Saturday, September 29, 2012

California dairies going broke due to feed, milk prices

This is what happens when you don't let the market decide prices:
And while milk revenues in California have soared to over $7.5 billion in 2011, making milk the top agricultural commodity, higher revenues mean little, famers say, because it costs so much more to produce the milk.

"I don’t think there’s a milk producer in the state who is profitable right now," said Michael Marsh, CEO of Western United Dairymen.

Since 2008, California has lost nearly 300 dairies, with 1,668 remaining as of January, according to the California Department of Food and Agriculture. There are no official estimates on how many dairies have shuttered in 2012 — but interviews with dairymen and experts indicate several hundred dairies could be in danger of going under.

"It’s been like a floodgate," said Riley Walter, a Fresno-based agricultural bankruptcy lawyer who has worked on 58 cases of dairies in financial trouble this past year — from bankruptcies, to liquidations, to operations taken over by receivers.

"Recently, I had two men over 60 years old who broke down and sobbed in court," Walter said. "You would be surprised how much these men care about their cows."
And why is this happening? Read it and weep...
California has had its own milk pricing system for dairy since the 1930’s, separate from that operated by the federal government in other states. The California Department of Food and Agriculture sets minimum prices that must be paid to farmers in the state for five classes of milk.

In recent years, California’s prices tended to be lower than in other states. In 2011 and 2012, California’s price for milk used to make cheese was frequently $2 or more lower per hundredweight of milk than in the rest of the nation.

CDFA spokesman Steve Lyle said the reason for lower prices is that milk supply exceeds demand in California.

The glut forces California producers to sell much of their milk to makers of products such as cheese, which pays much less than selling milk for drinking. And since much of the milk is sold out of state, the price farmers receive is lower to reflect higher transportation costs.

Several dairy organizations filed suit in August, alleging that CDFA failed to follow the law when it refused to increase the minimum price of milk sold for cheese to bring it in line with prices around the country.

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