Things aren't so golden for Calif. dairymen

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With moderate milk prices unable to keep up with soaring feed prices, many dairy farmers in California have decided to throw in the towel.   

“People are exiting this business in droves,” Tulare County, Calif., dairy farmer and Western United Dairymen president Tom Barcellos told the Visalia Times-Delta and Tulare Advance-Register. “I would say catastrophic just about describes the situation.”

Based on newspaper reports such as these, it would appear that the current situation in California is as bad, if not worse, than anywhere else in the nation.

The situation is so bleak that at least one dairy cooperative has launched a crisis hotline for dairy farmers and their families, according to The Fresno Bee. The hotline provides members with confidential counseling and support services to help those in the industry cope with life-altering changes.  

“Dairymen are getting out of the business — sending their cows to slaughter as fast as they can,” said Barcellos, owner of a dairy farm that goes back generations.

Riley Walter, a Fresno-area bankruptcy attorney, noted that the dramatic increase in bankruptcies among dairies is staggering. "This is just a bloodbath," he told John Lindt, publisher of the Sierra2thesea News Service, whose article appeared in the Visalia Times-Delta.

The year has tested even the most stable and weathered dairy producers. Last month, the USDA released July’s preliminary milk-feed ratio, a rough measure of dairy profitability, at a staggering 1.29, marking the lowest ratio reported in the 27 years of records.

"There is not enough money from their milk check to pay the feed costs,” California Dairies Inc. CEO Andre Mikhalevsky says.

Also, see “Dairy farmers say farm closures are continuing to rise” from the California Farm Bureau Federation.



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Don    
midwest  |  August, 21, 2012 at 07:44 AM

Dairy producers have been given a choice the past 2 years. More milk or more money. Most, almost all, chose more milk and turned their back on a managment plan to match production to what dairy product is actually needed. Chosing to ignore supply and demand is a foolish path to follow. National Dairy Producers Organization has pleaded with producers not to go this route but it has fallen on many deaf ears. The "milk cartel" has an iron grip on dairy and will continue to do so until producers see do something "out of the box" which I don't think they have the smarts to do. They make milk but have no idea how to put the processers to work for them instead of the other way around. Anyone who thinks it is just all going to work out somehow is really simple minded. It will work out all right and in the end with just a few mega dairies the first thing they will do is put in a production system to control output to profitable levels. If you want to save your way of life I'd think about joining NDPO asap.

globalview    
newengland  |  August, 21, 2012 at 09:13 AM

Don is correct ...I would add there are no more sacred cows on farms today ...they need to justify their presence at the farm or they are gone. Hopefully dairy processors are thinking about decisions us in the dairy production sector are making today. Replacing lost milk production takes months. We might not have heifers (new generations) to replace lost milk production. Milk futures should reflect the cost of production realities otherwise we will become a larger importer of dairy products for the pleasure of a few large multinationals.

Joel    
PA  |  August, 21, 2012 at 10:34 AM

What is currently happening to the dairy industry has very little to do with over production of milk or ignoring supply and demand as $16-$17 per cwt is actually on the higher side compared to the last 10 year avg, but rather a direct result of ethanol, which if you want to talk supply and demand it uses 40% of the nation's corn crop. I think this drought would have had a huge effect on feed prices with or without ethanol, however, tying corn to oil via ethanol has created much more market volatility and speculation. It wasn't until ethanol that corn hit $8 the last 3 years even with good yields, so on an extremely poor year even with record acres it can only go higher. This inturn effects corn silage which now sells for over twice as much as other years as well as every other substitute for corn. Hence dairy production feed costs have escalated more than 50% in the last 2 months. Supply will be cut, not because it's being ignored, but because cows are culled due to high feed prices and inturn and probably not soon enough the milk price will reflect this.

Cat    
MN  |  August, 21, 2012 at 11:25 AM

Dairy farmers, processors, and politicians all have a different idea of what constitutes supply and demand. Going back several decades politicians believed US dairy producers should be able to supply the fluid needs of the country, and all other dairy needs should be imported. That is the route we are going. We have been a deficit producing nation for the last ten years. Processors tout the new 'technology' they use in cheese production that involves either imported components or non-dairy additaves to bring the cheese yield of 100 lbs of milk up from ~10 lbs to closer to 14 lbs. Were the FDA to enforce standards of identity for cheesemaking we would be seeing a severe shortage of milk. New Zealand seems to be able to supply the increased demands for dairy product in the US so far. But when a world-wide bidding war starts for food who do you think is going to come out on top, the US or China?

