Low Somatic Cell Count Provides Revenue for Four FMMOs, But Not California

There are four Federal Milk Marketing Orders (FMMOs) that get a Somatic Cell Count (SSC) financial adjustment in their milk check.  This is part of the USDA rules and formulas for calculating producer milk prices.  Graphic I below show the four that get an adjustment.  It is called an adjustment, because it provides a bonus for a low SCC and a penalty for a high SCC.  Below 350,000 cells per milliliter there is a bonus and above 350,000 cells per milliliter, there is a penalty.   The four FMMOs that receive this adjustment are in the central part of the U.S.  They are the Upper Midwest, the Mideast, the Central, and the Southwest.  

Graphic I - Map of FMMO receiving SCC Adjustment

When California is added as an FMMO, producers in California will not participate in this adjustment.  In the "Regulatory Economic Impact of the Final Decision to Establish a California Federal Milk Marketing Order" produced by the Agricultural Marketing Service (AMS), California is consistently compared to the Upper Midwest FMMO.  However, there are many differences between the new California FMMO and the Upper Midwest FMMO.  Some of these differences was discussed in a recent post to this blog.  Differences in the rules governing SCC are discussed in this post.

The SCC is primarily a measure of the dead white blood cells that are disposed of through milk secretion.  In a sense, the white blood cells are the soldiers fighting infections, primarily mastitis, which have died in the battle.  High SCCs in milk are an indication of milk from a sick cow.  There are SCC limits required for the milk to be Grade A.   The Federal limit is 750,000 cells per milliliter, but California has a tighter standard of 600,000 cells per milliliter.

The good news is that SCC is consistently and significantly declining, principally through better sanitation efforts.  Charts I and II below show this graphically.  Data from the four FMMOs participating in the SCC adjustment is used to demonstrate the improvement because it is data that has been consistently compiled since the beginning of 2000 and is carefully monitored because money is involved.  

It is impossible to totally eradicate SCC, and some experts believe that a minimum of 150,000 cells per milliliter is as good as it can get in summary.  However, the long-term trends shown in Charts I and II suggest that some improvement below 150,000 is possible.  Because there is a limit to what is possible and practical, Charts I and II below will level out at some point.  However, It has achieved a point thought impossible by some experts and is still improving.  

Chart I - SCC for the Four FMMOs that have a Fnancial Adjustment

Chart II below shows the SCC data for the Upper Midwest, which was used as a comparison in the AMS paper mentioned above.  The SCC in Charts I and II show a trend approaching 150,000 cells per milliliter.

Chart II - SCC for the Upper Midwest FMMO

What is this worth for the four FMMOs who get this adjustment?  By the data above, it is obvious that there are few instances above 350,000 cells per milliliter, so there is rarely anyone receiving a financial penalty.   The payment is based on the formula shown below: 

  Somatic Cell Count Adjustment/cwt. of milk = cheese price x .0005 x 

(350,000 - Actual SCC) /1000

At a level of 200,000 cells per milliliter and at today's depressed cheese prices, a producer receiving a SCC adjustment would realize about $.12/cwt. upward adjustment.  At the peak price for cheese, and at 150,000 cells per milliliter, it would be worth about $.24/cwt.  Is this significant?  When combined with an adjustment for not having "quota" in California, and a probable negative Producer Price Differential, California non quota milk will be lowest priced milk in the U.S.  Processors can pay more, if negotiated, but the FMMO pricing sets a minimum and most of California's milk will have the lowest price in the U.S.  

In the Upper Midwest, there are frequently bonuses for higher milk protein levels because the protein is needed for efficient cheese making.  When California is an FMMO, there will almost certainly be bonuses above the FMMO minimum price, but that FMMO price less the CDFA non quota adjustment will be a low starting point.

Why is there no SCC adjustment for California when it becomes a FMMO?  In response to an inquiry to AMS they simply stated that "(SCC adjustment) was not proposed by any of the proponents and therefore it was not considered by the USDA."

The other difference in SCC rules that differentiate California from the rest of the U.S.  is the limit for being classified as Grade A milk. As stated above, to be accepted as Grade A milk, the U.S. standard requires a SCC of less than 750,000 cells per milliliter.  California has a slightly tighter standard of 600,000 cells per milliliter.  While today's levels of SCC are well below either of these, it does make the California standard slightly more difficult to qualify as Grade A.

Future posts will continue to analyze the new California FMMO.