Chino dairies are feeling squeezed by housing developments.

"Where Everything Grows," the city of Chino's motto, originally referred to its agricultural roots. Today it applies instead to growth in families, non-agricultural businesses and commercial and industrial complexes. Houses and business structures are going up at an astonishing rate.

The Chino Valley was once home to more than 400 dairies and 400,000 head of cattle and dairy cows are keeping pace with the human population. But that won't be the case for long, with 70 percent of the remaining 140 dairies either sold to real estate developers or in negotiations.

This shift in land use from agriculture to urban development is going on throughout the state, but none is more dramatic than the mass exodus currently taking place in the Chino dairyshed, where family farms have thrived for more than 50 years.

Chino's rich agricultural history dates back even further, to the Spanish land grant forming Rancho Santa Ana del Chino. The area once specialized in orchard and row crops and, until recent years, was the No. 1 dairy area in the United States.

Old-time farmers in the area say they aren't dismayed by the shrinking farmland base. The area's shift away from agriculture has been expected for a long time. They point out that dairies migrated 40 to 50 years ago to the Inland Empire in Riverside and San Bernardino counties from burgeoning coastal communities surrounding Los Angeles and from Orange County.

Now dairy farmers are again making a transition -- either to retirement or to new, more dairy-friendly locations. That means that many Chino dairy families who want to continue in the business are moving out of state, primarily to Idaho, New Mexico and Texas, or to other California counties.

Some dairies are trying to relocate to the San Joaquin Valley, around the Tulare dairyshed, but the permitting and regulatory requirements discourage many smaller dairy businesses. The California Department of Food and Agriculture reports that in the past several years there have been more than 75 dairies added in Merced, Madera, Fresno, Kings, Tulare and Kern counties. The region now is home to more than 50 percent of all California dairies.

Nathan de Boom, executive director of Milk Producers Council based in Chino, said during a recent tour of the former Chino Agricultural Preserve that his grandfather, who has operated a Chino dairy for decades, just sold his operation. Housing developers are paying from $300,000 an acre to, in one case, $600,000 an acre for dairy land in the Chino Valley.

De Boom said this isn't just happening in Chino. A report last year on dairy trends from CDFA shows a continuing shift in the state's dairy landscapes, with nine counties recording a net loss of 57 dairies, and 34 of them in Riverside and San Bernardino counties.

What's happening in the Inland Empire now, however, is an astounding acceleration of that shift to upscale housing developments. Homes are being built and occupied before dairy farmers can even get their cows out. Golf courses sit cheek to cheek with dairy hay piles.

Chino city officials admit this has caused friction between the dairies, which until recently operated in a protected agricultural preserve, and the new homeowners. There are issues with flies, odors, supply trucks, waste management, noise and dust.

Homes overlook corrals where dairy cows still feed. Dairy calf replacement operations adjoin high school playing fields. Cattle and feed trucks compete with minivans and pricey sports cars for space on what were once country lanes leading to family dairy farms. Domestic pets, like dogs, harass and sometimes kill or injure livestock.

"There's definitely an encouragement here for dairies to look to greener pastures, locations where they can be accepted and encouraged in their businesses," de Boom said. "That's not the scenario here in Chino.

"And," he continued, "Chino is representative of what's going to happen throughout California. This is a statewide issue and sooner or later all areas will have to face this problem. California has got to decide at the policy level whether it wants to maintain its agricultural roots or go even more heavily into urban development."

San Jacinto dairyman Brad Scott agrees with de Boom's assessment. He pointed out that while urban encroachment hasn't directly constrained his operation, which is 45 miles away from Chino, there are effects of increased government regulation, often formulated to address a specific problem area, then applied statewide.

"We moved from Chino and finished building our dairy here in San Jacinto about 1979," said Scott, who is president of Riverside County Farm Bureau. "And, although urban encroachment isn't a big issue here yet, there's an indirect effect of the urbanization that's taking place in the Chino area and elsewhere around the state.

"Regulations put in place to address environmental and urban concerns are usually applied across the board and that means they affect me," he said. "And there are the problems of traffic congestion that mean it takes longer to truck our milk to the processor, it's harder to get feed and supplies onto the dairy.

"Traffic is one of the biggest problems I face," Scott continued. "There are too many people and cars and not enough infrastructure. There has been no freeway or road building in this area since we first started doing business out here in 1976."

Gary Korsmeier is president and chief executive officer of California Dairies Inc. in Artesia, which is owned by 680 California dairy farmers who ship more than 14 billion pounds of milk a year for processing. These members have nearly $100 million of equity invested in the company and the cooperative.

California Dairies is the result of a 1999 merger of three of the state's financially strongest cooperatives: California Milk Producers, Danish Creamery and San Joaquin Valley Dairymen.

The co-op owners have dairies located from San Diego County in the south to Marin County in the north. Most of the milk supply, however, is located in the San Joaquin Valley from Kern to San Joaquin counties.

"In the past three years we've lost 40 percent of our milk production in Southern California and we're the largest dairy processing organization in this part of the state," Korsmeier said. "The last dairy in Santa Maria sold out yesterday.

"But, this movement isn't going on statewide," he said. "Where you see movement is where real estate is at a premium that is the coastal areas and the areas around the Los Angeles basin. A lot of our dairies are moving, but they're moving up to central California. We're still retaining dairies in the state. But there are dairies going to Idaho, New Mexico and Texas.

"The bigger picture really is what's going on in the real estate market, what's going to happen with interest rates. All that has to mesh in order for the kind of transition you're seeing in Chino to continue at such a rapid pace," Korsmeier said. "Every time you pick up a paper lately, they're talking about the housing market stabilizing and how home prices are starting to go down. Things are slowing down compared to the past 12 months."

Those familiar with the real estate market in the Chino area say there are reports that a few deals for dairy properties have fallen out of escrow in the past few weeks, perhaps indicating that developers are uncertain about the direction of the local residential and commercial real estate markets. The Federal Reserve Board has been steadily increasing interest rates, which has a bearing on construction lending and the cost of home loans.

What happens for the very last dairies in Chino if the real estate market stops moving?

Korsmeier said, "If you had talked to any of us 10 years ago, we would have told you that the exodus out of Southern California was accelerating and within five years there would be very few dairies there. What happened is our economy went in an opposite direction and the dairies didn't move.

"When you get caught, you have to hunker down and fight the fly issue and all the other issues, and wait for a turnaround. I do know that a lot of dairies in Chino are still programmed to leave. They've closed escrow. But I think the pace it's currently at will slow down and some will get caught."

Korsmeier said a higher percentage of dairies being forced to relocate are going east rather than staying in California. Only time will tell what that will mean for the state's agricultural economy.

Currently milk and cream are California's No. 1 commodity with a value of more than $4 billion.

"I see a future where residential developments and dairies will be able to co-exist more comfortably," de Boom said. "There's an opportunity for that to happen in this state."

He said he doesn't think finding ways for dairies and residential communities to coexist will be easy--and certainly it won't happen in time to staunch the exodus from Chino--but he thinks it can be done.

California Farm Bureau Federation