Dairy farmers want to be paid more for the whey they make

jsmith@mercedsunstar.comJune 5, 2012 

Whey has made a real name for itself recently on farms and in stores.

Processing plants used to discard the cheese byproduct without thinking. Today, it can be sold as a popular ingredient in protein powders, energy bars and other health foods.

Recently, dairy farmers, many struggling significantly with the high cost of animal feed, have asked for a larger share of whey's value. A decision on that will be made by state ag officials sometime in July.

While some farmers have endured hard times over recent years, dairy has been a top-grossing industry in parts of the San Joaquin Valley for decades. The industry brought in more than $1.8 billion for Merced, Modesto and Fresno counties combined in 2010, according to county crop reports.

"The dairy case in the supermarket is one of the most profitable areas of the grocery store," said Lynne McBride, executive director of the California Dairy Campaign, a chapter of the California Farmers Union. "But dairy producers are partially left out of this profit opportunity."

In California the state Department of Food and Agriculture sets the minimum price that processors must pay for milk. The prices of cheese and other dairy products on the Chicago Mercantile Exchange are factors in the formula, which is recalculated on a monthly basis.

Dairy farmers got together this winter and petitioned the CDFA to hold a hearing to consider changes to the pricing formula for whey that would force cheese processors to pay farmers more for milk.

Last week, a panel of judges that specialize in milk marketing heard arguments over two days from processors and farmers on why state officials should or shouldn't change their pricing formula.

"We opposed the petition to increase the regulated price for whey because our concern is that there are a number of cheesemakers that do not get any revenue from whey," said Bill Schiek, spokesman and economist with the California Dairy Institute. "I think some of them will go out of business if this goes through."

But diary farmers have little sympathy for cheese processors, arguing that market fluctuations and other factors have put more than 180 California dairies out of business since 2009, while processors have remained largely insulated.

"Most guys are upside down. It costs more to make milk than what they can sell it for," said Simon Vander Woude, a dairy farmer in Merced County. "The premise of the milk-pricing system is it's based on an end-pricing system. Whey is a real end product of milk now. We need consistency in the system."

But increasing the minimum price processors pay for milk will not stop dairy farmers from going out of business, Schiek said.

"There's a long-term trend towards consolidation. We're getting more milk from fewer farms. It's a long-term trend where efficient dairymen expand production and less-efficient dairymen have to leave."

Agriculture officials have in the past seen a need to raise the minimum price for milk. Last fall, the CDFA adjusted its formula for whey to give farmers a greater share in revenue.

"Market price equity between processor and producer is always the target: Does the price point have an equal impact on each?" said Steve Lyle, spokesman for the CDFA. "The market should not benefit one side at the expense of the other."

Reporter Joshua Emerson Smith can be reached at (209) 385-2486 or jsmith@mercedsunstar.com.

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