite interested in digesting the information.
Geoff Vanden Heuvel
Director of Regulatory and Economic Affairs