By Craig W. Anderson
The San Joaquin County dairy industry is just coming out of the COVID pandemic that cut off a chunk of business from restaurants and schools causing milk prices to producers to hit the skids and now are faced with a drought. The lack of water threatens all agriculture and San Joaquin County’s $378.8 million dairy production – according to the county’s Agricultural Commissioner’s 2019 Crop Report – certainly won’t be exempt from the suffering.
“The drought is a huge issue that affects forage,” said Lodi dairy farmer Jack Hamm. “No. 1, it could cause a short supply of feed and No. 2, the prices will go up for feed.”
“This is exactly what agriculture doesn’t need,” San Joaquin Farm Bureau President David Strecker said of the drought, now in its second year. “Higher prices for drought-affected feeds are only part of the drought’s effect on agriculture, including dairies.” He said inflation is happening “across the board” for commodities needed for dairies and other ag operations.
The lack of water, both currently and impending, has forced farmers to make painful choices such as removing productive orchards and fallowing other land in order to use what water there is to irrigate remaining crops.
“Discretionary water use is happening: water trees, vines or other crops?” said SJFB Executive Director Bruce Blodgett. If those “other crops” are ruminant feed stock, it’s good for cattlemen, dairies and the feed growers because while the feed is available, the price is high.
“It’s one of those existential years in California. We’ve got an extreme drought and farmers are going to be hurting all over the place,” said Chris Scheuring, CFBF senior counsel. While some growers may be able to default to groundwater, this situation, he said, “Really brings home the fact that the state has been too slow in building additional infrastructure that could have captured more water.”
Hank Van Exel, Van Exel Dairy in Lodi, said, “Water is the most critical element in California but we need more storage. However, due to mismanagement by the state, we don’t have it. We’re the bread basket for the world and we wouldn’t be in this situation if the necessary infrastructure had been built. Agriculture has been mismanaged into this shortage.”
CFBF President Jamie Johansson feels the same, noting, “Where are the projects the voters invested in when they approved a water bond seven years ago? Building, not just planning is needed [and] we need to ensure family farms are able to survive this year.”
An expanded drought emergency order issued by Gov. Gavin Newsom should provide some short-term benefit via voluntary water transfers and exchanges in drought- wracked areas. CFBF commented that the real need is “for significant, long-term investments to secure future food production in the state.”
The drought emergency has now been declared in 41 counties, impacting about 40 million citizens statewide due to “acute water supply shortages” in Northern and Central California, according to the emergency plan.
“We’ve to be able to save water when we’ve got it, so we can use it when we need it, said SJFB First Vice President Ken Vogel. “If we had more surface water, we wouldn’t need to tap into groundwater resources.”
“A drought like this affects everything on a dairy,” Hamm said. “Probably the only positive about this thing is that cows like dry weather.”
Overhead costs increasing
The costs of doing business are, as far as dairies are concerned, rising at a breakneck rate as costs for feed, fuel, wood for construction, equipment, transportation and labor, are increasing as the dairy industry and agriculture in general work their way out of the pandemic’s malaise.
During all this, “Milk prices to producers remain steadily mediocre,” Hamm said.
“Trucking costs have increased 70% over last year and that has to affect dairy’s milk shipping,” said SJFB Second Vice President Jake Samuel, CEO of Sunrise Fresh LLC, and a custom harvester in Linden. “Dairy farmers face rising expenses but they’re still getting essentially the same prices.”
As the pandemic has come under greater control, demand for truck drivers has increased and, “Dairies may not have enough truckers to take their loads that need to be moved to processors,” Samuel said.
Van Exel noted that production had been capped during the pandemic but it could return to normal levels and “if the state would get out of the way, our industry could do what’s needed to move forward.”
Strecker said the reasons trucking costs have gone up significantly is due to many regulations, road conditions and overcrowding on the roads. “We must come together in the future to create a more successful trucking experience for dairies.”
“Feed costs are up 80% and corn has jumped from $185 to $330 per ton delivered,” Hamm said. “Rolled corn is $7 per bushel. This is good for our feed friends, but difficult for the dairy industry.”
Rick Staas, president/CEO of the San Joaquin Valley Hay Growers Association, said “Prices were $40 stronger than last year with the best quality alfalfa I’ve seen in a while. But, was there enough feed grown in the county to meet our customer’s needs for dairy cows and beef cattle? No.”
