The first formal step has been taken to end California’s 49-year-old Class I milk pool quota system.

A petition was submitted March 29 to the California Department of Food and Agriculture (CDFA) by a coalition of producers who want a referendum on what is now known as the Quota Implementation Plan (QIP) since the state became a Federal Milk Marketing Order last year.

The petition was signed by 285 of California’s Class I milk producers as of January 2019. To be official, at least 25 percent of the state’s total is required. While the number of Grade A dairy farms in the state on that date is known (1,183), the number of farm owners is not readily available. The difference is important, because referendum voting will be done by farm owners, not farms.

The next step is for the QIP administrator to confirm the validity of petition signatures and verify the 25 percent requirement has been met. He has 90 days from receipt of the petition to do so.

If the petition is certified as valid, the California Producer Review Board will meet within 60 days to review it, adopt findings, and submit a recommendation to the secretary.

The secretary will then have 30 days to determine if a referendum will be held. If her decision is yes, then CDFA will have 45 days to initiate the referendum process.

As the petition drive gained steam last year, the aggregate market value of quota owned by producers plunged from roughly $1.159 billion in July 2018 down to just $699 million this month. It is a $460 million loss of equity that has dairy lenders on edge.

Opinions vary

Quota remains on the minds of former Californians who now dairy elsewhere.

“We sold quota and turned it into bricks and mortar in another state,” said one. “It could not have happened without that equity in quota. Some producers in higher-cost areas have made conscious decisions to stay at a small herd size, but with full quota to be viable. For those producers, a terminated quota system seems a great injustice.”

“I understand both sides of the argument,” said another transplant. “My opinion is you can’t just make quota disappear (all at once). There have been generations who have invested in this program; there must be a buyout of some sort.”

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(c) Hoard's Dairyman Intel 2019

April 22, 2019