Are California dairies drying up?

CHOWCHILLA -- California dairy farming can be a real roller-coaster ride.

In a good year, an average-sized dairy farm can make more than $500,000, money often largely invested back into farm operations, industry figures show. However, in bad times, the losses can be just as great.

Over the past four years, dairy leaders say, far more farmers have been hanging on amid steep drops than riding high.

And recently, a surge in feed prices, due in part to a devastating drought plaguing the Midwest, has forced some of the state's dairy farmers to the brink of losing their way of life.

"If it stays like this, this time next year we'll be out," said Chowchilla dairyman Alfred Soares. "This time next year, this whole conversation will be, 'What are we going to do now?' "

Soares and wife Reis have been dairy farmers for 28 years. When they moved to Chowchilla in 1992, they were milking 160 cows. They've grown with the times and today have a mid-sized herd of about 900.

Like many dairy farmers, the Soares family was hit hard in 2009 when the price farmers were getting for milk dramatically dropped and feed prices steadily increased. As a result, they refinanced their ranch.

"We literally borrowed more than what we paid for the ranch just to stay in business, because everything was so upside down," Reis Soares said. "You can weather a couple bad months, but when it lingers on a whole year, then that's hard."

With little equity left to borrow from and the cost of production again outpacing the return on milk, the Soareses are concerned about being able to secure a loan to buy feed this winter.

"There's always bankruptcy courts," Reis Soares said. "We haven't gone there personally, but a lot of the fellow dairymen we know have."

Chris Keeler is the district director for the Central California Farm Service Agency, an extension of the federal government that provides emergency loans and disaster relief to farmers.

"There's no question, commercial banks do not want to lend to dairymen right now," he said. "What we're seeing now is that we have existing dairies that banks are turning away, and they're showing up on our doorstep. We're able to help about 20 percent of everyone who comes to us."

From 2006 to 2011, the California dairy industry lost about 300 dairy farms, reducing the number of dairy farmers to 1,668, according to data from the California Department of Food and Agriculture. Preliminary signs suggest that the industry could be on pace to face significant losses again in 2012.

Over that same period, most dairy farm production expenses increased only mildly, but the average cost of feed rose steadily, the CDFA data shows. In the first quarter of 2012, it cost a farm $10.81 to buy enough feed to produce 100 pounds of milk, up from $6.84 in 2006.

Some dairy farmers, especially operations with large acreage, grow their own feed in an effort to insulate themselves from market fluctuations. But the California farming industry trucks in much of its livestock feed from other parts of the country.

"We have historically in California a feed-deficient state and are very dependent on importing feed and hay from the Midwest," said CDFA Secretary Karen Ross. "It is a very challenging time for our producers who are not feed sufficient."

While dairy farmers have been going out of business, the number of cows being milked in the state has remained relatively stable, and milk production increased as technology improved.

The impact on families who have to go out of business is "monstrous," but the impact to the overall economy is "small," said Leslie Butler, agriculture and economics professor at the University of California at Davis.