News Column

California Dairy Farm Income Rises Dramatically

August 5, 2013

California cheese makers and other dairy processors have paid the state's dairy farmers over $400 million more in the first six months of 2013 than for the same period last year, according to data released by the California Department of Food and Agriculture.

"That $400 million in additional revenue translates to about $250,000 more per dairy farm this year," said Rachel Kaldor, executive director of the Dairy Institute of California, noting that the trend was expected to continue for the rest of the year due to strong global demand for dairy products.

Kaldor said dairy farm margins are also improving.

"One of the most common ways to gauge dairy farm profitability is to measure farm income over feed costs," said Kaldor. "For the most recent two quarters reported, dairy farmers are enjoying an average 57 percent improvement in their margins over the middle of last year."

Kaldor said feed costs have moderated this year and are expected to decline dramatically over the remainder of the year -- down about 40 percent from last year's drought-driven highs.

"All of these trends are very good news for California's dairy farmers," said Kaldor.

Kaldor said processors supported the California Department of Food and Agriculture last year when it temporarily increased the price of milk that processors pay dairy farmers.

"Those temporary price hikes will add about $62 million to dairy farmer income this year," said Kaldor. "But compared to the $400 million more processors have already paid, it's very clear that vibrant dairy markets are far better at improving dairy farm income than reliance on regulated government imposed price adjustments."

Kaldor warned that the state's complex regulatory pricing system needs to change if California dairy farmers and processors are to compete in the new global market.

"Our current regulatory system was not designed for today's marketplace," said Kaldor. "Dairy farmers need to join us in understanding that competition builds markets for their milk, which leads to more farm income for them.

"We need to create a market-driven system with high levels of investment, vigorous competition and growing global demand for our products," said Kaldor.

"We're partners in this, and we should be working together to make it happen."


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