Six months ago, many predicted the milk price collapse afflicting dairy operators would end mid-year.

They were wrong.

The price paid to milk producers, which is far below production costs, actually declined in May to $9.76 per hundred pounds of milk (one gallon weighs about 8 pounds).

That’s just above the government support price but far below production costs.

And milk prices aren’t expected to really recover until January, according to Bill Van Dam, CEO of the Alliance of Western Milk Producers.

“This is real demoralizing, because every time we approach a time where we think it’s going to go up, it doesn’t,” he said.

The crisis began late last year when soaring feed prices collided with the global recession, which killed demand and left farmers with too much milk on their hands.

Since then several steps, such as removing cows from milk herds nationwide, have been taken to try to cut supply.

They haven’t had any upward effect on price.

True, the crisis has yet to result in massive bankruptcies and sell-outs in Kings County’s dairy business.

According to the Web site Cooperatives Working Together, which is finishing a buyout program that removed 100,000 cows from the U.S. market, only two Hanford-area dairies have completed the process.

But dairymen say that just because dairies continue to go through the motions doesn’t mean that everything is fine.

In fact, they say that dairy operators are burning through their equity fast, including the ones who saved up for the big ups and downs the industry has faced since the 1990s.

This downturn is considered far worse than previous ones because it’s part of the global economic crisis.

“Give it 30 to 90 days. I think you’re going to see a lot of bloodletting,” said George Longfellow, who operates a dairy south of Hanford.

“I don’t think people understand how serious a situation this is,” Longfellow said.

Longfellow said he’s meeting with financial advisors next week to hammer out survival strategies.

One of those may include asking banks to defer loan payments, he said.

On Monday, U.S. Agriculture Secretary Tom Vilsack said that within a week or so he’ll announce a plan to make it easier for dairy farmers to take out new loans or keep up with their existing payments.

But its unclear whether the announcement will help California dairies, which tend to be larger, or primarily target smaller dairies in the Midwest.

Meanwhile, analysts like Van Dam expect far more dairies to participate in the lastest round of herd buy-offs announced Friday by CWT. Either that, they say, or possibly a wave of bankruptcies precipitated by banks calling in loans and cutting off credit.

And some predict it won’t happen to just start-up and overleveraged dairies. Even dairies without much debt and a lot of equity are in danger of going under, according to Jamie Bledsoe, a dairy operator in Riverdale.

A good year in 2007 and continued high real estate values are helping, Bledsoe said, but it may not be enough to help him and others keep going until the anticipated January recovery.

“We can’t create demand,” he said.

So, like others, he keeps feeding the cows and hoping that he can hang on until the price creeps back up to manageable levels.

“I can’t say that we’re going to survive,” Longfellow said.

The reporter can be reached at 583-2432.

(July 10, 2009)