National Dairy Month started out as a way to distribute extra milk during the warm months of summer. The commemoration was established in 1937 by grocery organizations sponsoring “National Milk Month.” By 1939, June became the official “National Dairy Month,” which is celebrated annually every June as a way to draw attention to the contributions the dairy industry makes locally and globally, as well as to promote the consumption of dairy products to consumers, with the goal of benefiting every segment of the dairy industry, from dairy farmers and processors, to distributors, retailers and food service operators. It’s an 85-year tradition.
Dairy Month is always a good time to take a look at the state of the dairy industry, from the standpoint of both the opportunities available, as well as the challenges facing it as an industry.
Dairy farmers are the backbone of the dairy industry – and California remains the leading milk-producing state in the nation. California dairy farmers produced a whopping 41.8 billion pounds of milk in 2021, accounting for 22% of the nation’s total milk supply. The next four closest milk-producing states are: Wisconsin (31.7 billion pounds), Idaho (16.4 billion pounds), Texas (15.6 billion pounds) and New York (15.5 billion pounds).
California has been the nation’s leading milk- producing state for 29 years, since surpassing Wisconsin for that honor in 1993, and based on current production levels, the state’s dairy farmers won’t be relinquishing the title any time soon because despite a host of challenges facing them – drought, difficulty finding farm labor, environmental regulation, the supply chain mess and others – when it comes to dairy milk production, the Golden State is in a league of its own, with only Wisconsin, which has even more serious struggles when it comes to dairy farming, coming close to it in terms of milk production volume.
You can sum up the current state of the California dairy industry right now in a single phrase, cautious optimism. The optimism primarily has to do with the fact that the outlook for milk prices paid to dairy farmers is favorable compared to the previous few years.
The pandemic shutdown of 2020-2021 also resulted in increased sales of numerous value-added dairy products, particularly cheese, butter and ice cream but also, albeit to a slightly lesser degree, fluid dairy milk, as consumers returned to more familiar comfort foods and put a premium on authentic tasting foods. Much of this behavior has stuck.
Millennials and the generations below them also are rediscovering dairy, including fluid milk, in large part because various established food-makers as well as startups have upped product innovation over the last few years.
Butter and ice cream are two good examples of this innovation. Take a look at the grocery store dairy case, for example, and you’ll see numerous brands of premium quality butter that weren’t there two or three years ago. These brands, even in this time of food inflation, have reinvigorated the butter category in a big way. And when it comes to ice cream, which has had a healthy double-digit jump in sales over the last two years, dairy ice cream not only rules the roost (97% of all ice cream sold in the U.S. is made with milk produced from cows) but continues to grow in sales, led by premium varieties, global flavor innovations and unique new styles of ice cream like Japanese Mochi, Indian-style and a few others.
Fluid milk too is experiencing an innovation revolution, led by family-owned California-based dairies like Straus Family Creamery and Clover Sonoma in Sonoma and Marin Counties, Alexandre Family Farms in Crescent City, Burroughs Family Farms and Nutcher Milk Company in the Central Valley, and others. These dairy farmers all have their own brands of fluid milk and are focusing on producing premium quality milk, both conventional and organic, as well as highlighting humane and sustainable dairy farming practices. They also produce branded value-added dairy products. Similar innovation by vertically-integrated family dairy farmers is going on throughout the country. This development is bringing consumers back to dairy milk, along with other value-added products like A2 Milk, which most of the California dairy farmers mentioned above also are focusing on.
The challenges too are many for California dairy farmers, which is where the ‘cautious’ in cautious optimism comes in. These key challenges are: Drought, which means dairy farmers are unable to grow enough of their own grain to feed the cows they milk; soaring feed costs due to inflation and the war in Ukraine, which has upset the global feed market; inflation, which has caused an increase in the cost of nearly everything required to operate a dairy farm; supply chain issues, including soaring freight costs; new federal and state environmental mandates, particularly a big one involving manure methane reduction; and a shortage of labor, which not only means difficulty in finding workers, but also having to offer higher wages than in past years to those they do find.
Uncertainty is the major situation California dairy farmers find themselves in because of a confluence of serious issues, chief among them being drought, the labor shortage, inflation and the always- shifting government regulatory landscape. Even with favorable milk prices these inputs all add up to increased costs, which can easily eat any profit margin gains achieved by more favorable milk prices.
In terms of long-term trends, consolidation will continue among California dairy farmers. In today’s environment scale seems to be one of the few advantages when it comes to dairy farming. The same is true, scale seems to matter, with dairy processing, where consolidation has been the norm for the last two decades and will continue.
Over 80% of California’s milk cows are located in the Central Valley. The Central Valley also is the hardest- hit drought region in the state. So as the Central Valley goes in terms of the challenges facing dairy farmers in the Golden State, so goes California’s dairy industry when it comes to milk production, which is the mother’s milk for the dairy industry, not just in California but also nationwide, because the state produces over 20% of all the milk in the nation.
Dairy prices at retail in the U.S. have increased at a faster pace this year than they have at any time since 1983, according to a USDA report released in April, with milk prices up 7.7%, cheese up 10.4%, and butter up 16%. Dairy farmers though haven’t seen a comparable increase in the price they’re paid by processors for their milk, despite a significant increase in their input costs.
Dairy farming is an entrepreneurial business as well as an agribusiness, so there’s not a one-size fits all solution leading to success for the state’s dairy farmers. Many, like those I noted earlier, are finding success by vertically-integrating and marketing their own brands of milk and value-added dairy products. Others are looking to scale, either acquiring other dairies and merging with or selling to others.
The majority of dairy farms in California remain family-owned. But generational realities – the children of many dairy farmers aren’t interested in taking over the family dairy – along with the economic and psychological stress of dairy farming today should be of concern to all of us who believe that independent, family-owned farms, including dairy farms, remain an important and even vital aspect of California agriculture.
The family-owned and operated dairy farm not only has been an key economic engine for California agriculture and the state’s economy in general – milk is the leading farm commodity produced in California, followed by almonds – it’s also a valuable part of the history and culture of the Golden State, which would never have become the powerhouse it is without immigrants. Most of the family-owned dairy farms in California were started by immigrants and still are operated by family members who descend from those immigrant entrepreneurs, including those from Portugal, the Netherlands, Italy and elsewhere. Additionally, about 51% of all dairy labor in California is done by immigrants, according to USDA and other data.
Cookies and milk, cheese and crackers, an ice cream sundae with a cherry on top are all not only tasty delights and affordable indulgences for Americans, they’re also part of our cultural and social heritage, all brought to us by the dairy farmers who produce the milk that processors and food-makers turn into these iconic treats and others that are beloved by most Americans and are part of the fabric of our nation.
