All agree the state’s milk pricing system is ‘antiquated,’ but progressive change is elusive.
Michael B. Marois
Ray Souza’s voice cracks a bit when he says it, when he tells how his family’s Turlock, California, dairy farm is struggling to pay the bills.
"We go from black to red month by month," the 66-year-old said. "For us, it’s break even at best."
Souza is like many other dairy farmers in the state who say the price they’re paid for milk from cheese producers isn’t enough to cover the soaring cost of feeding cows. Those economics have caused a fifth of California’s dairies to shutter since 2007, according to state agricultural figures.
California is the largest milk-producing state in the U.S., accounting for 20 percent of the national supply. Cheesemakers buy about 43 percent of all the milk produced in California at prices set under the state’s unique pricing system rather than by federal formulas.
The dairy industry has petitioned the state to raise the prices cheesemakers must pay to buy California milk and have sought legislation to change a pricing system that dates to the 1930s. The producers say raising prices will harm them, the very people the dairy farmers need to buy their milk.
"There needs to be a balance between producer prices and what the market can bear in terms of the product we manufacture and the market for those products," said Rachel Kaldor, executive director of the Sacramento-based Dairy Institute of California, which represents processors. "In order for us to be able to stay in business, we need to be able to buy milk at a price that allows us to do that."
Under California’s system, the state Food and Agriculture Department sets the minimum price for five classes of milk. The most expensive is fluid milk found at the dinner table. The cheapest is cheese. The system was set up in part to encourage more cheesemakers to open plants in California.
Farmers say the state system pays less than federal prices for milk used to make cheese and for whey, a dairy byproduct. California’s system worked for dairy farms a half-century ago, when 60 percent of milk sold was fluid. Now, almost 80 percent is sold for products such as butter, dry milk, powders and cheese, the least profitable of the classes.
The system has left cheesemakers paying less for milk they buy from California than elsewhere. California farmers in March were paid 19 cents per gallon less for milk sold to cheesemakers than those in Washington, Oregon, Wisconsin, Minnesota, New York, Pennsylvania, Vermont, Texas and Arizona, according to state and federal figures.