September 15, 2015

 

 Drought, volatility hurt dairies

​Veterinarians see clients fold, smallest dairies hit hardest

Posted Sept. 2, 2015

Melvin Simoes said empty dairies used to be rare and the result of poor management. Near his dairy in Tulare, in the heart of California’s dairy country, they are becoming commonplace.

“There’s some people that are phenomenal dairy operators and managers that just decided to get out,” he said.

Tricia Stever Blattler, executive director of the Tulare County Farm Bureau, estimated hundreds of dairies in California’s Central Valley have gone out of business over the past decade because of volatile milk prices and the lack of surface water.

“As the droughts worsened, there have been some really hard losses in the dairy community,” Stever Blattler said. “There actually have been a number of suicides throughout California in the dairy sector from the devastating drop in prices and the costs of inputs coupled with shortages for water.”

Small dairies—particularly those with fewer than 750 cows—have been hit hardest, Stever Blattler said. 

(​The Washington Post/Getty Images)

Dr. Greg D. Smith, who founded Tule River Veterinary Services in Tulare in 1986, said some of his clients have been among the dairy owners that went out of business.

“They’re people I know and have known for years,” he said. “They are families that are involved.”

Ten years ago, California had 2,043 dairies, of which 334 were in Tulare County, according to U.S. Department of Agriculture statistics. In 2014, state figures indicate the state had 1,470 dairies, including 281 in Tulare County.

The declining number of dairies coincided with consolidation and an increase in the mean number of cows per dairy, as the overall number of cows remained level statewide and rose about one-tenth in Tulare County. 

Using reserves

Simoes described himself as blessed with a good amount of water. He said his wells are weak, but he was able to continue irrigating his feed crops while his neighbors left fields fallow.

“I’ve got one more watering to go on all of my corn, so I think I’m going to make it,” he said. “And it’ll be a big sigh of relief when it’s time to chop it.”

Sadly, they’re spending a quarter-million dollars, half a million dollars, even more drilling for water and trying to find those deeper aquifers to tap into because they’re just out of options.”

Tricia Stever Blattler, executive director, Tulare County Farm Bureau

But he had to turn off the water misters that cool his cows during an “ugly streak” of 100-degree–plus days in early August. His wells had too little pressure to keep up with the cows’ demands for drinking water, the milk tank cooling, and the cooling sprays, despite his desire to keep his cows comfortable.

Dr. Gerard J. Koenig, owner of Koenig Veterinary Services in Tulare and a member of the American Association of Bovine Practitioners board of directors, said his clients have turned to groundwater to make up for a lack of surface water during the drought—now in its fourth year—adding, “Wells are failing at an astonishing rate.” Fixing or drilling wells adds to the costs of those lucky enough not to be on long waiting lists for the services.

Simoes waited more than a year for repairs in August to a well on farmland he rents, and he is so deep in waiting lists to have other wells drilled that he said the drought may be over by the time they get to him.

Stever Blattler said farms are pumping in a race to the “bottom of the bathtub.”

“Sadly, they’re spending a quarter-million dollars, half a million dollars, even more drilling for water and trying to find those deeper aquifers to tap into because they’re just out of options,” she said.

The bigger problem was not the drought.”

Dr. Greg D. Smith,
Tule River Veterinary Services,
Tulare, California

By April, California had about 6 percent of normal mountain snowpack, a record low, and state and federal programs that deliver stored surface water to farms already had been reducing deliveries, according to analysis from the USDA Economic Research Service.

“A major uncertainty about the impacts of the ongoing drought in California is the extent to which farmers will be able to offset shortfalls in surface water deliveries through increases in groundwater withdrawals,” ERS information states. “Historically, groundwater extraction is much higher in drought years, and given low recharge rates in some areas, the aquifers are very slow to recover the depleted water resources.”

Dr. Smith said dairies in California were already hurt by a downturn in milk prices in 2009, when amounts paid to dairies plummeted. Losses ate dairy owners’ reserves at the same time as the value of cows declined, reducing access to credit.

“The bigger problem was not the drought,” he said. 

click to enlarge
 

The statewide weighted mean prices paid to California dairies for milk had risen to highs of more than $20 per hundredweight—or 100 pounds—in late 2007 before plunging below $10 per hundredweight from February through July 2009, according to figures from the California Department of Food and Agriculture.

When the drought hit, Dr. Smith said, some dairy owners unable to afford a new well sold their cattle and, sometimes, their land.

Dr. Terry W. Lehenbauer, an associate professor of population health and reproduction and director of the University of California-Davis Veterinary Medicine Teaching and Research Center in Tulare, similarly said milk prices have been volatile since 2007. While prices rose in 2014, they declined again in 2015 to near the cost of production.

“With a drought situation, we have increased costs for growing crops and taking care of dairy cattle,” Dr. Lehenbauer said. “And, when that’s combined with reduced milk prices, that really has a severe impact on dairy farming.” 

Source: California Department of Food and Agriculture
The chart shows the statewide weighted mean prices paid to California dairies for 100 pounds of milk from January 2006 through March 2015.

click to enlarge

Dr. John J. Migliore, who has been in practice almost 40 years at Lone Oak Large Animal Veterinary Services in Visalia, which also is in Tulare County, said all his clients have survived the drought, and he suspects most of the dairies that went out of business had no land to grow feed. Those with ample land to grow corn, wheat, or other crops for their cows “are the ones that are in pretty good financial position,” he said.

Adapting, hoping for a silver lining

Dr. Koenig said dairies owned by some clients closed, and others were bought by dairies with more capital. Investment groups also have bought dairy and forage cropland to plant pistachio or almond trees, he said.

Culling rates in dairies have been high the past several years, a short-term fix for owners trying to bring in money with limited resources, Dr. Koenig said. He knows of others who have moved to the Southwest, the Midwest, or the Great Plains. 

Nobody has the optimism, I guess you’d say, to even consider building new dairies.”

Dr. Gerard J. Koenig,
Koenig Veterinary Services,
Tulare, California

 In California, Dr. Koenig said, “Nobody has the optimism, I guess you’d say, to even consider building new dairies.”

The most efficient dairies are making money, he said, but owners of many others are barely making it, some hoping to hang on and “see the silver lining.”

Dr. Koenig described losing not only clients but also most, if not all, the money still owed to him for products and services he sold to some of them on credit. From bankruptcy proceedings, he received pennies on the dollar for outstanding balances.

Despite the harm to dairies, Dr. Lehenbauer said he has not seen effects of the drought on cattle health. But dairies are changing the components of cattle diets, requiring adjustments to avoid health problems.

For example, he said growing sorghum requires less water than growing corn, but incorporating it into feeding programs and avoiding health effects can be challenging.

“I think, as veterinarians, we’re aware of the stress that the dairy industry is under, and we still have a job to do to help keep the cows healthy and productive,” Dr. Lehenbauer said. “And, so, it does require us to be thinking and creative in ways that we can still get the job done and still keep the cost affordable.”

For example, he said, veterinarians, dairy owners, and nutritionists have evaluated which feed components made sense under other conditions but should be cut during economic- and drought-related difficulties.

Simoes said dairies can mix, match, eliminate, or substitute feed components. “But water is just water,” and effects of its absence have been humbling, he said.

“From the cows to the plants to the milking facility, it’s the lifeline of what we do out here,” he said.

The rise in milk prices in 2014, including a record high in September, helped dairies bounce back or buy time, Simoes said. But water remains a bigger concern to him and other farmers than milk prices.

“As long as we get water, we know we’ve got a chance,” he said.