SALEM, Ore. (AP) -- The planned closure of an Oregon dairy that has been in business for more than half a century has added to the problems facing other farmers, including low milk prices and skyrocketing costs.

Mallorie's Dairy in Silverton had built a reputation for having one of the best-run dairies in the state, the Statesman Journal reported.

But Mallorie's officials said last week that low milk prices and rising costs made it impossible to continue operations.

Layoffs of 55 employees were expected to begin later this month while the company's herd of 3,000 animals is being shipped to new owners in Texas.

Jerome Rosa, who operates a dairy in Marion County and is a member of the State Board of Agriculture, said Mallorie's planned shutdown raises troubling questions about where the industry is heading.

"You would be hard-pressed to find a dairy anywhere that is more efficient," Rosa said of Mallorie's. His Jer-Osa Organic Dairy produces organic milk, a niche market that many Oregon farmers have turned to because it commands a higher price.

"I just get up every morning and put my head down and plow through it. I don't wish this on my kids. I don't wish this on anybody," added Louie Kazemier, a co-owner of Rickreall Dairy in Polk County. The dairy has 1,600 mature cows, plus young stock, at its location along Highway 22.

Like other Oregon dairies, Kazemier's farm is paying about $260 per ton for corn to feed his livestock -- roughly a 53 percent price increase from a year ago. Corn is a fundamental part of a cow's diet.

Dairy farmers blame increased prices on the tremendous amount of corn used for ethanol, and government subsidies to promote bio-fuel production.

At the same time, wholesale prices for milk are inching lower and, at present, barely cover the farmer's costs.

Changes in U.S. Department of Agriculture regulations for milk marketing, enacted in 2005, also affected Mallorie's. The changes were aimed at certain dairies that milk cows and package milk in-house and are known as "producer-handlers."

Other dairy industry members complained that producer-handlers had an unfair pricing advantage. Rule changes were ultimately approved by the government and Mallorie's responded in 2006 by downsizing its operations.

Charlie Flanagan, Mallorie's business manager for 28 years, told the Statesman Journal there's no doubt the dairy industry is suffering.

"Almost every dairy in the United States is probably hurting," he said.

Copyright 2011 The AP.