Income from temporary increase 'modest' compared to dairies' losses


Capital Press

A temporary increase in California's minimum milk price will offer only a small amount of relief to farmers, as 10 percent of the state's dairies face failure by year's end, industry officials say.

California's milk producers will get a helping hand from the state with an increase in the minimum price they can charge for milk.

The state Department of Food and Agriculture last week announced an average 15.5 cent per hundredweight increase to all milk across the board from Jan. 1 through March 31.

"This is not terribly important money," said Bill Van Dam, president of the Alliance of Western Milk Producers. "It's the kind of gesture from the state that's appreciated by producers. But prices have recovered on their own."

The increase means an extra $5 million in monthly revenue to California's producers combined. The state ag department estimates the state's producers lost $1.4 billion as production costs surpassed revenues in the first three quarters of 2009.

"This amount of money is rather modest against the huge losses that dairies have had in the last year," Van Dam said.

The losses are unprecedented and will take out 10 percent of the state's 1,700 dairy farms by year's end, said Michael Marsh, CEO of Western United Dairymen. The number of failed dairy farms in the state number more than 100.

"And we're still counting," he said.

The average California dairy has been losing $100,000 a month for the past 16 months for a total loss of about $1.6 million to $1.8 million per dairy, he said.

The state's increase in milk prices was less and for a shorter period of time than both groups were seeking.

"We would have appreciated a bit more, but any relief is, of course, appreciated," March said. "It will help, but the financial hole here in California is so big and so deep, it'll take several years to fill that."

Nonetheless, producers appreciate the state's help and recognition of their struggles, especially considering USDA chose to distribute congressional dairy aid through direct payments rather than cheese purchases. Cheese purchases would have helped Western producers a great deal more, he said.

"With USDA giving Western farmers the shaft on direct payment, at least our ag department here gave us the chance to get a little more for our producers," he said.

The state increase restores the amount by which the state ag department reduced the pool's minimum price a year ago, Van Dam said.

Based on 1,700 producers, the increase represents an average monthly revenue increase of about $3,000 per producer through March.

The increased milk price amounts to about 3 cents a gallon and is not expected to affect retail prices.

Capital Press reporter Wes Sander contributed to this article.

Milk prices

Temporary increases on milk prices

Class 1: 35¢/cwt.

Class 2 and 3: 25¢/cwt.

Class 4a and 4b: 10¢/cwt.

-- California Department of Food and Agriculture

January Class 1 prices for California

North: $18.22

South: $18.49

-- Alan Levitt Daily Dairy Report

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