Kawamura

Under California law, firms termed “handlers” that package milk and manufacture other dairy products must buy the milk they process under a regulated price structure where the price is determined by the consumer product into which the milk is made. Milk purchased by a handler for packaging as fluid drinking milk is designated class 1 and has the highest regulated price, while milk purchased for manufacturing into butter, cheese, and other products has other class designations and lower prices. By contrast, dairy farmers termed “producers” receive uniform regulated prices that are not based on the uses to which their buyers put the milk. These prices are designed to ensure that all producers receive an adequate return, regardless of the products their buyers make. The mechanism by which the prices paid by handlers and the different prices received by producers are reconciled is a pricing “pool.” Handlers pay producers the mandated producer price and then either make additional payments into or receive refunds from the pool, depending upon the types of products they make. If the value of the milk a handler processes, as determined by the products it makes with it, exceeds…