April 26, 2007

California dairy producers must grow despite glut

“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. ‘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. 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.”

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