Skyrocketing feed costs and weak milk prices are forcing growing numbers of California’s dairy farmers to sell their herds or file for bankruptcy.
The situation has become so dire that at least one dairy cooperative is launching a crisis hot line for despondent dairymen and their families. In the past eight months, 28 San Joaquin Valley dairies have filed for bankruptcy in the U.S. Bankruptcy Court’s Fresno office, up from 24 in 2011 and 10 in 2010.
Most bankruptcy filings this year have been since April, and many more are expected.
This is devastating to so many families, and it doesn’t look like it’s over.
Court records show that farmers — several who have multiple dairies — owe more than $100 million to lenders, feed companies and other dairy suppliers, putting some suppliers at financial risk as well.
Several feed companies owe more than $2 million. Although California, led by the Valley, is the nation’s leading milk producer with 1,668 dairies, the industry has been rocked this year by soaring feed costs. The problem has been worsened by drought in the Midwest, where many Valley livestock farmers get their corn.
Farmers blame the high cost of corn on the drought and the nation’s alternative fuel policy that consumes 40% of the corn crop to make ethanol.
Without enough cash coming in from milk sales, many farmers aren’t able to pay for their cattle feed. And they are running out of options. Many borrowed heavily after 2009 when milk prices collapsed, export markets dried up and farmers had an oversupply. Dairy analysts say that while milk prices are starting to rebound, they aren’t keeping pace with feed costs.
Many farmers face the situation of not having any more money to pay their grain bill. Some dairy farmers are able to grow some of their own feed, such as alfalfa and corn silage, to help shave feed costs. Diversified farmers are also better insulated from the highs and lows of the dairy industry. But smaller and mid-size dairies don’t have that luxury. And with banks and feed companies owed millions of dollars, many farmers are confronting the inevitable: filing for bankruptcy or getting out of the business.
Dairy industry leaders have sought relief in Sacramento, including a request for a six-month increase of 50 cents per hundredweight on all classes of milk. Last month, milk was selling for about $15 a hundredweight.
A local economist says feed costs will remain high through the rest of the year. And a return to profitability may not happen until sometime next year.
For many, it’s already too late. For one farmer, the dairy barns that used to house his 500 cows sit empty now, as he and his family are trying to pick up the pieces.
It has been very heartbreaking to these farmers. How do you walk away from something that has been your whole life?
Many farmers in financial trouble borrowed everything they could so they could afford to keep their cows alive — all the while hoping things would get better. But it was month after month of losing money. And the only light that these farmers saw at the end of the tunnel was a train.
For one California farmer, monthly feed bills jumped from about $20,000 about six years ago to $69,000 this year. This is causing other farmers to sell to other dairies, getting out before it was too late.
Dairy crisis line
Dairy industry leaders say they expect at least 100 California dairies this year to exit the industry, either through bankruptcy or by voluntarily shutting down their operations.
For many, it’s the end of a lifetime of work. To help farmers cope, California Dairies Inc., the state’s leading dairy cooperative, is launching a crisis hot line. Cooperative members will receive confidential counseling and support services for farmers and their families. They want to provide as much help as they can.
The California Dairies Board, said he has been advising several fellow dairymen on how to reduce their feed rations — anything to help them weather the storm. There is a great sense of desperation in the voices of many dairymen. When your milk check does not cover your feed costs and your employees, that is a serious situation. And many are wondering how long they can hang on.
To save on feed, some dairymen are trimming the size of their herds and selling cows to livestock auction yards, where operators are reluctantly doing booming business.
Yards are seeing a 25% increase in dairy cows being sold in the last four weeks.
So what happens when these farmers are done? Who is going be left?
Source: fresnobee.com, 8.18.12