California's cheese manufacturers say they are being squeezed out of hundreds of millions of dollars by dairy farmers, and they want the state to change the complex formula used to determine the price they pay for milk.
Cheese makers claim that the current formula, changed four years ago when dairies were struggling with low milk prices, could drive smaller plants out of business because it raises the cost of making cheese in a competitive market where it is hard to recoup the added expense.
But the Golden State's dairy farmers -- who produce 1 out of every 5 glasses of milk drunk in America -- say that any change would lower the price they get for milk and could put their financial health in danger.
"This is your basic fight over who gets the change that's left on the table," said Leslie Butler, a UC Davis agriculture economist and milk pricing expert.
The battle pits two of California's most important food interests against each other. Farmers in the state produced $4.5 billion of milk last year, an amount larger than the total farm output of many states. Cheese makers purchased much of that milk and produced 2.2 billion pounds of cheese, second only to the 2.4 billion pounds made in Wisconsin.
The two groups are fighting over whether cheese makers should continue to reimburse dairies for a portion of the value of whey, a milk protein and cheese manufacturing byproduct used in products as diverse as infant formula, protein drinks and animal feed. This wasn't a big issue until the last year, when international demand sent whey prices soaring, Butler said.
The complaint has caught the attention of the California Department of Food and Agriculture, the agency that regulates milk pricing in the state. The CDFA has scheduled an Oct. 10 hearing to consider changes in the formula.
Under current state rules, cheese producers pay more for their milk any time the U.S. Department of Agriculture monthly average price for dry whey rises above 26.7 cents a pound. As of this week, dry whey cost 48.5 cents a pound, down 6.5 cents from the previous week and far off of its peak of more than 80 cents in May and June.
Farmdale Creamery Inc., a small family-owned producer of cheddar and jack cheese in San Bernardino, has lost $1.2 million over the last year because of the rule, said Nicholas Sibilio, the creamery's vice president.
"The cost of milk is more than what I can sell my cheese and the whey for," Sibilio said.
