DeGroot is a third-generation California dairy producer whose San Joaquin Valley operation milks 2,400 cows.
It’s amazing to me how many different things impact our industry today. As I think about every day-to-day task we perform on our dairy, there isn’t one that hasn’t been influenced by politics, policy or the environment.
We face many challenges with regard to water and air quality, feed prices, food safety, employment and environmental conditions. There is no crystal ball when it comes to any of these issues, but I’d like to share a couple that are affecting our family farm today.
One of the biggest issues we face on our farm and as an industry is feed prices. Ethanol is a big factor in the increased corn price for dairy producers. One major thing that will affect our bottom line in a positive way this year was the expiration of federal subsidies for the ethanol industry at the end of 2011. There is also currently some legislation here in California to help end funding for ethanol subsidies when they expire in 2013.
In addition, there was a good crop inventory report that helped soften corn markets at the beginning of the year.
These will directly affect our family farm. Corn is something that can’t be replaced easily, so our industry must fight to keep the cost down. The dairy industry cannot be sustained with high corn costs.
Another major issue we are facing this year in California is a water shortage. Of course, with a water shortage comes a feed shortage, and, as a result, higher prices for hay and forages.
So far this year, California is 40% below its annual snowpack amount. This means that farmers won’t have enough water or they will have to use electric pumps, which comes at a high price. Fortunately for our family, we grow all our own forages and alfalfa hay. Even though we use electric pumps for a majority of our property, we still rely on ditch water for a portion of our ranch. When the water doesn’t flow down the mountains, our cost of production goes up. This will have a huge negative impact for agriculture across California.
On a positive note, we are enjoying very high cull-cow prices right now. Although we are in the milk business, we are all in the beef business too. We are also seeing high bull-calf prices. On our farm, we sell our day-old bull calves, currently for $180 per head. With a 37% cull rate and an average of 140 bull calves born per month, these high prices are helping us pay the bills.
There’s a domino effect when we discuss these topics. One leads right into the next because they are all affected when we look at policy, politics and the environment. So, for now, we will move forward in 2012 with a hope for stronger milk prices, reasonable feed costs and, for us in California, some rain and snow.
|DeGroot's Most Recent Prices
|Milk (3.51% bf, 3.28% prt)
||$14.61/cwt. (over base), $16.31/cwt. (quota)
|Alfalfa hay (delivered/premium)