Dairies hope to reduce milk supply

State operators trying to work out a plan.

Published online on Friday, Jul. 03, 2009

As the state's dairy operators scramble for ways to stop one of the worst industry downturns in years, a proposal to cut California's milk production is slowly moving forward.

Members of the state's five dairy cooperatives are trying to reduce production by 5%, hoping the move will help boost prices that have fallen below the cost of production.

The crash has forced some operators out of business and caused others to sell their herds.

And while the idea to shrink supplies is supported by many, getting the plan hammered out has taken longer than some have liked.

"I am not as optimistic as I once was," said John Gailey, general manager of Milky Way Dairy in Visalia. "The issue is not dead yet, but I guess I am feeling a little bit negative."

The idea to cut milk production grew out of a grass-roots meeting in May that was attended by more than 200 frustrated dairy operators in Tulare.

A group of dairy cooperative board members has met twice in the last several weeks but they have not reached a definitive plan, said William Van Dam, CEO of the Alliance of Western Milk Producers in Sacramento.

At issue is that some dairy processors may not be able to meet their obligations to suppliers if they cut 5% of their milk. Others already have reduced their supply.

Richard Cotta, president of California Dairies Inc., one of the industry's leading cooperatives, said that while he supports the general idea of reducing supply, his 500 members already have achieved that.

The recent hot temperatures and less nutrient-rich feed supplies have reduced the amount of milk the cooperative's cows produce by at least 5%, Cotta said, "and it does not seem to have an effect on price."

Milk that cost about $17 per hundredweight last March is selling for about $9 per hundredweight. The cost of producing milk in California hovers around $15 per hundredweight.

Cotta says the industry must solve one of two problems: significantly reduce production or increase consumption of dairy products. "And neither is going to be easy."

The industry is saddled with an oversupply of milk at a time when international and domestic sales remain relatively flat. Dairy operators say they ramped up production to meet a booming export market for milk powder. That demand has since fizzled.

"We are very efficient at making more milk but we are not very good at backing off," said Donald Vanderpoel, a Kern County dairy operator. "Sometimes we can be our own worst enemy. If dairymen looked at OPEC as a role model, we may not be in this situation."

One drastic way to reduce the industry's milk supply is to cull cows. Nationwide, more than 100,000 cows representing nearly 2 billion pounds of milk have been removed from production this year as part of the Cooperatives Working Together program.

Vanderpoel isn't ready to give up on the milk reduction plan. He said the fact that the cooperatives are working together for the first time in years is itself a small victory.

"This isn't over," Vanderpoel said. "We have groups in four or five states that are looking for California to take a leadership role in this."