By CAROL RYAN DUMAS

Capital Press

Feed and fuel costs are keeping margins lean for dairymen in California and the Pacific Northwest.

Cost of production is high and it's anyone guess what feed prices will be this year, said Ray Souza, a Turlock, Calif., dairyman.

"I think right now most dairymen are in a negative cash flow. There's a real feed crisis in California," he said.

Hay inventories are down, and the driest January on record brought beef cattle down from the mountain ranges. Cattlemen are biting into lower quality hay dairymen feed to replacements and dry cows, he said.

A lot of historical hay acreage has gone to almonds and grapes, and last year's first-cutting hay from Nevada was rained on.

"There's not a lot of inventory going forward; we need a good hay crop," Souza said.

Milk prices of $15 to $16 per hundredweight don't pay for $330 ton hay and $275 ton delivered corn, he said.

The situation in the coming year will depend a lot on drought and the availability of irrigation water. In tough water years, ground for feed crops has been fallowed in order to irrigate higher value orchard crops, he said.

Idaho dairymen are on pins and needles coming into 2012, said Mike Roth, co-owner of Si-Ellen and White Clover family dairies in Jerome, Idaho.

"It's not particularly rosy in dairy in Idaho," he said.

Feed costs per cow are up $1.50 to $2 from the same time last year. No. 1 dairy hay is $240 to $260 per ton, he said.

"I think there's hay available, it's just expensive. And nobody knows what (this) year's hay price is going to do," he said.

Class III futures prices are down about $1 per hundredweight from $17.50 three weeks ago, but feed prices are not decreasing, he said.

"Volatility is still here in the marketplace," he said.

The cost of production for most Idaho dairymen is $16.50 to $18 per hundredweight, but the milk price on a cheese yield basis was below $14 per hundredweight in the second half of January, he said.

In Tillamook, Ore., 30-year dairy producer Sue Emerson, president of the Oregon Dairy Farmers Association, said rising fuel prices are really scary.

"It reflects in our feed prices," she said.

Alfalfa hay prices are running $300 a ton, and dairymen are expecting that high price to continue in 2012, she said.

While milk prices of $18 to $22 per hundredweight are better than in Idaho, Tillamook County dairymen have much higher costs because they have to haul in a lot of their inputs. Cost of production varies but is in the $20.60 per hundredweight range, she said.

"The milk price is really good, it's just everything else," she said.

But dairymen are getting creative in raising their own feed and have started planting corn for silage. Emerson and her husband, Tim, are planning to buy more acreage and plant grass for silage and grow their own seed, she said.

All in all, things are a little scary ... but the weather is good, she said.