What's next? California Dairy Producers Map Out A Path To The Future
US - Already fraught with a persistent glut of milk, enormous environmental challenges and lack of new processing capacity, the California dairy sector will need to continue its growth or face declining profits and harder times ahead, according to a report commissioned by the California Milk Advisory Board.
25 April 2007
2 minute read
"These three challenges end up amounting to a problem where the industry will face a sustained period of tougher profits and tougher economic times for dairymen," said David Palecek, a consultant with McKinsey and Co., which conducted the study.
Stimulating debate among California dairy producers and processors on how they can grow profitably in the next 20 years, the study outlined several policy options that could buoy the industry's competitive edge and increase profitability for producers.
As the No. 1 milk-producing state in the nation, California is now a major exporter of dairy products nationally and globally. Producers enjoyed several decades of success and two of their most profitable years in 2004 and 2005. But they are also at a crossroads because the very strategies that have worked so well to drive their success in the past are now threatening the dairy sector's viability, the report said.
Ray Souza, a dairy producer from Stanislaus County and president of Western United Dairymen, which conducted a forum this month to facilitate discussion of the study, said the McKinsey report lays down a road map for producers to look at where they want to go in the future.
"And it comes at a critical time because we're on the heels of developing a new Farm Bill, so we're looking at milk pricing and our dairy industry both in a national and statewide level," said Souza.
More than 300 dairy producers and others attended the forum in Modesto to debate how their industry should move forward.
Many producers agree that one of the biggest problems they face is the abundant milk surplus that remains unstoppable, even in difficult years such as last summer when a record heat wave killed thousands of cows and squelched milk production.
Ideal weather, large farm scale, impressive herd productivity and other factors have all contributed to the oversupply of milk. And without policy changes that offer producers an incentive to control supply, producers will likely see major price downturns in coming years that are more severe and linger longer than they have ever experienced, the report said.
