One thing too often overlooked in a discussion of the “state of dairy” is that dairy farmers are, first and foremost, people and family members.
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Illustration by Corey Lewis.

And while uncertainty in dairy markets is nothing new, the toll taken on personal lives due to the COVID-19 pandemic has created fatigue and engagement issues that are unprecedented, leading to morale problems across the dairy family spectrum, said Anja Raudabaugh, chief executive officer of Western United Dairies (WUD).

“Between school shutdowns, employees feeling personally slighted because of their ‘essential’ status to the shuttering of houses of worship, it is a daily challenge to find good news to bring to our dairy families,” said Raudabaugh, putting faces on WUD’s membership, which covers about 900 California dairies producing about 60% of the state’s milk.

Within that California dairy “family,” the pandemic and the resulting emphasis on cheese purchases under the Farmers to Families Food Box Program created winners and losers in 2020.

“The government purchases and payments have had a major influence on the current stockpiled product and increased production currently affecting about half of our California farmers,” Raudabaugh explained. “But what is more significant is how the Federal Milk Marketing Order has played out. Half of our dairy farmers are having the best years of their lives. The other half have equated this last year to 2009. The difference was and is the ability of those cheese plants to depool and pass those savings to their farmers – or not.”

Between June and November 2020, California’s Federal Milk Marketing Order (FMMO) reported producer price differentials (PPDs) of -$7.70 to nearly -$10 per hundredweight (cwt) in four months. That wide variation in the impact on milk checks had a similar influence on the moods of dairy producers, said Daniela Bruno, University of California Extension dairy adviser in Fresno County. “From ‘happy’ to ‘desperate,’ individual outlooks are not a matter of farmer age or dairy size but a matter of what cooperative their milk went to,” she said.

The regulatory climate

Regulations and public perception are among the headwinds facing California’s dairy producers.

“It is not easy to be a dairy farmer in California with all regulatory and labor requirements,” Bruno said. “There is a lot of pressure from nonprofits and public health organizations on the government to invest in climate change solutions, and dairies are always pinpointed as big polluters. This contributes to deconstruction of the dairy industry’s image and affects change in food consumption habits, with people switching to plant-based products.”

Paul Sousa, WUD’s director of environmental services, said California’s dairies continue to reduce manure methane emissions, contributing to the state’s climate change and environmental goals. The state’s low carbon fuel standard (LCFS) program continues to provide economic incentives to dairy digesters that produce renewable natural gas for vehicle fuel.

“Dairies have made tremendous progress using grant funding from the state, combined with private investment, to build digesters and alternative manure management systems that reduce manure methane emissions,” Sousa said. He worries, however, that cutbacks in grant funding will place a heavier financial burden on dairy farmers already faced with the economic impact of the pandemic.

The new year also brought significant change in water quality regulations to the Central Valley, where most of California’s dairies are located, Sousa said. While the change brings additional costs, it also brings certainty of regulation going forward.

“The changes will improve how water quality regulations are implemented,” he explained. “In exchange for a longer time to meet water quality objectives, permitted facilities will have to ensure that clean drinking water is provided to those whose drinking water is impacted by nitrates.”

Escalating costs

Adding to an overall uncertain outlook for 2021 is commodity price volatility, especially the price of protein-based commodities which are contributing to an increasing cost of production, Bruno said.

For Doug Beretta, an organic producer who milks about 300 cows near Santa Rosa, in northern California, the outlook for 2021 is one of concern. Drought – in the form of lack of rain and water available for irrigation – contributes to the challenges he faces. Not only is there no carryover of hay, but short pastures also stress the organic producer’s ability to meet pasture rules to retain organic certification. Milk prices aren’t keeping pace with escalating feed costs.

California’s regulatory climate frequently fails to recognize the needs of agriculture while piling on costs, said Beretta. Meeting minimum wage requirements will raise labor costs substantially or force a cutback in hired labor. Sources for services and supplies are becoming less available.

For Joey Airoso, who milks about 2,800 cows near Pixley, California, the view is one of “disgust” as regulations and economic factors challenge dairy producers’ abilities to control their own farms and businesses.

“One of the few things farmers have control over is making as much milk as possible,” he said. “On-farm innovation is way ahead of marketing and processing, and that is because the farmer has the most passion for what he does.”

