Multiple California Dairies Going Out of Business Due to Low Profitability

Dairy operations have seen their input costs more than double in the last 12 months. However, the price for the milk produced and sold to creameries has only increased by 11% to 14% on average for conventional and organic production, respectively. The main factors influencing the increasing production costs are the price of diesel, fertilizer, hay, labor, and the lack of water to irrigate fields for pasture. California's extreme drought, recently labeled as "one in 1,200 years" has caused the water supply to dairies and farmers to be cut by 70% to 100%. These water cuts and drought have exacerbated hay and feed prices for cattle due to a severe demand and supply imbalance. The price of fertilizer has increased by 148.6% YoY for urea (n), by 67% YoY for DAP (P2O5), and by 120.3% YoY for Potash (K2O). And the average price of alfalfa hay has increased by 46.2% YoY. Some creameries have agreed to increase the purchase price of dairy on November 1st, but it is too late for some dairy farms that already decided to shut down.