California Dairy Producers Seek 5% Production Cut

An effort by an informal network of California dairy producers to cut milk production by 5% is underway.

The still-forming plan took off last week at a meeting in Tulare, Calif., where a reported 200 producers gathered to discuss ways to address California‘s milk supply-demand imbalance and other industry troubles.

“It still needs the support of the co-ops,” said John Gailey, who milks 4,200 cows at Milky Way Dairy near Visalia, Calif.

Richard Cotta, CEO of California Dairies Inc. (CDI), the state’s largest dairy cooperative, said CDI’s board has agreed to address the reduction proposal. “We are willing to talk with other co-ops provided all come to the table and participate,” Cotta said. “It’s not a ‘yes’ or ‘no,’ but it is open to discussion.”

Neither Gailey nor Cotta could specify a timeline for discussions, although both expected efforts to take place in the next few weeks.

Last week’s meeting in Tulare was born after a few producers began expressing frustration among themselves over the lingering woes for California‘s dairies. “A lot of people don’t see change happening from co-ops,” Gailey said.

Dairy processing co-ops represent an estimated 75% of the state’s milk production.

Producers are looking for a way to reduce the state’s over-supply of milk and bring it into balance with demand, Gailey said. Some producers at last week’s meeting objected to the idea of dumping milk as a way to meet the proposed 5% reduction, saying it wouldn’t sit well with consumers.

“That would be a black eye for our industry,” Gailey agreed. “Any dairy producer can figure out a better way to get a 5% reduction. They could change their rations, beef a few more cows or dry off some cows earlier.”

Gailey said he and many other producers were disappointed that the futures market didn’t rally in reaction to the May 18 herd-retirement announcement by Cooperatives Working Together (CWT). The producer-funded supply management program would remove almost 103,000 dairy cows from the nation’s milking chain over the next few months.

While the Golden State struggles with a shortage of processing capacity to handle its annual 41 billion pounds of milk, its financially stressed dairy producers have steadily reduced their milk output this year.

Production dropped in April 2009 by 2.3 percent – or about 80 million pounds of milk — from year-earlier levels, USDA’s National Agricultural Statistics Service (NASS) reported May 18. It marked the ninth consecutive month, excluding September 2008, that California has seen year-over-year production declines.

Dire economic conditions this year have driven California‘s dairies to heavier cow culling and reduced feeding rations. Supply management programs implemented by several California dairy processors have also contributed to the state’s reduced milk output.

Mailbox prices for California dairy producers stand at about $10/cwt. to $11/cwt., about half the level they reached in 2008. Many of the state’s producers put their production costs at about $15/cwt.

Catherine Merlo is Western editor for Dairy Today. You can reach her at cmerlo@farmjournal.com.