California dairy producers received welcomed news Friday morning when the U.S. Department of Agriculture published in the Federal Register a final decision to establish a Federal Milk Marketing Order (FMMO) for California. The proposed FMMO would incorporate the entire state of California.

During the past three years, margins on California dairy operations have been negative. As a result of recent economic conditions, California lost 171 dairies -- representing 11% of the industry -- during the four years ending in 2016, and it expects that a similar trend will be confirmed for 2017 when California Department of Food & Agriculture (CDFA) data are released.

According to USDA’s “Regulatory Economic Impact Analysis of the Recommended California Federal Milk Marketing Order,” the all-milk price estimated change from the baseline for California would be 48 cents/cwt. The latest data (third quarter of 2017) showed a loss of 64 cents/cwt. of milk produced.

The final decision is based on the evidentiary record of a public hearing held in Clovis, Cal., from September to November 2015. A recommended decision regarding the proposed program was published Feb. 14, 2017.

An ongoing Supreme Court case forced USDA's hand to not further delay the rule. USDA announced in February a decision to delay the final decision for a California FMMO until after the U.S. Supreme Court rules on a challenge to the use of administrative law judges (ALJs) throughout federal government agencies. An ALJ was part of the process during 40 days of hearings regarding the establishment of the FMMO sought by California producers.

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USDA said it will conduct a referendum among dairy producers to determine whether they support the proposed FMMO. The referendum will be held from April 2 to May 5, 2018. USDA will mail ballot materials to all known eligible dairy producers supplying milk to the proposed marketing area. The FMMO would become effective if approved by two-thirds of the voting producers or by producers of two-thirds of the milk represented in the voting process.

FMMOs are legal instruments that regulate the sale of milk between dairy farmers and the first buyer. Where appropriate, the proposed California FMMO adopts the uniform order provisions contained in the 10 current FMMOs in the national system. These uniform provisions include, but are not limited to, dairy product classification, end-product price formulas and the producer-handler definition. The proposed order would recognize the unique market structure of the California dairy industry through tailored, performance-based standards to determine eligibility for pool participation. The proposed order provides for the recognition of producer quota as administered by CDFA.

Related:USDA green lights establishing federal milk marketing order for California

California represents more than 18% of all U.S. milk production and is currently regulated by a state milk marketing order administered by CDFA.

Along with issuing this final decision, USDA conducted a regulatory economic impact analysis to determine the potential impact of regulating California milk handlers under an FMMO on the milk supply, product demand and prices and milk allocation in California and throughout the U.S. The entire hearing record, including the regulatory economic impact analysis, is available at www.ams.usda.gov/caorder. The Federal Register notice is available at www.regulations.gov.

USDA will hold a public meeting beginning at 9 a.m. on April 10, 2018, in Clovis to answer questions related to how the proposed California FMMO would operate and how eligible dairy producers can participate in the referendum. Interested parties will have the opportunity to attend in person or watch the meeting live via webcast. Meeting details, as well as information regarding the producer referendum, are available on the AMS website at www.ams.usda.gov/rules-regulations/moa/dairy/ca.