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March 29, 2016

California's Average Size Dairy Declines

 |  By: Fran Howard

The nation’s top dairy state, has been struggling with low milk prices for years, and it appears that thin to nonexistent operating margins have now taken a toll on the average size of a Golden State dairy operation.

“California's dairy industry is in decline. By every measure, the industry was smaller in 2015 than in 2014,” notes Sarina Sharp, agricultural economist with the Daily Dairy Report.

According to the California Department of Food and Agriculture, California producers had nearly 1.75 million milk cows headed into 2016, down 41,670 head from a year earlier, a 2.4 percent year-over-year decline. Annual milk production last year in California dropped 3.4 percent to 40.87 billion pounds, and there were 1,438 dairy operations in the state, down 32 operations from the prior year.

“The decline in the number of dairies represents a continuation of a trend that has been underway across the nation for decades,” notes Sharp. “By and large, the U.S. dairy industry is consolidating.”

At the end of 2015, 43,584 licensed dairy farms operated in the United States, an 18-percent decline from 2010 even though milk cow numbers expanded, according to USDA data. Over the same period, the number of dairy operations in California dropped 16.2 percent.

“The latest decline in the number of California dairies is not merely a sign of consolidation,” notes Sharp. “There were 1,438 milk cows on the average Golden State dairy at the end of 2015, two head fewer than the previous year. That doesn't sound like much, but it is the first time in decades that the average number of cows on a California operation has fallen.”

In the five years preceding 2015, she says, the number of cows per California dairy, on average, climbed by 33.5 cows per year.

“In Tulare County, which would rank fifth in milk production if it were a state, the average dairy had 1,693 cows in 2015, a drop of 30 cows from the year before,” notes Sharp. “The shift in 2015 represents capitulation—not just consolidation—in a state that has been plagued by inadequate milk prices for years.”

Persistently low milk prices compared with nearby states convinced some California dairy interests to petition USDA for a federal order, and a hearing was held in November 2015. The next step is for USDA to develop and issue a Recommended Decision based on the evidence presented during the rulemaking process. Once the Recommended Decision is published, USDA will request public comment.

If USDA recommends that a California Federal Milk Marketing Order be created, dairy producers potentially covered by the order would still need to vote on whether to adopt it. A “yes” vote by more than two-thirds of the state’s dairy producers or by dairy producers representing two-thirds of the milk produced in the state would be needed to approve the order.

According to USDA, the earliest an order could be enacted would be sometime in 2017.

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