With only a a little relief from the CDFA on prices – California dairy leaders are worried more Central Valley milk shippers will be closing their barn doors and selling off their cows. CDFA Secretary Ross decided late last month to raise the minimum price paid to dairymen only 25 cents disappointing the farmers. Since then” I’ve seen more announcements of herd sales” shrugs Western United Dairymen president Tom Barcellos of Porterville.
These dairy operators were hoping for an 80 cent to $1 bump in the price the state’s processors including cheese makers must pay on an emergency basis for the next 6 months.Dairymen call the 25 cents a drop in the bucket.
In the meantime “we lost that much on the CME” market in recent days where dairy futures are traded says Hanford dairyman Joaquin Contente. California milk prices rise and fall with the price of of dairy commodities in Chicago.
Those prices have been falling since the New Year with 500 lb barrel of cheddar that went for $2/lb last October fetching about $1.54 today.
At the same time feed costs are staying high at $7.36 per bushel for corn on the futures market until the new Midwest crop comes in next summer. The drought has also hurt hay prices and availability with Valley alfalfa hay going for $300 a ton. Lots of hay was exported keeping prices up and China is expected to buy double what they bought last year. All eyes are on rain forecasts for this summer in the Midwest to see if there will be another drought year. It was dry this winter hurting the winter wheat crop.
Dairy Body Count
Testimony at the most recent CDFA hearing on the subject suggests more dairymen threw in the towel recently. Some of that testimony includes a body count of lost dairies.
– From DFA: Data from Frazer LLP shows net income losses per cwt. for first six months at $0.92/cwt. in Kern County, $1.75/cwt. in San Joaquin area, and $2.24/cwt. in Southern California.
-Have seen abnormal exodus in farm counts within the co-op Dairy Farmers of America membership in 2011 (20 farms went out of business) and 2012 (34 farms have failed or exited).
Western United Dairymen testified – Just within WUD, 50 dairy sell outs occurred in the last eight months.
California Dairies co-op testified – The cost of feed makes up nearly 70 percent of the cost of producing milk. California witnessing an unprecedented drop off in milk production: September 2012 was the lowest month of milk production since 2005, about 13 percent lower than the peak month.
California Dairy Campaign testified- Estimated that more than 100 dairies will close their doors in 2012, more than in the devastating year 2009.
Land O Lakes co-op testified -In 2012, 43 LOL member farmers have discontinued milking.
Fresno bankruptcy attorney Walter Riley testified – Over last two years have worked with 60 dairymen and their families who have
experienced extreme financial pressure due, in part, to low milk prices.
This month the Overland Stockyard in Hanford has a full scheduled of dairy herd sales announced, several “complete dispersals”.
In Tulare County, milk production was down 1.4% in November says CDFA. The state’s dairies are selling nearly 4% less fluid milk to consumers this year.( but nearly 10% more organic milk).Cheese consumption was up 0.01% through November and butters sales are 6% higher.
Losing Their Shirt
CDFA says the average price paid producers in 2012 was $16.39 per cwt compared to $18.63 in 2011. At the same time CDFA says dairy farmers cost of production in the South Valley in the 3rd quarter was $20.12 per hundred lbs weight (CWT).That compares cost of $18.54 for the same period in 2011.
The numbers don’t lie, dairymen say, they are losing their shirt.
If California dairymen are complaining about the low price they get for their milk,so are NY dairymen this month ,a newspaper reports. NY dairy operators say they can’t sell their milk because California milk prices undercut them.
“A large part of California’s dairy edge stems from its milk pricing system, which is set by the state, rather than using the federal milk pricing system that most states utilize, including New York. Dairy farmers in California are often paid up to several dollars less per hundred pounds — about 12 gallons — of milk than farmers in New York. In December, preliminary average milk prices paid to farmers were $18.80 per hundred pounds of milk in California, according to the USDA’s National Agricultural Statistics Service. Farmers in New York received $22.20 per hundred pounds of milk in the same month.”
At next weeks Tulare Farm show a panel of dairy experts from around California will weigh in on the idea of abandoning the California system and joining the federal program like New York.