Go West, Milkman
For many of the nation’s farmers, the overwhelming abundance of the past year’s harvests has been a curse, pushing crop prices down to crippling levels. But for California’s dairy farmers and processors, record levels of milk production have only made good times better.
As the consumer appetite for rich dairy products such as cheese and butter has soared, the state’s dairy operations are enjoying fat times, especially since drought has hampered milk production in the Midwest.
The boom has prompted the state’s largest dairy cooperatives to embark on ambitious plant-expansion plans, which economists say could help California surpass rival Wisconsin in cheese production in the next several years, just as it outpaced the Midwestern state’s milk production earlier in the decade.
In the first half of the year, total cheese production in the West outstripped the five-state region that includes Wisconsin--for the first time--by about 92 million pounds, according to U.S. Department of Agriculture figures.
Although the state’s dairy boom is likely to be tempered in the next year or so, economists say California--with its large, efficient dairy operations, corporate management and mild weather--is well-positioned to grab a bigger slice of the cheese business in the long run.
In the first seven months of the year, California turned out 794 million pounds of cheese, an 11% increase from the previous year, compared with Wisconsin’s 1.2 billion pounds, a 1.7% increase.
“California faces all kinds of pressure from higher farm-labor costs, feed costs and tougher environmental regulations. But long-term, the future looks quite positive,” said Daniel A. Sumner, a professor of agriculture and resource economics at UC Davis.
Already, California cows are producing more milk per cow than those in any other part of the country, as well as more milk overall. Milk production in California surged 8.6% in the first seven months of the year, while production in other areas remained relatively flat.
“We’re probably the only sector of agriculture that’s doing relatively well,” said David Parrish, who heads the California operations of the nation’s largest cooperative, Dairy Farmers of America.
Farmers in the Midwest have suffered this year as bumper crops of grain and soy pushed prices to record lows. Likewise, many fruit and vegetable farmers in California and across the country stumbled into tough times as the export market collapsed.
But the dairy sector has escaped such setbacks and even benefited from them: Low grain prices brought down the price of feed, one of the dairy farmer’s biggest operating costs, said Chicago-area dairy economist Mary Keough-Ledman.
Dairy farmers in much of the country are doing well as increasing demand for cheese and other products has kept prices high. However, farmers in the Midwest are seeing more of their product end up in milk cartons, whereas more of California’s milk is going into more profitable products such as cheese, Keough-Ledman said.
And because California, with its abundant dairy cow herds and mild weather, has become such a cheap and reliable source, processors here are grabbing a greater share of the cheese business, analysts say.
Most of the cheese made in California is so-called commodity cheese such as Cheddar and Monterey Jack, which wind up atop burgers and pizzas. As consumption of fast food has spiraled upward, analysts say, so has demand for California’s main cheese products.
Total cheese consumption has risen sharply over the last three decades, reaching 28.4 pounds per person in 1998, up from 17.5 pounds in 1980 and eight pounds in 1965, according to USDA data.
The rising market has provided enough incentive for the state’s largest dairy cooperatives to begin expanding their production capacity, or, in the case of Fresno-based California Dairies Inc., to jump into cheese making for the first time.
“American consumers have a huge appetite for cheese. It’s being sold just as fast as it’s being made,” said Jim Gomes, executive vice president of California Dairies.
And because dairy products are such staples, consumers will continue to buy them even if retail prices rise, said Jack Prince, vice president of Land O’Lakes’ creamery in Tulare.
The profit potential of cheese has prompted California Dairies to draw up plans for its first cheese-making plant, with construction set to begin in Los Banos this fall. The massive facility is expected to churn out 1 million pounds of cheese a day, expanding to 3 million pounds as the next two phases are built, Gomes said.
Other large cooperatives are spending millions of dollars to boost the capacity of existing plants. Dairy Farmers of America’s Golden Cheese plant in Corona is in the midst of an expansion that will boost production 25%, Parrish said.
Prince said Land O’Lakes board will vote next month on the renovation of an empty plant, bought from Kraft Foods, that would expand its cheese-making capacity 50% and allow the company to produce mozzarella, a variety Land O’Lakes currently doesn’t make in California.
The massive Land O’Lakes plant in Tulare and the jobs of its 550 employees rest on America’s increasing consumption of processed foods. Kraft is the biggest customer of the plant, which spans several city blocks just north of Main Street.
Huge Kraft banners hang over the Tulare County fairgrounds adjacent to the plant, a reminder that big dairy business supports this town. Of the 90 million pounds of Cheddar, Colby and Monterey Jack produced in the plant each year, most becomes Kraft shredded cheese and slices.
Tulare County is the richest dairy region in the state, producing 21% of California’s milk from 300,000 cows. Now economic development officials are trying to promote the area, which has long been dominated by huge operations such as Kraft and Haagen-Dazs, as a hub for specialty cheese makers.
County officials have drawn up plans for a 10-acre business park that would allow small cheese processors to share transportation and processing facilities.
“We want specialty cheese making to be to Tulare what fine winemaking is to Sonoma and Mendocino counties,” said John Hobbs, chief executive of the Tulare Chamber of Commerce.
Before the 1980s, few dairy processors in Tulare or elsewhere around the state made cheese or considered it a major part of their business, mainly because it was more costly to manufacture than dry milk powder or butter. But when federal price supports for other dairy products started declining, the higher-margin cheese business became more attractive.
After a rough patch in the early 1990s, when high grain prices and lower wholesale prices for milk made it hard for dairy farmers in the state to keep going, California’s dairy business started on the upswing about two years ago.
“In 1993 and 1994 we were losing money big time every day of the week,” recalls Jules Wesselink, a small dairy farmer in Winchester. “Yet I’d go to the store and get nailed on the [retail] price of cheese. I thought, ‘if they can play the game, I can play the game.’ ”
Wesselink returned to his native Holland in 1995, learned to make Gouda cheese and returned to set up his own specialty cheese business. As the economy has rebounded, demand for Wesselink’s gourmet cheeses such as jalapeno and cumin Gouda have soared, and he’s doubled his production to 500 pounds a day in the last year.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Cheese Whiz
California’s cheese business is growing at a much more rapid clip than that of any other state and is expected to eventually surpass No. 1 Wisconsin.
1998 cheese production, in billions of pounds
Total U.S.: 7.5
Wisconsin: 2.1
California: 1.2
Source:U.S. Department of Agriculture
Extra Topping
U.S. cheese consumption has soared over the past three decades as consumers have packed away more fast food such as hamburgers, pizza and tacos. Per capita cheese consumption, in pounds:
1998: 28.39 pounds
*Preliminary figure
Source: U.S. Department of Agriculture
