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California Dairy farmers want state to raise milk prices

AP 15nov00

FRESNO — California dairy farmers, grappling with the lowest milk prices in 25 years, likely will ask state regulators for an emergency increase in the price they’re paid by cheese and butter makers.

The industry group Western United Dairymen asked the California Department of Food and Agriculture last week to schedule a hearing on the farmers’ request to change the way milk prices are established in the state.

“If you have to sell milk for less money that it takes to produce it, then you kind of wonder how long you can continue to do this,” said Bram Vantzelfde, who emigrated from Holland to operate a 1,000-cow dairy near Visalia. “How long are your suppliers willing to carry you? Two months, three months?”

Farmers want the state to set the minimum price paid to dairies for milk used to make butter and cheese set at the higher of either the going market rate or the amount established by Congress as the national “support price,” said Western United’s chief executive officer, Michael Marsh.

The support price is used by the federal government to buy milk during times of oversupply. It’s part of a safety net program established to protect farmers from volatility in the market by helping to drive prices upward during the industry’s periodic gluts.

Because of the current glut, the market price is hovering around $8.40 per 100 pounds of butter and cheese milk — the lowest price farmers have endured since the mid-1970s. The federal support price is set at $9.90 and the average break-even price for California dairymen is about $11.75, Marsh said.

“A dairyman can take that hit for a few days, but the prices this year have been very, very poor and ... our estimate for December is that it’ll go to $7.88,” Marsh said.

California’s 2,100 dairymen, whose 1.4 million cows gave about 32 billion pounds of milk last year — almost 20 percent of total U.S milk production — fear that if the price drops to the predicted level, many of them will begin to slip into bankruptcy or be forced to sell out to larger, corporate farms.

“We want the California pricing structure to ensure that the market price won’t slip below the safety net price,” Marsh said.

But not everyone is happy with the proposal, and the farmers still have to convince a panel of state agricultural officials to overhaul the current pricing system. A hearing date is expected to be announced some time next week.

Predictably, cheese and butter makers are lining up to oppose the suggestion.

“Even though we strongly support higher milk prices for producers, it would come at the expense of the plants that produce the cheese,” said Land O’ Lakes Vice President Alan Pierson.

“We don’t think we can go out to the market and command any higher prices,” Pierson said.

Plus, the rest of the country doesn’t have to abide by minimum price mandates.

“If we incorporate it, there’s a possibility that our processors will pay a higher price than other areas, and it raises some serious questions as to the competitiveness of the finished product coming out of California compared to Wisconsin or Idaho,” said CDFA’s dairy marketing chief David Ikari.

“The cheese industry in California wouldn’t be able to survive in a market like that,” said Patricia Stroup, a spokeswoman for Hilmar Cheese Co.

Also, Ikari points out, the federal safety net program for dairy farmers is scheduled to end after next year, as mandated by a provision of the 1996 Freedom to Farm Act that phases out government programs for many other commodities as well.

“Right now, the government stands ready to buy all the cheese that meets a certain standard. But is the government always going to be there to buy the cheese?” Ikari said.

“We’ve had emergencies before like this. As we move to a more market-oriented pricing structure, we’ve had very volatile pricing and right now we’ve got a low price, period. But all this can change fairly quickly based on supply and demand,” he said.

Winter is one factor that may boost prices paid to farmers, at least in the near term. As the weather gets colder, milk cows become less productive, so there is less milk on the market and the price generally rises a bit.

Also, America’s butter and cheese intake peaks every year between Thanksgiving, Christmas and the Super Bowl, as cheese platters and baked goodies pile up on dining room tables. It’s a feeding frenzy that usually forces milk prices up slightly.

Still, consumers likely won’t feel the price changes until much later next year, if at all.

Right now, people are paying about $3.99 for a pound of mild cheddar cheese in California. About 98 cents of that goes to farmers.

If the price were to rise a few cents, processors might absorb that cost or pass it on to retailers, who likely would raise their prices as the more expensive cheese trickles in over the next several months.

Right now, if the price increase is approved, California farmers could expect to see an extra $15 million divided up among them over the next year or so.

“It’s going to be a gloomy holiday season,” said Frank Faria Jr., who runs his family’s 1,400-cow dairy near Escalon.

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