The California milk recommendation joined a price rule to a distribution rule. In the February 14, 2017 document, USDA explained that regulated handlers pay minimum class prices according to milk use, while eligible producers receive pooled payments on a uniform or average-price basis. The handler's use of milk and the producer's participation in the pool are different parts of the arrangement. [2017-02732]

That distinction is the useful market question. The proposal would use existing federal product classifications and pricing provisions across California, but would tailor performance-based standards for pool eligibility to California's market structure. Recognition of the CDFA quota program added another distribution feature, including possible authorized deductions from producer payments. None of this establishes a single price charged at the grocery store. [2017-02732]

The August 6, 2015 hearing notice shows that the design had competing alternatives. USDA received four interested-party proposals, including some pricing and pooling provisions not present in current federal orders. The notice expressly said the proposed provisions had not received USDA approval. Those submissions explain the policy choices under consideration; they are not evidence of competitive responses by firms. [2015-18704]

Our interpretation is that any assessment of incentives must distinguish minimum handler payments from the receipts of eligible producers. Pooling cannot by itself demonstrate higher income for every farm. The February recommendation still accepted written exceptions through May 15, 2017. The paired documents describe one agency proceeding, leaving realized prices, competition and business behavior outside what this record establishes. [2017-02732][2015-18704]

Source documents

  1. Milk in California; Recommended Decision and Opportunity To File Written Exceptions on Proposal To Establish a Federal Milk Marketing Orderhttps://www.govinfo.gov/content/pkg/FR-2017-02-14/html/2017-02732.htm
  2. Milk in California; Notice of Hearing on a Proposal To Establish a Federal Milk Marketing Orderhttps://www.govinfo.gov/content/pkg/FR-2015-08-06/html/2015-18704.htm