“High supply of milk must be met with high demand for milk and dairy products,” DePeters said.
Because of the extreme variability of milk prices, the CDFA creates a “milk pool” by combining the total amount of money of different milk products, and paying them out to dairy farmers.
“What’s clear is that California dairymen receive much less for their milk than other states,” Mitloehner said.
But dairy owners contend with another challenge — the price of feed for cows. Although the price of milk remains stable, feed prices have gone up in the last few years.
“Approximately 40 percent of today’s corn produced in the U.S. isn’t going to animal feed or human food, but into fuel — mainly ethanol,” Mitloehner said.
According to the U.S. Department of Agriculture (USDA), corn grown for ethanol is predicted to compete with feed over the next 10 years. In 2010, corn grown for ethanol began to seriously compete with corn grown for feed when ethanol production surpassed feed production at 5 billion bushels. The USDA claims that in the next few years, the cost of corn and other crops used for ethanol will be at “historically high levels.”
However, ethanol isn’t the only reason for corn prices increasing.
“Corn and soybean prices affect the prices of other feeds. Plus the drought in the Midwest this summer also impacted price of corn and soybeans,” DePeters said.
The increased price of corn also means the increased price of alternative feed.
So you see what is happening? It's that ol' stinker Unintended Consequences! You pass a law REQUIRING ethanol which drives the cost of feed up since most is corn based. Then you control the price of milk keeping it artificially low such that farmers can't raise their product price to cover their feed costs, you have the makings of a shortage!
That's the CA and the US Government working hand in hand. I don't think they could have planned it any better.