Dairy Cliff narrowly averted for California milk industry

150 150 Niki Woodard

California cows are still happy…for now. (photo: Flickr/USDAgov)

The fiscal cliff wasn’t the only cliff that threatened the nation’s economic balance to start the year. Elected officials in Washington were also grappling with how to keep the nation from going headfirst off the dairy cliff.

We narrowly averted a plunge off the proverbial dairy cliff by extending provisions of the U.S. Farm Bill, set to expire at the end of 2012. The Farm Bill is a comprehensive five-year bill that largely defines the economics of the American food and dairy industries by providing funds for crop subsidies, research, insurance programs, environmental conservation, and food stamps.

In the absence of subsidies provided through the Farm Bill’s Milk Income Loss Contract, milk prices would have soared to $7 or $8 for a gallon of regular milk. According to some California dairymen, this would have destroyed the milk industry.

And that would have been a hard reality for California to swallow. California is the nation’s largest producer of milk and dairy products. In 2011, the industry was valued at $7.68 billion, almost 20 percent of California’s total agriculture economy. The San Joaquin Valley is home to all five of the top milk-producing counties in California, accounting for almost three-quarters of California’s total production.

Although no farmer, cow or consumer fell off a cliff, dairy producers aren’t necessarily celebrating a reinstatement of the status quo. Their reasons, however, are quite varied.

“These stop-gap efforts don’t even qualify as kicking the can down the road,” said Jerry Kozak, President and CEO of National Milk Producers Foundation, in a press statement. “It’s little more than a New Year’s Day, hair-of-the-dog stab at temporarily putting off decisions that should have been made in 2012 about how to move farm policy forward, not offer more of the same.”

Milk pricing is complicated. Suffice to say that since recovering from catastrophic lows in 2009, California milk prices in 2012 look to be, once again, on the decline. Meanwhile, the cost of production is rising as a result of increasing feed prices and the cost of regulatory compliance.

At least one Fresno County dairyman is largely unaffected by the drama of the dairy cliff. “We’re not dependent on any of the provisions of the Farm Bill,” said Mark McAfee, CEO of Organic Pastures.

McAfee has been blazing his own trail. He runs the largest raw milk dairy in the nation, and was the first organic, raw milk producer in California in 2000.

“The problem is that they [Farm Bill provisions] support a welfare system for farmers instead of a market system,” said McAfee. “The majority [of subsidies] go to mega corporations.”

He explained that the current farming system accentuates the disconnect between producers and consumers by strengthening the role of the processor. “The processors don’t even know what a connection to the consumer is,” said McAfee.

The Organic Pastures business model is built on direct and frequent interaction with its customers through farm tours and social media. McAfee’s products are fueled by the nutritional feedback he receives from his customers. One need only glance at the Organic Pastures Facebook page to see the genuine zeal that defines the producer-consumer relationship in this business model.

And it seems to be paying off. His dairy operation is growing at a million dollars a year. Meanwhile, regular fluid milk sales are dropping precipitously:  per-capita consumption has fallen by about 25 percent in the last two decades, according to the USDA’s Agricultural Marketing Service.

While Organic Pastures is a small slice of California’s overall dairy industry, the farm is an example of an innovative, expanding market within the system.

Whereas the current milk market caters to shelf life, he said that his products cater to gut life. Raw milk is believed by its advocates to be a health food containing diverse strains of probiotics, proteins and enzymes that can prevent lactose intolerance, allergies, and even some diseases.  

“When consumers become enlightened, markets behave appropriately,” McAfee said.

Whether you buy into the raw milk market or not, the agricultural policy discussion of 2013 might be a good time for us consumers to ask ourselves, “what do we really know about our food system?”  


Niki Woodard

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