Joel    
Central CA  |  August, 21, 2012 at 12:04 PM

Including last Friday's report, U.S. milk production so far this year has increased by 2.8% adjusted for the extra day in 2012. This is too high for a level of demand that has averaged a 2.0% increase over the past ten years and this year due to sluggish U.S. and world economic growth consumption may not even be increasing at this "average" rate. No doubt nation's biofuel policy has altered playing field and put domestic feeders at a competive disadvantage. Still fact is that more work needs to be done on the demand side of the equation given backdrop of long-term decline in per capita fluid milk consumption (conventional), diminished restaurant traffic, and competing countries more able to capture and serve growing import interest in various manufactured dairy products and ingredients,

    
hemet ca.  |  August, 21, 2012 at 01:20 PM

dairy biss. sucks

Patrick    
Wisconsin  |  August, 21, 2012 at 01:47 PM

My Dad used to say that if you have to pencil everything out, your doing it wrong. And isn't it amazing how one year of dry weather is causing so many to fold. That having been said California is only another example of what's been happpening for a very long time now. Our agricultural education system for the most part taught young dairmen six things. Borrrow, borrow, borrow, Produce, produce, produce. Those lessons are working out really well for us aren't they? Actual management came in the form of hiring or just being an expensive consultant. Things like diversification were thrown out the window because we found something that did exactly what proccessors and politicians wanted us to do,... borrow more and produce more. Get big or get out. Now here we sit looking towards dairy marketers to make everything right again. No one wants to work for us. No one wants to listen to us, no one wants to be a farmer anymore. Being on welfare is far more fun then,... well, you know,... work. It is nice to know that farmers have some of the most vocal and passionate supports anyone could hope for but nobody seems to care that the cheerleaders are outnumbering the players.

Ken    
Batavia, NY  |  August, 21, 2012 at 06:49 PM

Ethanol is the best thing that has happened to the dairy industry in the last few years. Sure if you have one of the highly leveraged farms that has to buy all of your feed, then it is not so good. But I never heard any of those guys complain about subsidies when they were feeding $2.00 corn. Then when the subsidy shifted to ethanol blenders did the tears ever flow. Dairymen who bought land instead of building ever bigger barns to house increasing numbers of cows are now in better positions then before ethanol. All of the consultants for years said to build barns, add on cows and buy feed. If you listened to those idiots then the price of that advice is being paid now. I do not feel sorry for them at all since they are the biggest reason for the times of over supply. And now they want Supply Management so we can bail them out. Dairymen who bought land and expanded at a controlled rate are laughing. And if corn goes higher, these dairymen can always sell the cows and grow corn for the ethanol plants.

Steve    
WI  |  August, 21, 2012 at 07:37 PM

I agree with Ken, California was the way to go. Own a couple of acres and cram all the cows you can get on them and buy all your feed. Now that model does not work very well. Here in the midwest most farmers own or rent land and do there own cropping and can withstand these downturns in milk prices to an extent.

matthew    
maryland  |  August, 21, 2012 at 09:01 PM

What milk cartel?? The milk cartel is the stupid federal order system and the processers are the benificearys of this ancient scam. But over the past decade, that has not work good enough for them so now they are pushing this supply managment crap down our throats, so poor dean foods can have stable milk prices. And whoever said the country is milk deficant is an idiot. We export 10 pecent of our production and less then 1 percent is imported and most of that is special high value stuff. Good ridance to the cali dairys, they been living off transportation credits from order 5 for 30 years. Maybe now we can produce the milk where we need it, and that's not in the middle of the desert

Roger    
fresno  |  August, 22, 2012 at 11:12 AM

Not to mention that security guard companies are lineing up with armed guards and off duty police to take over the ranches by the bankers decesions. Occurred about 2 months ago.What bank holds most dairyfarms? If you know the answer like I do then you realise they have been getting ready for repossession.That is what is coming.

Keith    
August, 22, 2012 at 11:54 AM

Ethanol is part of the problem. Not being paid a fair price for what we produce has always been the number one issue. God forbid if there is another drought next year.

Joel    
Lebanon, PA  |  August, 22, 2012 at 05:59 PM

I don't know how you can say that ethanol is the "best thing that happened to the dairy industry in the last few years." How do you get into farming without becoming highly leveraged? Whether you have a big farm or not you are probably equally highly leveraged on a per cow basis. It is nearly impossible to buy the cows, equipment and farm at the same time, so as I did we bought the cows first and we waited to buy the farm. Now that feed is high guess what happened to farm rent and farm prices. Now farms sell for up to $30,000/ acre depending on size and location. Tell me how ethanol again is the best thing that ever happened to the dairy industry. I'm not against ethanol, but anytime something demands that high of a nation's domestic production it's gonna create volatility. Ethanol may be the best thing that ever happened for crop farmers, but beyond that the benefits are marginal. Dairying has become a lot about risk management whether its prices for feed or milk to vaccinations and how much risk you want your herd to have to diseases to genomic bulls. If California dairies chose not to protect themselves from a high feed prices by not locking in feed costs or buying land then this is what happens. It pains me to see any dairy sell out whether large or small but it really is just reality for all small businesses, they all don't make it.

Jeff    
MO  |  August, 23, 2012 at 08:42 AM

Although I certainly agree that ethanol is a disaster for the dairy farmer. It is no supprise. All governement programs create disasters! But on a side note; I wonder what the current supply and price would be without us all having all those replacement heifers. Sexed semen has a role in this as well.


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