Most people know the old slogan: “Happy cheese comes from happy cows, and happy cows come from California.” For the past few years, however, dairy farms have been struggling to keep afloat.

The California dairy industry produced over 2 billion pounds of cheese in 2011. In fact, California ranked second in the nation for highest cheese production, according to the California Department of Food and Agriculture (CDFA). However, that may change in the near future.

In Yolo County, there are only two dairies, including UC Davis’ own. Merced tops the list for the highest amount of California dairies at 258, with over 268,000 head of cattle.

Dr. Frank Mitloehner, who studies agriculture and air quality, says that there are a few reasons for this.

“California has a milk and cheese market that’s separated from the rest of the United States and the prices for milk and cheese are determined by the California Department of Food and Agriculture. It’s a very complex system that’s not really understood,” Mitloehner said.

According to the CDFA’s website, many different components of the milk market are taken into account by monitoring milk, butter, cheese and other products at the Chicago Mercantile Exchange. Then they take economic factors into account such as feed, labor, utilities and veterinary care. Each class of milk product has a different price, with “fluid milk” ranking the highest. However, when fluid milk production peaks during the summer, the chief consumers — school children — are absent, resulting in low prices.

In an email, UC Davis professor of animal science Ed DePeters, who studies cattle and milk production, spoke of low milk prices.

“High supply of milk must be met with high demand for milk and dairy products,” DePeters said.

Because of the extreme variability of milk prices, the CDFA creates a “milk pool” by combining the total amount of money of different milk products, and paying them out to dairy farmers.

“What’s clear is that California dairymen receive much less for their milk than other states,” Mitloehner said.

But dairy owners contend with another challenge — the price of feed for cows. Although the price of milk remains stable, feed prices have gone up in the last few years.

“Approximately 40 percent of today’s corn produced in the U.S. isn’t going to animal feed or human food, but into fuel — mainly ethanol,” Mitloehner said.

According to the U.S. Department of Agriculture (USDA), corn grown for ethanol is predicted to compete with feed over the next 10 years. In 2010, corn grown for ethanol began to seriously compete with corn grown for feed when ethanol production surpassed feed production at 5 billion bushels. The USDA claims that in the next few years, the cost of corn and other crops used for ethanol will be at “historically high levels.”

However, ethanol isn’t the only reason for corn prices increasing.

“Corn and soybean prices affect the prices of other feeds. Plus the drought in the Midwest this summer also impacted price of corn and soybeans,” DePeters said.

The increased price of corn also means the increased price of alternative feed.

“The reason that’s such a problem is that the feed costs are by far the most important cost — more than 70 to 80 percent of the cost is on feed, and when these prices go up then your revenue goes down,” Mitloehner said.

These problems force out smaller, less competitive dairies, although some larger dairies have been hit too.

“There are predictions that we will lose 100 dairies here in the next month,” Mitloehner said. “Personally, I think that although we’re losing dairies, I don’t think we’ll lose cows.”

The USDA’s most recent report on rising costs in agriculture suggests the same thing. The report talks about record-high costs for milk for the country, while the number of dairy cows has declined.

The USDA Agricultural Predictions to 2021 report suggests that large dairy operations are on the rise, while small operations will fade out.

“The decline in cow numbers slows somewhat toward the end of the projection period as the transition in most regions from smaller, diversified farms to larger, specialized dairy operations matures,” the report states.

According to the report, this means in the next 10 years, big farms will overtake small farms. Small farms may not have the ability to withstand the future of dairy costs.

“Costs of environmental regulations continue to increase for dairy producers. Banks are also tight with money so loans are difficult for dairy farmers to obtain during times when things are bad. [Agriculture] is often cyclic with good and bad times,” DePeters said.

Mitloehner believes that the only real solution is a reevaluation of the U.S.’ priorities.

“A long-term solution is to think really critically if we should grow food crops for fuel. I’m very skeptical of growing corn for ethanol,” Mitloehner said. “For example, if you get rid of a 20-, 30-, 40-acre dairy [and replace it] with a development — if you look at the environmental impact, it’s really a question of which landform is more helpful to our land use.”

In a statement issued by Karen Ross, secretary of the CDFA, she announced the creation of the Dairy Future Task Force to address issues for dairy.

The announcement gave some background on failing dairies.

“Many dairies are still trying to recover from the 2009 crisis which saw record losses in the industry and they simply didn’t have enough equity to see them through this crisis,” stated the announcement.

However, the statement also lists some reasons to be hopeful.

“The minimum price [of milk] has increased approximately 30 percent since June 2012 and is now among the highest prices on record. Class 4b milk, which is used to make cheese, is also up in recent months by about 30 percent,” the announcement stated.

In the end, California may not lose its happy cows — just some happy farmers.

JULIE WEBB can be reached at city@theaggie.org.