Government to help CA's dairy industry

July 31, 2009 10:16:25 PM PDT
The federal government is stepping in to help California's struggling dairy industry. Prices have dropped so far that cattlemen are struggling to stay in business. The Van Warmerdams have been dairy farmers for nearly six decades. But lately, it's been a struggle to hold on in a recession that's forcing many to sell their cows for meat and shut down.

"We're producing milk below cost. And you can do that for a little while, but not too long," said dairy farmer Ben Van Warmerdam

The Western United Dairymen estimates farmers get an average of 85 cents per gallon. It, however, costs $1.70 per gallon to make it.

The Obama administration hopes to generate $243 million in revenue for the industry by boosting the price the government pays for milk and cheese for the next three months. That may be long enough to keep more dairies afloat.

"The help that we're getting couldn't have been come at a better time. It would have been nicer to have it a little earlier," said dairy farmer Leo Van Warmerdam.

Farmers had been begging for help to slow the rate of dairies shutting down. An estimated 70 have already gone out of business this year in California, threatening its status as the number one dairy state. About 1,800 dairies produce $7 billion worth of milk.

But some economists question whether government intervention is good for the long term.

"Markets will eventually work. They'll correct the supply and demand imbalance and lead to a more stable and successful environment later on," said Bill Schiek, PhD from The Dairy Institute of California

The California Department of Agriculture also warns the intervention could raise milk prices at the grocery store for recession-weary consumers.

"No, I can barely afford it as it is. I got laid off in April and I haven't been able to find a job yet," said milk drinker Christina Stigelmayer

California dairy farmers generally don't want the help, but the Van Warmerdams don't know how else to keep their family tradition alive.

"It's a pretty big history. My father started the farm in 1953. If this generation closes the door on him, it really wouldn't make us feel very good," said Leo Van Warmerdam.

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