California Approves Temporary Price Increase for Struggling Dairy Producers

December 15, 2009 06:00 PM

Source: CDFA news release


California's struggling dairy farmers will receive a temporary adjustment in the minimum price of milk, the state's agriculture department announced today.


The decision comes after testimony from dairy farmers at a hearing in Sacramento on Nov. 9 to consider numerous proposals to adjust minimum milk price levels. The California Department of Food and Agriculture (CDFA) is increasing the minimum prices of all milk usage by varying amounts for a temporary three-month basis from January through March 2010.


The adjustment includes 3¢/gln. on fluid milk products. The temporary adjustments on other dairy product classifications will cost less than 1¢ per container in production costs but are unlikely to have an effect on consumers at the retail level.


California producers are in the midst of a financial crisis brought about by recession in the global economy and a sizeable reduction in consumption of milk and dairy products.  In 2009, dairy prices plummeted, dropping by over half the level they were in 2008. Dairy feed costs have kept milk production costs at levels that greatly exceeded farm milk prices. As a consequence, California dairy farmers lost an estimated $1.4 billion dollars in the first nine months of 2009. dairy farmers are in the midst of a financial crisis


More importantly, California's annual milk production in 2009 suddenly reversed its 30-year trend and is running almost 4% lower than the total for 2008.  Additionally, a growing number of California dairy farmers exited the industry in the latter part of 2008 and into 2009.  For the first time in decades, the state's milk production will be less than the total needs of its processing plants.


While the temporary price adjustment is not designed to recover the financial losses that California dairy farmers incurred over the past 12 months, it is designed to help dairy farmers sustain their operations as milk prices begin to return to near profitability.  Farm prices for fluid milk began to adjust in September after national milk supplies declined. The temporary adjustments end on March 31.

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