WEEKLY UPDATE April 21, 2017

CONTACT US @ 1315 K Street, Modesto, CA 95354 Telephone: 209.527.6453Fax: 209.527.0630 info@westernuniteddairymen.com

WEEKLY UPDATE DELIVERY OPTIONS Send change of address or request for Update delivery to WUD by phone or fax, or email to info@westernuniteddairymen.com

For those that own diesel powered trucks, there are some recent changes to how those trucks are regulated for air quality. SB1, the gas tax law, which was recently passed by the legislature, had some provisions regarding diesel powered trucks over 14,000 Gross Vehicle Weight Rating (GVWR) (does not include pickups) that will affect agriculture. Starting in 2020, the Department of Motor Vehicles (DMV) will have to confirm with the California Air Resources Board (CARB) that a truck is in compliance with air quality rules before that truck can be registered. This is similar to how our smog check program works now for cars and pickups.

This provision gives even more value to the agricultural extension that Western United Dairymen and other Ag organizations negotiated into the truck rule. There is also a low use vehicle extension that allows trucks operating less than 1,000 miles per year (5,000 miles per year through 2019) among other extensions for logging, construction and other trucks. Having those extensions gives you more flexibility in maintaining older trucks that stay within the mileage limits of those extensions. However, CARB has recently been reviewing their database of trucks that have the extensions and preventing the update of vehicles that are missing some information or were not reported correctly. If you got a notice from CARB or were not able to report this January it is important that you resolve any issues so that your dairy is able to maintain its extensions. This is further complicated by the fact that if you call or e-mail CARB regarding your trucks it will likely be weeks until you get a response and resolving something that takes multiple correspondences could take months. If you need help with this please let me know.

Lastly, it seems that CARB is not waiting until 2020 to find trucks that are operating out of compliance with their truck rule. That rule currently requires that all trucks greater than 26,000 GVWR have an exhaust particulate filter and an engine that is 1996 and newer. Apparently CARB is checking DMV records for trucks that may not fit these criteria and reaching out to the truck owners. This quite complex just for owning a truck in California and that is why Western United Dairymen is here get provisions like the agricultural extension into rules like this and to help you understand and comply with them. If you need any help with reporting your trucks or understanding what this means for your dairy please give me a call.

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SB1 Changes for Trucksby Paul Sousa, WUD Director of Environmental Affairs

GET INVOLVED

For more information on how to get involved in WUD’s political machine, visit WUD’s website www.westernuniteddairymen.com Or californiaagaction.com to see how you can be a part of the action.

Three public stakeholder listening sessions and one webinar were scheduled to obtain feedback and comments on CDFA’s Alternative Manure Management Program (AMMP) framework. The listening sessions are designed to obtain input from a wide group of stakeholders including but not limited to dairy and livestock farmers, environmental advocates, local community members and the general public. The following final sessions are taking place next week:

Monday, April 24, 2017 – 4:30 p.m. – 6:30 p.m. Energy Education Center - 4175 S. Laspina Street, Tulare, CA 93274 Friday, April 28, 2017 – 9:00 a.m. – 11:00 a.m. Webinar Registration information for the webinar will be posted on the AMMP webpage: https://www.cdfa.ca.gov/oefi/AMMP/

More information about this program is available at: https://www.cdfa.ca.gov/oefi/AMMP/

Give Input on CDFA’s Alternative Manure Management Program (AMMP)

The CDFA is seeking nominations from California producers for individuals to fill vacant positions on the Milk Pooling Producer Review Board. CDFA will task the Board to meet regularly to develop a detailed proposal regarding a stand alone Quota program in response to the recommended decision released by USDA to establish a CA FMMO.

To be eligible for appointment to the Board, a nominee must be a California market milk producer. All newly appointed members of the Board will be required to: 1. fill out appointment documentation; 2. complete an annual Conflict of Interest Statement that must include investments, interests in real property, and business positions currently held per CDFA’s Conflict of Interest Code; and 3. complete an Ethics Training module. A producer may serve up to two four-year terms and will not be eligible for re-appointment thereafter.

Nominations are due MAY 1, 2017. You can find a nomination form on page 4.

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Price $/cwt Class 1 4a 4b Overbase Quota

February $18.28 $15.40 $15.81 $15.49 $17.19

March $18.76 $13.96 $13.76 $14.14 $15.84

April $16.91 $13.73 $14.23 $13.99 $15.69 Prices in italics are estimates.

