CDFA Moves to Maintain Competitive Balance in Market Place
SACRAMENTO-A period of careful calculation and analysis by state agricultural economists has resulted in a decision to not adjust farmgate milk prices in the wake of Californiaís energy challenge.
The California Department of Food and Agriculture (CDFA) held a special hearing in January following petitions by the Western United Dairymen, representing dairy farmers, asking for price increases to compensate for higher diesel fuel and natural gas costs. The requests were countered by the Dairy Institute, an organization representing dairy processors. The Dairy Institute asked for decreases in farmgate milk prices.
CDFA, which sets the minimum price paid to farmers, moved to hold prices firm in order to maintain competitive balance in the market place. State economists were concerned that an adjustment in either direction would upset this balance.
The CDFA analysis found that the prices received by California dairy producers were not significantly lower or higher than those of the last 10 years, and that energy costs total about two percent of a dairy farmerís cost of doing business. Also, the current price structure allows dairy processors to keep pace with their competitors in other states. Studies show that, for the calendar year 2000, California prices were close to the levels of federal milk prices in neighboring states.
As always, CDFA will continue to evaluate the status of the dairy industry, including producer costs, milk supply, processor costs and processor competitiveness.
California Department of Food and Agriculture Office of Public Affairs
1220 N St., Ste. 214, Sacramento, CA 95814