Plunging milk prices compound drought trouble for Merced dairy farmers

Falling milk prices this year are further hampering Merced County dairy farmers plagued with four consecutive years of withering drought.

“It certainly doesn’t bode well for our local economy,” said David Robinson, the Merced County agriculture commissioner. “Agriculture is our economic engine here and it could have a lot of effects across our economy.”

Dairy is the top commodity of the county’s most lucrative industry, accounting for a third of an annual $3 billion in farm revenue, Robinson said.

Longtime dairy farmers like Winton’s Ray Veldhuis said the price drop is the result of overproduction outside of California last year when prices were high and a reaction to the resulting surplus stock.

“Last year, we had a great market, everything aligned,” Veldhuis said. “It was one of the best years we’ve seen in a long time. Now it’s haunting us. Last year, we made good money; now we’re having to give some back.”

The problem for dairy farmers has meant lower milk prices in grocery stores, according to the California Department of Food and Agriculture.

Jay van Rein, a department spokesman, said the average retail price in April of last year for a gallon of whole milk was about $4.52. This week, van Rein reported, the average price for the same milk is about $4.39.

The flip side, van Rein said, is less money for farmers, who received about $2.13 per gallon a year ago and now get about $1.45 per gallon sold to processors.

For agriculture-based communities like Merced, the price plunge compounds ongoing drought-related issues. Farmers have already reported fallowing land, hiring fewer workers and purchasing fewer supplies.

Veldhuis, 52, is a fourth-generation dairy farmer in Merced County who opened his own operation – RV Dairy in Winton – in 1994. He employees about 50 people. Veldhuis said he is confident his operation will not suffer dramatically.

He said he believes most operations will survive the duel threats of a tough market and little water, but smaller operations may be in trouble, particularly those with poor access to water.

“Before the year’s out, we’ll see some people that will lose things,” Veldhuis acknowledged. “If they go broke or go out, they’ll leave vendors unpaid, employees displaced, and some families could be displaced.”

Veldhuis said he hoped Merced County residents not directly involved in farming understand the economic relationship between agriculture in the county and everything else.

Robinson agreed.

“In general, everyone is concerned about the coming crop season and how farmers are going to make it,” Robinson said. “Dairy is an important employer here.”

This story was originally published March 27, 2015 at 6:30 PM with the headline "Plunging milk prices compound drought trouble for Merced dairy farmers."