Latest Class Prices

Average AA Butter NFDM 40# Blocks Barrels Dry Whey

March $2.1518 $0.8445 $1.4358 $1.4174 $0.4925

April $2.0978 $0.8442 $1.4826 $1.4263 $0.4988

April 21 $2.0900 $0.8527 $1.5450 $1.4275 $0.4980

Week to date 0.25 cent 2.1 cents 7 cents ——- 0.50 cent

Commodity Markets: CME - California Plants

Estimated* producer CWT prices

Federal Order Class Prices

Nominations Open for Milk Pooling Producer Review Board

Month Class I Class II Class III

Class IV

Feb. all milk price

March $16.90 $16.21 $15.81 $14.32 $18.50

Allied Business Members

* Forecasted prices are not a guarantee of future prices and are subject to change as markets fluctuate.

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OSHA inspections - Be Aware!

Quota vs pooling: do they need each other?

OSHA has recently ramped up inspections of dairies in California. It is important to keep up to date on all requirements, including your Injury and Illness Prevention Plan (IIPP). This plan is part of a process that helps employers fix workplace hazards before someone gets hurt. Dairy producers are aware of many of these issues, such as having covers on PTO shafts, guards on other power equipment, and lockout/tag-out procedures for equipment undergoing maintenance. However, sometimes OSHA discovers a new issue and begins issuing notices of violation before people are aware that something is a problem. The picture included here shows one of these situations. The open shaft between the motor and pump is now considered a violation by OSHA and several dairies have received citations for this issue recently. Work with your pump company or create a screen that would prevent someone from reaching into the shaft area. This would also be a good time to practice your lockout/tag-out procedures while you are working on that pump. Please contact your Western United Dairymen field representative for more information on OHSA inspections and how to prepare for them.

Quota has been a big topic lately as CDFA works toward the potential implementation of a stand-alone quota program should a FMMO be voted in California. Not only is it a complex issue, it is one that drives passion from many in the industry.

In recent weeks, pooling and quota have been discussed together like they’re bread and butter. But while it is true they work well together, their differences are also key to each of their respective roles. The connection between the two is not surprising, considering it is rooted in history: quota was an integral part of the Milk Pooling Plan when it was implemented in 1969. Prior to pooling, producers were paid according to how the handler receiving their milk used it. Under the Pooling Plan, this was no longer the case: producers were now paid a price reflective of the poolwide utilization of all classes. Pool quota was allocated to producers at the time based on each producer’s historic production and Class I usage. While passage of the Pooling Plan required the creation of quota, quota and pooling evolved separately over the years. Because quota is a tradeable asset, it has changed hands many times since 1969 and is not tied anymore to original Class 1 contract holders like it did 45 years ago. The bottom line is: quota is not a necessary ingredient to operate the Pooling Plan. But this certainly does not undermine its importance in any way. Quota is a very valuable asset that has proven to be an effective investment to keep some dairies’ cash flow positive. Bread may not need butter, but it sure can make it better!

On the other hand, butter may be tasty on its own, but it does depend on a reliable surface to spread on; just like quota now relies on pooling funds to operate. Let me take a step back to explain. Each month, handlers submit to CDFA a report detailing the milk purchased from producers and in which class it was used. The total value generated by each class is computed by multiplying each class utilization by its corresponding class price. Summing all this results in the pool value. Quota premiums paid to quota holders come out of that calculated pot of money. Those deducted payments average between $12.5 million and $13 million per month. The quota premium paid to producers in Southern California is set at $0.195/lb of SNF (or $1.70/cwt on standardized milk). Producers in other counties receive a lower value based on their location due to regional quota adjusters. RQAs are a deduction from quota payments and consequently return revenue to the pool. This means that eliminating (or increasing) RQAs would ultimately increase (or decrease) the cost of the quota program to the pool.

Because pooling in theory does not need quota to serve its purpose of revenue sharing among producers, USDA decided in its draft FMMO proposal to leave quota’s fate to CDFA. CDFA hosted a meeting on April 4 to get producers’ feedback (summarized in this Friday Update – <here>); next comes the May 1 deadline for Producer Review Board nominations. The PRB will be tasked with further examining this complex issue. Since a potential FMMO will likely have different pooling rules which will allow pooling volumes to fluctuate from one month to the next, CDFA must determine a way to keep the quota program functioning without the current Pooling Plan. If a set quota premium deduction is taken out of differently sized pools each month, it could impact the milk left in the pool very differently from one month to the next. Let’s take a separate example of a company deciding on fixed health care premiums of $1000 every month. If the company has ten employees, each expects to pay $100 each month to get the benefits. If 5 employees leave, only 5 employees are left contributing $200 each. As you can imagine, employees are likely going to get irritated with the scheme if employees are allowed to come and go.

For the sake of a durable quota program, CDFA must ensure the program’s funding is applicable to at least as much milk as it is now in a consistent manner (in 2016 96% of the milk in California participated in the pool). You can rest assured, WUD will continue working with CDFA in that direction.

by Annie AcMoody, Director of Economic Analysis

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