Send tens of thousands of dairy cows to the slaughterhouse, and what do you get?Hopefully higher milk prices, according to local dairy producers eyeing a new herd-removal program announced Friday that builds on a just-completed round that removed 103,000 cows from milk production.
"We've just got to reduce the number of cows, and this will do it," said Selma dairyman Steve Nash.
Cooperatives Working Together, an national consortium funded by producers, is hoping this second round of buyouts will achieve what the first round didn't -- a spike in dairy prices to alleviate a months-long crisis of high production costs and vanishing demand.
The program works by paying producers to get rid of their herds. The idea is to quickly move cows out of production, which theoretically should help create upward pressure on milk prices.
Except in the last round, it didn't work that way.
Given an estimated national herd size of 9 million (according to
www.dairyfarmingtoday.org), removing 100,000 wasn't enough, according to Hanford dairy operator Chuck Draxler.
He called Friday's announcement of a second round "a small step in the right direction."
"I'm afraid certain dairymen are going to have to go out of business," he added.
The speed of Friday's announcement, coming just days after the first round wrapped up, was spurred by desperation among producers, according to Bill Van Dam, CEO of the Alliance of Western Milk Producers.
"I think it's a fairly aggressive approach. I don't think the producers have much choice," Van Dam said.
Producers have been facing a milk glut since demand dropped off with the recession. They have been bleeding cash since December.
Exports have declined 60 percent, according to Michael Marsh, CEO of Western United Dairymen. And the domestic market has been slow to rebound. Cheese prices -- a primary driver of liquid milk prices paid to producers -- have remained stagnant.
Van Dam said he's surprised how many producers have stayed in business this long. That leads him to believe that there will be significant participation in this latest herd-reduction effort.
Many say they think that increasing pressure from lending institutions will play a bigger role this time. About 50 of California's approximately 2,000 dairy herds were liquidated in the first round, with two confirmed in Kings County.
"There's people in worse financial trouble that are probably ready to call it quits. Some of them may be told to call it quits," Nash said.
The reporter can be reached at 583-2432.
(July 11, 2009)
