Central Vallley dairies struggle to stay afloat

Farmers blame state regulation for fiscal woes

jsmith@mercedsunstar.comMarch 22, 2013 

— With more than a hundred California dairies having gone out of business last year, milk producers and industry advocates continue to search for an answer to the high feed costs and low milk prices plaguing the state's dairy farmers.

"It's very dire," said Lynne McBride, executive director of the California Dairy Campaign. "Dairies continue to exit. Whenever a dairy closes, it has a ripple effect on that community and all the related businesses."

The state lost 105 dairies last year, and a total of 290 over the past four years, bringing the total down to 1,563 farms, according to the state Department of Food and Agriculture.

The three largest milk-producing counties in the state -- Tulare, Merced and Stanislaus -- saw 35 dairies pack up and leave last year.

"Some of them are looking at it as a business and saying, 'I don't want to do this anymore,' " said Merced dairy farmer Simon Vander Woude.

"And some people didn't do that soon enough and are in bankruptcy court."

In response, a political campaign is gaining momentum to move the state's milk pricing system under federal control. Right now the state sets the minimum price processors pay farmers for milk.

"Our current system isn't working," McBride said. "We need to work together to iron out the details of what a federal order would look like in California."

This week, Rep. Jim Costa, D-Fresno, and Rep. David Valadao, R-Bakersfield, introduced legislation that would pave the way for just that. Original co-sponsors also included Congressmen Kevin McCarthy, Jeff Denham, Doug LaMalfa and Devin Nunes.

Federal pricing system

However, not everyone's convinced that moving to the federal system of pricing milk is a good idea.

The University of Wisconsin and Pennsylvania State University are doing an analysis of what moving to the federal pricing system would mean for California, said Mike Marsh, chief executive officer with Western United Dairymen.

"It's something we're interested in looking at given where milk prices have been, but we're looking forward to having that analysis completed," he said.

Under the federal system, many processors can opt out of the pricing requirement, Marsh added. "In California, if you're a processor, you have to pay the regulated minimum price."

The minimum price milk producers receive is a complex formula based on the market value of cheese and other publicly traded dairy-based commodities.

The average price paid to California producers in 2012 was $16.59 for a hundred pounds of milk, compared with $17.62 in production costs, according to the California Department of Food and Agriculture. In 2011, the price paid to dairy farmers was $18.52, compared with $15.79 in production costs.

At the same time, the size of California's dairy farms continues to grow. Last year the average number of cows on a dairy was 1,164, up from 1,101 in 2011, according to data from the CDFA.

Vander Woude said he's making his 3,200-cow dairy work, but the margin for error is thin.

"It's different now than it was five years ago," he said. "Every decision made, you have to run the numbers on it. Before you just did what you always did."

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

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