“Milk Price Fight Boils Over” — Wall Street Journal, 13 November 2012

With the drought and soaring feed costs, farmers have had a tough break this year. California’s dairy farmers, however, are experiencing more bad fortune: separate from the federal laws that regulate milk pricing, California has also implemented its own system of pricing. The state sets minimum milk pricing for buyers every month.

California has one of the biggest dairy industries in the US; but growing feed prices and slow economic growth has produced smaller milk production, which has ultimately increased milk prices.

While federal law sets milk prices at $2.50 per 100 pounds of milk, California has lowered its prices in order to benefit cheese-makers. As seen in the chart, California’s prices have never exceeded $2.00; and though prices are slowly increasing, they aren’t increasing quickly enough to save dairy farmers’ businesses.

This year, at least 100 California dairy farmers are closing down; and much of the state’s 1,600 dairy farmers are experiencing financial woes. Though there isn’t a maximum-set milk price, many dairy farmers stay close to the minimum so as to remain competitive. Cheese-makers contest raising the minimum price, since that would persuade cheese-makers to move out of state.

Many think that changing state pricing wouldn’t be enough to prevent dairy farmers from going out of business — most California dairy farmers face additional costs, such as paying higher prices for animal feed since they don’t grow it. This, in turn affects milk production, where milk per cow is decreasing because feed costs have sharply increased.

Some dairy farmers and cheese-makers propose that the market should decide pricing; however, because it takes several years for a cow to develop to full production, it’s difficult for dairy farms to match production to the marketplace.

This situation presents a Catch 22: if California keeps its current milk pricing, then dairy farms go out of business and cheese-makers stay in business; if the state increases milk pricing, then more dairy farms will likely stay open and cheese-makers will leave the state.

How can California save dairies, but also keep cheese-makers in state? Can, or should, the “market” decide the winner and loser, or — based on tax revenue, job creation and retention criteria – is it the state’s decision?

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

November 30, 2012

Fluid Management Systems

Copyright 2012   All rights Reserved by Fluid Management Systems, Inc.

www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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One thought on ““Milk Price Fight Boils Over” — Wall Street Journal, 13 November 2012

  1. Pingback: “Food Waste: From Farm to Fork and Landfill” – CNN, 21 December 2012 | Subodh Das's Blog

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