“States like Idaho and Oregon are growing more feed but Nevada’s cut way back and have reduced cuttings from four to two and they’re a month late,” Staas said. “The situation here is that more and more field crop acreage has been converted to orchards, mostly almonds. But the almond estimate is three billion pounds, so there should be enough hulls for feed after all.”
Overall, Staas said, “Everyone was skittish, but the market stayed firm; movement and tonnage was good. Government money helped our dairies.”
He said many dairies “bought early because there is usually substantially less crop by the end of the year,” and prices would be higher in 2021. “Trucking is very tight and getting enough hay haulers is a real concern. Crop changes are having an effect and will continue to do so down the road. Equipment costs have shot up and that affect feed prices, too.”
Milk and products made from it seem to be static and for producers its high feed prices and water selling for $1,200 an acre foot – if it needs to be purchased – has the dairy segment of the county still gripped in what San Joaquin County Agricultural Commissioner Tim Pelican called the effects of “the strange, pandemic-driven year.”
He said the return of schools and their milk programs will be positive for milk producers as “there will be choices in terms of marketing again.”
When the crop report for 2020 will be available with the results of the pandemic year’s dairy facts is unknown, he said, because the COVID prevention methods slowed his office’s work on the report.
Where does the Biden administration stand?
“What will the Biden administration do regarding agriculture and dairies?” asked Jack Hamm. “Rumor has it that the administration isn’t on ag’s side. But at this point that’s still speculation.”
“We don’t know what they’re going to do, they have no direction and that’s bad,” Van Exel said.
A recent report from the CoBank Knowledge Exchange said the policy focus in Washington is “shifting from crisis management to building for the future” and that the pace of U.S. dairy exports started on a weak note in 2021 as exporters “continue to struggle with the scarcity of containers, port congestion and rising transportation costs.”
CoBank Vice President Dan Kowalski explained that “U.S. milk production rose in January and February, giving dairy processors ample milk supplies for processing. Cow numbers in February reached the highest level in 30 years.”
Blodgett said, “There are real concerns that trade policies will change and not for the better.”
Vogel said, “Agriculture needs some support in D.C. I haven’t seen any indication toward reducing regulations.”
“People have wondered what a third Obama term would be like,” Strecker said. “With the Biden administration we’re finding out.” He said the Obama White House years weren’t friendly to ag and with the return of the Waters of the United States mandates and the Death Tax, it’s “not looking good for agriculture and for dairies, which are already the most regulated ag sector.”
And with the announcement by the Biden administration of its “30×30” plan, agriculture has another issue to fret about. Officials from the U.S. Department of Agriculture, Department of the Interior and Department of Commerce unveiled the “America the Beautiful” scheme recently which is a 10-year, nationwide effort to conserve, connect and restore 30 percent of the nation’s lands and waters by 2030.
Priorities of “30×30” include incentivizing and rewarding voluntary conservation work on farms, ranches, forests and fisheries. Johansson said, “The objective of climate policy should be to keep working lands working. California’s farmers and ranchers must have flexibility to manage land in ways that will succeed for their crops and for the type and scale of their operations. A one-size-fits-all approach will fail.”
Finding labor for dairies is a conundrum, according to Hamm. “Our workforce often came primarily from immigrants with a rural background and were used to rising early to work. We’d train them for dairy work but too many of them would work four or five days, decide the dairy business wasn’t for them and they’d move on.”
Hamm looks to hire experienced, dairy knowledgeable people. “I prefer experienced, good workers but it’s difficult to find them,” he said.
“It’s hard to get or keep good labor,” Van Exel said. “When the unemployment dollars encourage people to stay on the dole because they make more with unemployment than they can working, you’ve got a problem.”
“The system’s broken for the dairy industry,” he said. “Until we demand that people get back to work – and do quality work – labor will remain a problem.”
Samuel felt COVID fear may have led workers to shirk searching for jobs, or they couldn’t find people to watch their kids during the workday, or they had to home school their children due to school shutdowns. He said, “It seems obvious that people just don’t want to go to work when they can make more on unemployment.”
Now, he said, Amazon, packing sheds, summer jobs, dairies, ranches, equipment dealers and more jobs are out there “because there are now a lot of businesses looking for workers. Everybody needs to catch up from 2020.”
“Labor’s a huge problem,” Blodgett said. “An ongoing labor issue is we have no effective guest worker program, no bill yet that is good, logical and reasonable.”
