HOLLAND: Clashes persist between farmers, processors on price paid for milk

I picked up a gallon of milk this week for $3.79.

Simple enough transaction? Not really.

Dairy farmers and processors are clashing once again over what prices the farmers should get. This time, the debate is especially testy.

Farmers, many of them in and near Stanislaus County, are pressing state regulators to boost the minimum prices processors must pay them.

The farmers say they have been squeezed for four years by milk prices that do not cover feed and other production costs.

Dairy processors say increased farm milk prices would hurt the state's industry, which competes in a global market.

That industry includes several thousand people who bottle milk and make cheese, butter, ice cream, powdered milk and other products at plants in the Northern San Joaquin Valley.

The Milk Producers Council, a farmer group with a branch office in Turlock, sued the California Department of Food and Agriculture in August over prices for the portion of milk that goes to cheese plants.

"CDFA is violating that law and rewarding our cheese manufacturers — including several huge national and international corporations — with a state-sponsored discount on the milk they buy, all at the expense of roughly 1,600 California dairy families that deserve a fair price for their milk," Rob Vandenheuvel, the group's general manager, said in a news release.

The Dairy Institute of California, a processor group, acknowledged that feed costs are hurting farmers' margins. But it said an increase in the farm price of milk makes no sense at a time when this product is in surplus.

"Enough is enough," said a prepared statement from Rachel Kaldor, the institute's executive director. "The MPC pattern of bullying and berating processors, the Department of Food and Agriculture and the secretary is decades long. But for the past months, that bullying and berating is aimed at getting the secretary to do something that will cause real damage for years to come, to California dairy farmers and processors."

What's so complicated about this? Shouldn't we just rely on a free market, in which dairy farmers can make money if there is enough demand for the products?

Doubters of this model say a dairy farm cannot simply raise or lower its milk volume to follow the market. It takes a few years to bring each cow up to full production — years when that cow is consuming pricey feed.

And if farms shut down, the thinking goes, we'll have a shortage of milk when demand rebounds.

State and federal officials have tried for decades to balance the needs of farmers and processors. California adjusts its minimum prices monthly, taking into account supply, demand, farm costs, processing costs and other factors.

The CDFA, responding to the recent hubbub over the issue, explained the process at www.cdfa.ca.gov/dairy.

I'm not sure where this is going. Prices will rise, prices will fall, and the players will propose many tweaks to the regulations in the years ahead.

I can only hope that milk, long the top-grossing farm product in our region, will do better in the net income column, too. And that the processors can keep getting those gallons onto the shelves at a reasonable price to us shoppers.

Have an idea for the Farm Beat? Contact John Holland at The Modesto Bee, P.O. Box 5256, Modesto 95352; jholland@modbee.com; or (209) 578-2385.