Through a quirk in California agriculture policy, some dairy owners, like the three of us, are forced to subsidize other dairies for no reason other than that is the way it has always been.
Each month, some of us are required to give approximately $16 million collectively to our competitors, who are known as “quota” holders. That amounts to around $1 billion every 6.3 years. The reason why is hard to explain and has no justification in a modern context.
Those of us without quota are simply hoping to abolish the unjust quota system in favor of one where each dairy keeps what it earns, minus taxes, just like every other business.
We are unable to offer any comparison to another industry. Imagine if some real estate agents had to share $5,000 from each commission check with rival agents. Or if one restaurant was forced to give a cut of its monthly receipts to its competitor down the street. It’s hard to imagine, of course, because it is such a ridiculous notion and runs contrary to our entire way of life.
In the 1960s, quota was introduced because each dairy was on its own when it came to selling its milk. Processors–the brand names you find on labels–held all the power and could simply buy from the lowest-priced sellers, forcing a race to the bottom. As a way to protect each other, dairies banded together and formed the quota system, which was based on your percent of marketship.
It was as if dairies unionized, though instead of bargaining collectively for better working conditions and compensation, quota was purely about controlling wholesale prices. Milk used for some products sold at different prices than milk used for other products and quota was essentially a bribe to get the dairies with the better contracts to agree to price pooling.
Throughout the years, policies changed. Because the federal government wanted nothing to do with the quota system and California was interested in negotiating a Federal Milk Marketing Order, the California Department of Food and Agriculture created the Quota Implementation Program (QIP) tax, which allowed the state to deduct quota funds straight out of dairies’ checks.
The QIP tax was never an endorsement of quota. Instead, it was an acknowledgement of reality and a way to satisfy the federal government’s concerns over quota so that the FMMO could be negotiated.
But now the FMMO is a part of life, QIP is unnecessary and quota is little more than an unfair relic of a bygone era that stands as a barrier to entry for new dairies.
Quota holders cannot defend quota with any rational argument, except that they will lose money. To that we suggest they produce more milk if they need more money–that’s what must be done by those of us who do not have quota.
To make matters worse, quota holders work hard to ensure that they also control the oversight of this corrupt system. For example, 12 of the 14 members of the powerful Producer Review Board at CDFA are quota holders. And just a few months ago, the board voted to increase our QIP assessment because the quota holders did not feel they were getting enough free money.
Remember, there is no public purpose for the QIP tax. It funds no government services and has no bearing on consumer prices.
Its sole function is to line the pockets of private business owners who are in direct competition with those they tax.
A repeal of quota would come at no cost to consumers and would have no effect on taxpayers. It would simply allow each dairy to keep the money it earns–no more, no less.
It’s time to level the playing field.