California dairy producers fear 50 cent price drop

Unfortunately for dairy producers, you can't turn off a cow.

You can't park that cow in a garage, and you can't just forget about her for a while.

On Feb. 1, the official minimum price of fluid milk paid to California dairy farmers dropped 50 cents a gallon. And that's badly hurting dairymen, who are looking for ways to cut expenses.

Although the price drop will result in lower prices for consumers at the grocery store, dairymen are scrambling, trying to feed their cows and keep their dairies going.

"It's been devastating to producers," said Michael Marsh, the chief executive of Western United Dairymen, based in Modesto.

Marsh said that a typical 1,000-cow dairy in Merced lost about $100,000 in January. In February, that loss will jump to $150,000.

"Industry officials are not seeing any recovery until the second half of 2009," Marsh said. "But these guys are losing $10 for every hundred pounds of milk that they produce." Dairymen were getting $1.50 a gallon for milk last year. That's dropped to 97 cents a gallon.

Bill Van Dam, chief executive officer of the Alliance of Western Milk Producers, said that dairy producers enjoyed good prices for about 14 months, and then the bottom dropped out.

Those good prices hurt demand, because consumers couldn't afford to buy high-priced milk, ice cream and cheese. But there's more to the drop than just demand.

"The worm in the pile is the value of the dollar against other currencies," Van Dam said. The world market is also going through a recession, and the demand for American milk products is down.

Van Dam said that consumers should see a drop of about 50 cents a gallon in milk prices, especially in fluid milk prices. Other prices, such as cheese and ice cream, may not show such a big drop, or drop as quickly as fluid milk will.

Both Marsh and Van Dam said that milk prices fluctuate constantly, but this time is much worse than ever.

"There's no light at the end of the tunnel this time," said Marsh. "The dairymen are culling their herds and adjusting their feed rations to try and get through this."

There might be help for dairy producers in the future. Marsh said that his group is working with Washington politicians as well as California legislators to get some of the supply into alignment with demand.

"We are working as fast and as furiously as we can," Marsh said. "If the recovery is late, you've got to wonder who's going to be left in the business."

Some of the ideas that Marsh's group has come up with are using milk products to help feed both out-of-work Americans and those overseas.

"There are a lot of Americans who are hurting in this economy," Marsh said. "We could be part of that solution."

Reporter Carol Reiter

can be reached at (209) 385-2486