BY CRAIG W. ANDERSON
Dairies rebounded somewhat in 2011 and 2012's been a challenge, but 2013 should be better, is the word from dairy experts.
The dairy crash of 2008-2009 hasn't been forgotten by San Joaquin County dairy farmers and today they face the same, if slightly less drastic, challenges as they did then: the cost of production rose 15.3 percent in 2011, according to the CDFA Dairy Marketing Branch's annual Cost of Production report.
The numbers for San Joaquin County's milk production in 2011 aren't out yet but dairy was worth $341.4 million in 2010 according to the agricultural commissioner's annual Crop Report, the most current numbers available.
"The increased cost was largely due to higher feed prices for hay, grain commodities, and by-products, which increased in every quarter compared to the corresponding quarter a year earlier," noted the report.
"It's the cost-price squeeze," said Jack Hamm, SJFB first vice president and dairy farmer near Lodi. "Costs are astronomical and if prices decline even a little and costs stay up, you've got a real problem."
Feed and cows
The report said cow numbers are supposed to decline in 2012 but adds that "producers are not culling as quickly as anticipated" and that the total dairy herd will be 9.23 million head nationwide with milk production estimated at 201.9 billion pounds in 2012, increasing to 202.6 billion pounds in 2013.
California has about 1.75 million dairy cows and 1.5 million dairy heifers, along with 700,000 beef cows. "Dairy is a very big player in California beef," said Hamm.
Improving position in global market
He said the board has played a significant role in moving milk into Mexico, a product that has a long shelf life due to new, higher temperature pasteurizing that kills the spores, fungi and other elements that cause milk to spoil.
He said the key to the USA being a bigger player internationally is to change the way our exported non-fat dry and skim milk powder is made with low heat. "Overseas buyers don't want it because it spoils sooner. So, if we make a better milk powder we'll be able to compete more effectively in the international market."
Global milk production is increasing and, said John Kaczor, market analyst with California Milk Producers Council, "The laws of supply and demand seem to have hit the global dairy market as high milk prices around the globe last year helped boost cow numbers and production per cow in most regions."
Correct prediction? Wrong prediction?
"With all the business with Greece and concerns about China's quarterly growth, I'm not so sure," said Robin Schmahl, hedging and marketing specialist with AgDairy LLC. "We're fighting heavier production in other countries, seeing lackluster demand, and building stocks that will likely limit a price rally later this year."
And the U.S. Dairy Export Council threw cold water on any thought of a milk price uptick when it said, "Excess supplies of milk are leading to price softening in the U.S. and international dairy markets and increasing product inventories will keep downward pressure on those markets."
"If we're going to be competitive globally, we must think of our industry as a world product with world prices and that we must produce a better product if we want to compete in that world," Quaresma said.
If exports are being juggled and manipulated to keep demand ahead of supply, or at least tied, then what's happening in California?
"Regulations are still an expensive input cost," Hamm said. "Water, air, there are regulations for everything."
Hamm said, "Everyone's keeping an eye on the BSE situation. And kudos to the state and federal department's of ag. Farm Bureau kept people informed."
He said the agencies involved did a "fantastic job of checking for BSE and keeping the lid on it. It was investigated thoroughly and handled well."
The fast-emerging export markets might save the day and boost the state's dairy industry over the next few years. But some dairies don't have a few, or even two, years left.
With feed costs through the roof – $300 a ton for corn – energy arriving at premium prices, supply grappling with demand, dairies closing, the global market shaky, BSE appearing but being resolutely smacked down by local, state, and federal agencies, all that's left is for other states to recruit California dairies. Which is what they're doing.
What does the future hold for San Joaquin County dairies?