Vogel views dairy workers as being “managers” because “they must have certain skills to be a manager of milk, cows, calves, manure, feed and more.”
Strecker sees the big picture regarding labor in these pandemic times as being a challenge for dairies and other agricultural businesses. “Finding skilled, hardworking people and keeping them is the hard truth everywhere in every industry,” he said.
Perhaps as the pandemic and its accompanying worry and fear fade and agriculture returns to a semblance of normalcy these labor issues will likewise assume a more normal aspect.
Dairy cow diets have improved nutritional value and are also minimizing the enteric [animal] methane emitted when cows burp. The California drought, availability of trucking and overhead costs have contributed to rising feed costs.
Feed and feed additives have grown over the years to include seaweed – two types, both reducing methane produced by ruminants – almond hulls, sugar beets, corn, cotton seed, safflower, spent grains, grape pumice and alfalfa hay, among others.
“There’s a renewed interest in byproducts from other crops as additives,” said Jennifer Heguy, UCCE Dairy Farm Advisor for San Joaquin, Stanislaus and Merced counties. “Almond hulls are very nutritious and most commonly fed in California. The sticks and shells found in them are always being looked at for how they affect nutrition.”
Seaweed additives have been found to cut enteric methane by 82% and that’s good news for dairy farmers. “This is interesting and hopefully fruitful for both types of seaweed. It’s still early in ongoing studies but it’s a good idea being put into practice,” Heguy said.
The California Department of Food and Agriculture (CDFA) Alternative Manure Management Program (AMMP) is working on ways to implement non-digester manure management practices in California that will reduce greenhouse gas emissions from manure.
AMMP involves handling and storing manure in ways without using an anaerobic digester and supporting manure management in a dry form. The 114 AMMP projects funded so far are expected to reduce greenhouse gas emissions by an estimated 1.1 million metric tons of greenhouse gasses, including methane, over five years.
Unfortunately, Heguy said, “Currently there is no funding for AMMP but I hope funding will be offered in the future.”
Feed corn prices have increased due to weather and China buying it but “there was a little dip in the price, China bought it again and the price went up,” said Marit Arana, PhD, Professional Animal Scientist, Board Certified Animal Nutritionist and head of the Nutrition Department at A.L. Gilbert Animal Feed Company’s Oakdale location. “Hay prices are increasing and almond hulls are $140 a ton delivered, and a lot of cows are being culled because of the drought. All of this plays a role in feed planning.”
“We’re examining new seeds in California,” Arana said. “And we’re looking at Black Soldier Fly larvae as a protein-rich poultry food that could be used for dairy food and added to many byproducts.”
Almond hulls are a staple of dairy cow feed and its fame as a nutritional byproduct has led to it being shipped to Texas and New Mexico.
With almond hulls holding the top spot among feed additives, Heguy doesn’t see a shortage occurring despite almond orchards being removed due to the drought. “The estimate for this year’s almond crop is three billion pounds so I’m sure almond hulls will be around for some time.”
Whatever the case, Hamm put it succinctly: “Feed will be tough in the future.”
General ag challenges
“Ideally, we need to get California regulators to move ahead in different, positive ways,” Blodgett said. “Let dairy farmers do their jobs and spare them the silly rules, regulations and compliance requirements that drive up their costs.”
“The media will turn any story into a worst case scenario about anything,” Strecker said. “It’s an uphill battle to refute the media’s anti ag, anti dairy bias.”
“The biggest disconnect is between ag and the people who buy our food,” Van Exel said. “Education about what ag means to our society needs to start in school. Consumers need to understand how agriculture works to put food on their tables, before it’s too late.”
Quota Implementation Program
Voting on the controversial QIP program will end June 1 and the vote by Grade A dairy producers will determine whether to continue the QIP program as is, or to “sunset” it in 2025.
The QIP deducts $0.38/cwt. from all Grade A milk producers’ incomes and pays out up to $1.70/cwt. to the dairy farmers who own quota.
“We’ll see what happens in June,” Hamm said. “I’m a quota holder. Dairy farmers were told quota would not be an issue when promoting the Federal Milk Marketing Order’s adoption and now it’s become a big issue. This is an aspect of dairy farming we’ll have to deal with over time.”
The program has gone through controversy, court battles and now a referendum to determine its future fate.
The California Farm Bureau Federation contributed to this story.