Moving toward the future

Although cloudy, the future is not all gloomy. COVID-19 vaccinations are providing some hope that life will return to some form of normalcy, Bruno said. Uncertainty lies in how quickly food service markets, tied to the reopening of restaurants and schools, can recover.

Dairy farmers are embracing technology to offset labor costs, she added. Installation of robotic milking and feed management systems are on the rise. Investments in cow comfort not only improve productivity but also address animal welfare issues by reducing cow-human interaction. The use of beef semen on dairy cows has yielded extra profit through beef sales while helping control the number and cost for replacement heifers.

As a large trade organization, WUD has also had to embrace changes in day-to-day business and member services.

“There is not a single thing that has stayed the same in the space of the year,” Raudabaugh said. “Every single thing our trade group is doing has changed, from board meetings to field meetings, to the way we are helping our farmers. The services they need are completely different from what they needed in February 2020.”

Among those needs, WUD’s Western United Human Resources Service was created to help farmers faced with the plethora of labor laws in California, including requirements tied to COVID-19 to ensure a safe working environment for the essential dairy workforce. The program is particularly unique among human resource programs because WUD provides the farms with full-time legal advice, helping them prepare to defend themselves from “predatory” litigation.

To increase outreach, WUD started a new podcast, “Seen and Herd; Industry Updates for the Modern Dairy Family.” In addition to reaching more producers during a time of travel and meeting restrictions, the podcast reaches people across the globe who want a local California dairy farming perspective and is averaging more than 25,000 listeners per week.

Helping others too

Despite the internal dairy and farm family struggles, California’s producers and their cooperatives have stepped up to help others in need.

“Our dairy farmers, coupled with their processors and creameries, really stepped up our local donation efforts in California in 2020, and we’re looking forward to seeing our nutritious products continue to be donated to those in critically food insecure areas across the state,” Raudabaugh said. “Our cooperatives have begun to prioritize food bank distribution as ‘customers’ versus a product dump when critically necessary. This innovation is a great step toward being a partner with Californians who are being deeply hurt by the pandemic impacts.”

FMMO and policy reform

California’s FMMO was implemented less than three years ago, in October of 2018. Despite its relative short history, WUD leadership is open to assessing potential changes, if those adjustments benefit the maximum number of dairy families.

“The FMMO precisely worked the way it was intended, to the detriment of about 50 percent of California farmers,” she said.

Farmers to Families Food Box purchases heavy on cheese, combined with limited block cheddar cheesemaking capacity, widened the gap between FMMO Class III and Class IV milk values, Raudabaugh said. With more cheese capacity coming online in the Midwest, the market may even out.

“Avoiding such bottlenecks with ample cheesemaking capacity may be the most effective long-term means of addressing this imbalance,” she said.

She notes that the California FMMO replaced a state order that had an all-inclusive pooling system and was voted out during a producer referendum.

Beretta said he believes a supply management program would be beneficial to dairy producers of all sizes.

“The whole pricing system is broken for dairy producers,” he said. “Something needs to be tied to cost of production. If state agencies can mandate a wage increase, increases in water quality fees to cover their increased cost, then the dairy industry should be able to get pay increases to cover our costs. We need to stop being price-takers.”

One issue specific to California that seems to be moving closer to resolution is the debate over the Quota Implementation Plan (QIP). Producers will vote on a plan to sunset QIP during a referendum, March 4 – June 1. The plan equalizes regional quota adjusters such that the quota premium in all counties equals $1.43 per cwt. The QIP would then be terminated, effective March 1, 2025.

“If all the dairy farmers in California could have gotten together and resolved the quota issue and fixed the California milk pricing system, I believe there would have been more equality in this region’s milk price, but that horse has left the barn,” Airoso said.

Circling back to the importance of people and family from the hindsight of 2020, Beretta finds optimism heading into 2021 in things outside of dairy economics: “Enjoyment in the simple things of life, like spending time with grandkids and family … doing simple fun things on the farm,” he said. “Also, no matter what happens, people still have to eat.”

Shares of Saputo Inc. SAP, -0.63% dropped 2.76% to C$33.15 Monday, in what proved to be an all-around negative trading session for the Canadian market.

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