Matt Evangelho started in 1977 with 400 cows, growing that to more than 2,400 head at one point. The cows are now up for auction. Photo by David Castellon

Matt Evangelho wasn’t looking to become a dairyman when he emigrated from his native Brazil to California in 1975.

“I never milked a cow in my life,” he said.

That changed with an opportunity to invest in a small dairy east of Hanford in 1977, along with a partner. The two men started with about 400 cows, building their business into a larger one that until recently numbered more than 2,400 head.

That’s why the last couple of weeks have been so hard for Evangelho.

On Feb. 7, about 900 of his cows were sold at auction.

“I just couldn’t go,” said Evangelho, 66, as he drove through the business he built over the past 40 years, Phoenix Dairy, noting the empty corrals.

Others corrals still have cows and calves, some waiting to be picked up by their new owners, while the rest were marked with ear tags were used to identify them when they went up for auction last week.

Over the past four decades, Evangelho grew to enjoy running the diary and even learned to like the cows.

“It’s a good business — well, it was.”

 

Endangered dairies

He said dairies, like most farm operations, have up and down periods, but for dairies across California, it has been mostly down since 2009, when the prices paid for milk declined drastically. Since then — with the exception of 2014, when prices were good — prices have been mostly flat, with only occasional bumps at or above what it costs to produce the milk.

“You can’t dairy in California with these kind of milk prices,” Evangelho said.

That’s why he’s selling off his herd. His 255-acre dairy and 485-acre farm — where he grew feed crops for his cows — has been for sale for the past year.

Years of borrowing have put him in heavy debt, owing about 65 percent on the combined value of his cattle and 40 percent on the estimated value of his property.

If milk prices continue this year as they have over the past few years, Evangelho estimated that Phoenix Dairy couldn’t keep going through the end of the year, so he’s walking away now with the hopes he has enough equity to retire after paying off his debts.

“The longer I stay in the dairy business, the longer I’m bleeding. So I gotta stop the bleeding, somehow.”

 

A familiar story

It’s a situation dairies across California are facing, with many shutting down entirely or heading out of state for better prices and less stringent regulations.

The California Dairy Campaign reports that the number of dairies in California — the nation’s top dairy-producing state — declined from 1,952 in 2009 to 1,392 in 2016. While numbers for last year aren’t available, the campaign reports anecdotally the decline continues.

California dairy producers have lobbied to change their pricing system so prices are no longer set monthly by state Secretary of Agriculture Karen Ross. Instead, they want California dairies on the Federal Milk Market Order, which sets monthly milk prices for most states.

Low milk prices have been a problem for years in all milk-producing states, but the prices are particularly low in California — dairy operators are currently paid 90 cents less per hundred weight (100 pounds) than dairies on the federal order.

 

Who’s helping who?

Dairy operators largely lay blame for the inequity on Ross, accusing her of keeping prices low to give milk processors incentive to stay in California.

Last year, dairy operators took significant steps to change things by voting overwhelmingly to put California on the Federal Milk Market Order. But initiating that change has been delayed by weeks or months. The U.S. Department of Agriculture announced the delay last week, citing that the agency is waiting for the outcome of an unrelated case before the U.S. Supreme Court that could determine whether administrative law judges must be appointed rather than hired.

The outcome of that case would determine whether the administrative law judge who oversaw public hearings on switching milk orders in California was legally appointed.

A decision is expected before June 30, but even without the delay, dairy operators expected the change to a federal pricing system would take about a year.

 

Urgent need

Before the delay was announced, some in the industry saw that California’s dairies are on such shaky financial ground that they needed better milk prices before then,” said Lynne McBride, executive director of the Turlock-based California Dairy Campaign, a trade group representing dairy operators.

In a Jan. 18 letter to Ross, leaders of her organization and another trade group, Western United Dairymen, requested a hearing to publicly discuss raising the prices paid for all classes of milk over a 12-month period.

“Specifically, we propose a 60 cents

per hundredweight increase on Class 1,2 and 3 [milk], a 10 cents increase on Class 4a and a 40 cents increase on Class 4b,” the letter continues.

The classes are divided by how the milk is used, whether its bottled for drinking, powdered or made into cheese, ice cream and other products.

While the proposed price increases wouldn’t completely close the price gap, any added money would help dairies to keep going until the federal order is implemented, McBride said.

 

Clock is running

“It’s pretty grim out there,” said Joaquin Contente, a Hanford-area dairyman and president for the California Farmers Union.

The situation has been made worse by banks backing out of loaning money to dairies to help them stay afloat, added Evangelho.

“The banking industry has been the core of the dairy industry. I you lose a bank, then you can’t dairy. It’s impossible to dairy without a bank behind you,” he said.

It’s gotten to the point where most small, family-owned dairies — with 1,200 milking cows or less, which was about the number he had — are gone, on the verge of going or are barely hanging on, he said.

“It’s survival mode. Survival mode is you’ve got to get as big as you can, and — if you can — diversity into a lot of trees and row crops or whatever you can buy,” Evangelho said.

As for the milk pricing issue, CDFA issued a letter earlier this month responding to the hearing request, stating that the agency is acutely aware of the effects low milk prices are having on dairy families and noted that manufacturers of dairy products “are also under pressure, as evidenced by the department’s recently-released manufacturing cost study. The entire California dairy sector is currently facing financial stress.”

But CDFA declined to hold the hearing, stating in the letter that its inappropriate to do so while dairy operators are in the process of trying to implement the Federal Milk Marketing order.

“She always has an excuse,” Evangelho said of Ross. “The state of California seems to send us a message that they don’t want us here.”

 

‘Groundhog vibe’

In a press release, Western United accused Ross of “channeling the vibe from Punxsutawney Phil and announcing more weeks of bad prices for producers, as she denied the hearing. In recent years, producer unity had been a key factor in implementing positive changes for producers in the California system. Falling short of it this time certainly did not help Secretary Ross make a decision in our favor.”

“That door’s closed,” Contente said, noting that dairies don’t have the money to match the lobbying power milk processors have to try to turn things around in Sacramento.

“We can go back and try again, [but] unless there are forces there that can help, it’s not pretty.”

Contente added that “If we stay on this downhill path, and we continue as we are, we’re definitely going to see more [closures] than what we have in the past.”

For his part, Evangelho agreed, saying that if things don’t change, California’s entire dairy industry is threatened.

 

Consumers to feel the heat

While consumers haven’t much felt the pinch of California’s milk-pricing problems, that soon could change, said Evangelho, noting that for years, despite the number of dairies closing, their herds were purchased, and the remaining dairies worked efficiently enough to maintain milk-production levels.

But the number of cows in the state has begun to decline significantly, he said.

The California Dairy Campaign reports the number of cows at California dairies is more than 1.7 million in 2016 – the latest numbers available, 144,652 fewer than in 2009, the start of the industry’s financial crisis.

The CDFA reported only a 1.1 percent decline in milk production in 2016 compared to the previous year.

“We still have an abundance of milk in this country that makes it hard for us dairy farmers to price it right because it’s still there,” but as the decline in dairies and cows continues, it likely will have an effect on the availability of milk and how much consumers pay for milk and milk products, Evangelho said.