Dairy Cares: Rising Costs Put Strain on Family Farms, Food Production, Rural Communities

Affordability and the cost of living are the leading concerns for Californians today. This is the same for the state’s dairy farm families. Farmers and food producers in the Golden State increasingly face high input and environmental compliance costs, and the effects ripple through rural communities.

When a panel of dairy farmers took the stage at the most recent California Dairy Sustainability Summit this past March, the conversation focused on cost-effective strategies for helping keep their operations going well into the future.

“We are price takers, not price makers, so we have to control inputs” said Rochelle De Groot, a third-generation dairy farmer. “The most important consideration for us is cost effectiveness and efficiency,” she said about new technologies. 

Despite economic headwinds, an incredible amount of innovation continues to occur on California’s dairy farms, from new manure management technologies to AI-powered wearable health monitoring devices for cows, to electrified farm equipment. Dairy farmers continue to invest in advancing resource management, improving cow nutrition, health, and comfort, and making world-leading milk production even more efficient. However, between rising diesel and energy costs, increasingly limited water availability, and changing requirements with significant cost implications, much still remains outside of dairy farmers’ control.

Third-generation dairy farmer Jack de Jong said his greatest fear is the unknown.

“We try to be proactive as dairy farmers and look ahead especially to the next generation,” said de Jong. “But when you don’t know exactly what’s ahead and what the challenges are, and how you can mitigate that, it can make you nervous. Historically, every generation has built on the generation before it, and I want that for my family as well. When we don’t know what California might do next with regulations, it makes us nervous about how to be successful and pass it on.”

Economists at ERA Economics have been working to evaluate dairy farm trends, and likely economic responses to changing requirements and cost pressures. One critical observation is that price of California milk has decreased as input costs have increased, resulting in reduced net returns for dairy farms. The resulting reduced operating margins make farms increasingly sensitive to new costs, and cost pressures are disproportionately greater on small dairy farms. Larger dairies can spread capital, monitoring, environmental reporting, and other fixed costs over more milk production. Smaller dairies are more likely to merge, sell, or exit as costs increase.

Read more about the crisis here.