Milk-cow drought culling accelerates as prices jump

California Costs

It cost California farmers about $18.22 to produce 100 pounds of milk in the second quarter, and the average price was about $13.91, Marsh estimates. There were 1,675 dairies in California last year, government data show, and about 100 may close in 2012, he said.

Producers in California are not part of a federal system that sets minimum returns for farmers, so they tend to get lower prices than in other states, according to Ed Jesse, a professor emeritus in the department of agriculture and applied economics at the University of Wisconsin in Madison. Dairies got $16.42 per 100 pounds in August, 9.3 percent less than the national average, USDA data show.

Riley Walter, an agricultural bankruptcy lawyer in Fresno, California, said he’s had 58 cases of dairies in some kind of financial difficulty over the past year and half, including bankruptcy filings, out-of-court liquidations and moving operations into receivership.

“Dairies go through cycles, and I’ve hit every one of them since 1979, but nothing like this,” Walter said. “The recent spike in feed prices due to the drought and ethanol policies really put a nail in the coffin of a lot of people.”

More Bankruptcies

So far this year, 49 bankruptcy cases have been filed by family farms in California, up from 43 cases filed last year in the same period, according to federal court records. The cases include dairy and other family-run farms that are eligible to use Chapter 12 of the U.S. Bankruptcy Code to try to reorganize their debt.

“We’re all hemorrhaging hard financially,” said Jim Wilson, 44, whose dairy in Riverdale, California, milks about 3,000 cows and is losing about $200,000 a month. “We’re all on the brink of going under and just culling herds harder because we can’t afford to feed them.”

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