California dairymen lose $882 million in 2012
By CAROL RYAN DUMAS
California dairymen suffered losses of $882 million in 2012, according to milk-production data released by the California Department of Food and Agriculture.
That's based on the $2.11 per hundredweight decrease in milk prices minus the total cost of production of 42,801 million pounds of milk.
For a 1,000-cow dairy with an average per-cow annual production of 23,457 pounds, that adds up to a loss of about $310,200 for the year.
Tom Barcellos, a Porterville dairyman and president of Western United Dairymen, said he thinks dairymen's losses were even higher.
CDFA's estimate for cost of feed in 2012 was $11.48 per hundredweight of milk, but the real cost was more like $12.50, he said.
That would increase losses to $932 million.
California dairymen have to import most of their feed, and the increasing cost of proteins -- corn, soybean meal, cotton seed and dried distillers grains -- is driving their cost of production, Barcellos said.
"It's a huge portion of the feed cost," he said.
Total feed costs increased 13.7 percent in 2012, representing 65.3 percent of the total cost to produce a hundredweight of milk. That's a 2.9 percentage point increase over 2011, CDFA reported.
In 2011, producers paid in the high $200s per ton for proteins; now it's $400, Barcellos said.
More than 100 California dairymen went out of business in 2012, and there'll be more in 2013, he predicted.
"It's going to continue to be difficult for people who have to buy all their feed. It can't continue the way it is," he said.
Dairymen who do have farm ground are more stable. They're not making any money on their farming operation, but it is keeping their dairies afloat, he said.
Things were bad in 2012, but it wasn't the first time California dairies have suffered large losses. The situation was even worse in 2009, when the bottom fell out of milk prices due to the global economic downturn that devastated dairy demand.
CDFA puts losses in 2009 at $5.26 per hundredweight of milk, for a total loss of almost $2.12 billion. Losses were $1.03 billion in 2008 and about $303 million in 2010. Statewide, dairymen profited by about $294 million in 2011, but 2012 turned disastrous again with skyrocketing feed costs fueled by the drought.
Using CDFA cost of production numbers, California dairymen lost more than $4 billion from 2008 to 2012.
The state's dairymen have only seen positive margins in a handful of months over the past five years, said Ray Souza, past president of Western United and a Turlock dairyman.
That's because producers have been getting a double whammy when it comes to feed costs. Farmers are taking out feed crops and putting in almonds, and there's less local feed so dairymen have to go farther to find it, raising both the cost of feed and transportation, he said.
Feed costs used to take about half of a producer's milk check, now it consumes about 70 percent.
A lot of dairymen with no younger generation interested in running the operation are looking at exiting the business, he said.