Rising land costs, a declining labour force and heavy State Government regulation are hurting Californian dairy farmers.
Farmers frustrated at a State Government they feel doesn’t appreciate their value to the world’s fifth largest economy expressed their concerns to a group of New Zealand farmers who travelled to California with Alltech, held in conjunction with the company’s annual One: Ideas Conference held in Lexington, Kentucky.
Dairy farmers on California’s coast utilise pasture and the majority have become certified organic to access premium prices. Farmers in the nearby Central Valley utilise total mixed ration (TMR) systems and are reliant on irrigation.
However, the farmers visited had similar concerns about the future, with over-regulation and looming labour shortages top of the list.
When David de Sousa, a second generation farmer south of Modesto, was asked the biggest problem facing the dairy industry in California, he replied:
“The Government, no questions asked, and the second biggest problem is the government!
“We have the highest COP in the US for milk because of land prices and the cost of regulation. We have the biggest farms in the US now because people need to grow to stay alive.”
David’s father, Armelin, came to the US with only ‘money in his pocket’ and now owns two farmers, milking 2200 cows and running 4000 head across two farms.
“My father built an empire. That couldn’t be done today,” David said.
“Local dairymen say the breakeven price is rising every year. It’s now $16-$17 per hundredweight (100lb). We’re getting $11-$12 and haven’t made money in three years.
“We’re cutting costs at moment but in three years there will be a drastic minimum wage rise.”
The minimum wage in California is $10/hour for a 10 hour day/6 day week. In 2023 this will rise to $15/hour for an 8 hour day/five day week. Anything over 40 hours will be double time.
The de Sousas are paying $14/hour and providing housing and all utilities. They currently employ 20 staff across the two farms.
California has strict environmental regulations that farmers need to comply with, which adds further costs. The de Sousas recently had to lay concrete pads under their manure and silage, at a cost of $200,000.
“Now the Government is talking about a ‘cow fart tax’. Once you get into that, you know your industry is overregulated.”
Property tax rates are also rising as the land values rise due to demand caused by the profitability of almond plantations. This district has doubled in value in two years from $37,500 to $75,000 a hectare.
David said farmers can grow between 2270-3400kg of almonds per hectare and receive $1.80/kg. They planted 14ha of their farm to almond trees three years ago.
“We’re trying to jump on the winning team,” he laughed.
Fourth generation farmer Jennifer Beretta, from Beretta Dairy, in Santa Rosa, says the children and grandchildren of the Mexican immigrants who used to supply labour to the agricultural industry now want to work in factories as opposed to the work their parents did. It is making employment far harder to source.
“When we were kids growing up on this farm, people would come here daily looking for work. Now they don’t, and if they do, the first thing they ask is do you have a house.”
Californian regulations make it difficult to put housing on a farm. Adding a house could take up to 12 months to gain approval; a dairy or new barn will take about 2-3 years.
“Permits are crazy,” she said.
California is arguably the most ‘liberal’ and ‘green’ State in the country, and farmers believe the Government is pandering to this vote at the expense of agriculture.
State government officials have immediate access to farms to inspect the progress of endangered species. An endangered bird – farmers question how endangered as they see hundreds on a daily basis – built a nest in the crop of a nearby farmer.
He was forbidden from cropping it and they received no compensation.
In the litigious culture of the US, some environmental groups will take farmers to court, accusing them of breaching environmental standards.
It is common for vineyards that plan to expand (this is the popular Sonoma County wine region) to borrow additional money for when – not if - they get sued. It is easier to pay environmental groups off rather than go through court.
One fourth-generation dairy farm made the decision to make cheese in a bid to “escape the Californian milk pricing system”.
Fiscalini Farms, which milks 1500 cows at Modesta in California’s Central Valley, has won World’s Best Cheddar at the World Cheese Awards in London on three occasions for its Bandaged Wrapped Cheddar.
General Manager Brian Fiscalini said they began cheese making in 2000 in a bid to “escape the Californian milk pricing system”.
“There either seems to be too much milk or not enough,” Brian said. “We’re not confident California will fix the system.
“Here you need to get real big real fast or change the revenue market from fluid commodity milk to cheese.”
Cheese sales now make up 30% of his company’s revenue and the aim is to grow this to 100%, eschewing investors so they can maintain complete control.
“4-5 years ago we were using 7% of our milk, now we’re almost at 15% of milk used.”
The dairy and cheese business is run separately. However, under US laws, the cheese business must buy their milk at market prices from the dairy.
“Until we use 50% of the milk we produce, we can’t engage in a contract. We have to pay what the market is,” Brian said.
“California is a very hard place to do business. There is a lot of regulation and a lot of laws are not pro-business. Dairies are going to South Dakota, Idaho and Nevada to expand.”
Alltech funded Stephen Cooke's attendance at the Alltech ONE Conference and tour to California.