Dairies going broke due to feed, milk prices
Sunday, September 30, 2012
HANFORD, Calif. (AP) — In nearly six decades of running a dairy in central California, Mary Cameron made a name for herself in a male-dominated industry: She led several dairy organizations and was honored as Outstanding Dairy Producer of the Year.
But the 82-year-old Cameron — who still drives a tractor and supervises her Hanford dairy — is on the brink of losing her life's work. She can no longer pay the bills. Her bank has classified her loan as distressed. And she can't afford enough feed for her 900 milking cows and 1,000 heifers.
"I have been in this business for 57 years and I have never been in financial trouble like I am right now," said Cameron, who runs the Atsma-Cameron Dairy with her two sons. "I'm on the verge of bankruptcy. It's horrible and inexcusable."
Cameron is not alone. Across California, the nation's largest dairy state, dozens of dairy operators large and small have filed for bankruptcy in recent months and many teeter on the edge of insolvency. Others have sold their herds or sent them to slaughter and given up on the business.
Experts say California dairymen face a double whammy: exorbitant feed costs and lower milk prices. The Midwest drought has led to corn and soybean costs increasing by more than 50 percent this summer, stressing dairymen from Wisconsin and Minnesota to Missouri. But in California, milk prices have also lagged behind those in the rest of the nation, exacerbating the crisis.
And while milk revenues in California have soared to over $7.5 billion in 2011, making milk the top agricultural commodity, higher revenues mean little, famers say, because it costs so much more to produce the milk.
"I don't think there's a milk producer in the state who is profitable right now," said Michael Marsh, CEO of Western United Dairymen.
Since 2008, California has lost nearly 300 dairies, with 1,668 remaining as of January, according to the California Department of Food and Agriculture. There are no official estimates on how many dairies have shuttered in 2012 — but interviews with dairymen and experts indicate several hundred dairies could be in danger of going under.
"It's been like a floodgate," said Riley Walter, a Fresno-based agricultural bankruptcy lawyer who has worked on 58 cases of dairies in financial trouble this past year — from bankruptcies, to liquidations, to operations taken over by receivers.
"Recently, I had two men over 60 years old who broke down and sobbed in court," Walter said. "You would be surprised how much these men care about their cows."
At the Overland Stock Yard in Hanford, owner Peter Belezzuoli said he sees two to three dairymen selling their entire herd every month, compared to about four per year before the crisis. More cows are being sold for slaughter, he said. And the value of dairy cattle has plummeted by as much as 50 percent in the past five years.
"It's no different than the housing industry, where people lost all the equity," he said. "People have the same cow, but now it doesn't have the same value."
Economists say milk and feed prices always fluctuate — but it's the margin between the two that counts, and how far apart the thin years are.
Only three years ago, falling milk prices forced many dairymen to go under. The current crisis, dairymen say, came too quickly. Many still have unpaid loans, have exhausted their equity, and can't get new loans.
For Cameron, who grew up washing barns and feeding cows, costs of production vastly surpass revenues. She's losing $40,000 every month, she said.
Her parents emigrated from Holland in the 1920's and started a dairy in California's Central Valley. After college, Cameron followed in their footsteps: Her office wall is filled with awards and news articles touting her successful dairy career.
Today, Cameron owes $7.5 million to her banks and creditors, and has run out of cash for feed. To make ends meet, she has sold cows for beef and fed her herd less grain — but that means milk production is down and so is revenue.
Cameron recently saw a bankruptcy lawyer and may have to sell her entire herd and dairy.
"It just makes me sad," Cameron said. "This is a world I love, this is my life."
For her woes, Cameron blames state officials' decision to keep milk prices lower than those in other states.
California has had its own milk pricing system for dairy since the 1930's, separate from that operated by the federal government in other states. The California Department of Food and Agriculture sets minimum prices that must be paid to farmers in the state for five classes of milk.
In recent years, California's prices tended to be lower than in other states. In 2011 and 2012, California's price for milk used to make cheese was frequently $2 or more lower per hundredweight of milk than in the rest of the nation.
CDFA spokesman Steve Lyle said the reason for lower prices is that milk supply exceeds demand in California.
The glut forces California producers to sell much of their milk to makers of products such as cheese, which pays much less than selling milk for drinking. And since much of the milk is sold out of state, the price farmers receive is lower to reflect higher transportation costs.
Several dairy organizations filed suit in August, alleging that CDFA failed to follow the law when it refused to increase the minimum price of milk sold for cheese to bring it in line with prices around the country.
Economists say the market itself will lift prices: as more dairymen go out of business, fewer cows will produce less milk, which in turn will lead prices to go up.
For Cameron, higher prices would mean she could keep her dairy. When she dies, she wants her children to scatter her ashes in the corrals.
"That's where I belong," she said, "...that's where I've been all my life."
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