No help from government for creamery’s missed milk payment

Originally published in the "3-5-09" issue.

There is a government- backed insurance program for dairy farmers, but it appears to leave Humboldt Creamery producers out in the cold since they belong to a cooperative.

LGM-Dairy, an insurance program that went into effect in July 2008 and that is operated by the U.S. Department of Agriculture (USDA), is not available to California dairies because California, along with 19 other states, has not previously participated in the other, related USDA Livestock Gross Margin (LGM) ag insurance programs : LGM-Swine and LGM-Cattle.

California has, however, been a leader in setting up a program that protects producers of bulk milk in cases where they are not paid by the people they ship to, according to John Kaczor, the editor of the market update “Friday Report” for the Milk Producers Council in Chino, California.

“The program, the Milk Producers Security Trust Fund, began in 1986,” Kaczor told The Enterprise, “as a result of [Knudsen Foods/Winn Enterprises bankruptcy in 1986] not paying its dairy farmers for their milk. The Fund presently has $50 million in the bank, ready to help producers, reimburse producers who are not paid by their buyers.”

The Fund, operated under the auspices of the California Department of Food and Agriculture’s Dairy Marketing Division in Sacramento, is funded by assessments on milk processors and manufacturers. It only covers bulk milk shipped to processors during the first 35 days of payment default, and does not cover producers who ship to processors out of the state of California.

“If Rumiano does not pay its dairy farmers, they will be covered and reimbursed by the state fund,”

Kaczor said, “but Humboldt Creamery members will not because coops are an exception.” Kazcor further explained: ”Under the Capper-Volstead Act [US, 1922, the original bill that set up the cooperatives authorization, thus exempting cooperatives from anti-trust laws] … cooperatives do not have to pay their members any minimum price, or pay them at all.”

Further, a cooperative is, by law, “one farmer,” and can qualify for the Security Trust Fund in situations where it is not paid for the shipment of bulk milk to another processor.