Dairy Dilemma

North Bay milk producers struggle to diversify and stay solvent in an economy that's drowning in a sea of white


STILL LIFE WITH BARBED WIRE: Meet the happy, lucky cows who live on McClure’s Ranch in Point Reyes.

Four generations of McClures have milked cows on the northern tip of the Point Reyes National Seashore. Since 1896, they’ve watched the fog creep in around their coastal pastures, have felt the wind howl through their barns and have organized their lives around a rigid twice-a-day milking schedule.

That makes them the oldest dairying family on the peninsula, and among the last of a dying breed. “There used to be 13 dairies out here,” says 48-year-old Bob McClure. “Now there are six.”

At least one more historic Point Reyes dairy ranch is poised to close as tough economic times bring unprecedented hardship to the dairy industry. Experts predict a substantial shakeout as small family farmers throughout the country sell their herds and look for greener pastures.

California is the nation’s largest milk producer, pumping out about 39 billion pounds of milk each year, about half of which goes into cheese. Large corporate farms in the Central Valley supply the bulk of our exports, but smaller North Bay dairies are working hard to protect their niche as the state’s oldest producers of high-quality milk and cheese.

Northern California has some of the world’s best terrain for dairy farming, as Spanish missionaries discovered when they arrived with cattle in the 1700s. In later days, dairy farmers migrated north to the region that stretches from Marin County through Petaluma.

The sweetest of this region’s sweet spots is Point Reyes, the fog-prone peninsula bordered by the Pacific Ocean on the west and Tomales Bay on the east. Temperatures average 63 degrees year-round; dairy cattle thrive at 55 and suffer when temperatures climb above 70. The air is humid enough to support dense, sweet pastures that can feed a herd for more than four months a year. A hungry, well-heeled urban population to the south provides a captive market, within easy reach by schooner (in early years), train or truck.

A few Marin and Sonoma county ranchers are upgrading their operations to serve the upscale appetites of Bay Area consumers. Some are converting to organic herds; others have added creameries to make artisan cheeses for diners with sophisticated palates.

Will they succeed? It’s too early to tell, but boosters ranging from environmentalists to agri-tourists are pulling for them.

Fluid Markets

An Irish carpenter who set out to learn the dairy industry, James McClure arrived here in 1896. By 1919, his family had purchased the L Ranch; in 1930, they bought the I Ranch, where Bob and his children were born. Bob still lives there and, with his 79-year-old father, Ronald, tends a herd of 600, growing organic silage on a third of the land and milking 500 cows twice a day, at midnight and again at 11am.

The ranch covers a total of 1,500 acres, almost as far as the eye can see. As McClure describes it, the ranch goes “from the top of that hill to the chicken houses, and from the ocean up there to the ocean by the cliffs over there.”

His house is one of five that straddle the road from Pierce Point Road to dairy central, where the family and their staff milk cows, deliver calves, rehabilitate the mothers and store the feed. Employees live in four of the houses, McClure and his family in the fifth. That makes it easier to roll out of bed for the midnight milking.

McClure’s job, as he sees it, is “to keep cows calving and keep cows alive. That’s the secret to the dairy business.” He doesn’t mention the third variable in any profitable business: finding a market for his product. For most of his life, McClure ran a conventional dairy, riding out the milk market’s regular fluctuations. In December 2007, he converted to organic cows in an effort to gain some control. Clover Stornetta buys his raw organic milk and sells it in Northern California grocery stores.

“I wanted to get out of the rollercoaster cycles of the fluid milk market. I’m not going to do something for nothing,” he says. The decision was easier because he believes that organic sustainable ranching is the right thing to do.

So far it seems to have been a good decision. While feed costs are higher—organic soybean meal is a whopping $1,000 a ton—milk prices have held steady at about $28 per hundred pounds of milk. Compare that with conventional milk, which bottomed out at $8.50 earlier this year. That leaves McClure a little ahead after feed costs and all the other expenses of maintaining his herd. The McClures’ ranch was purchased in 1971 by the National Parks Service, along with all the others on Point Reyes, but they have a long-term lease McClure feels sure he can extend once it runs out.

Over the years, dairies like the McClures’ have become so efficient they can quench Northern California’s thirst with enough milk left over to supply international markets in Asia and beyond. The region is riddled with plants that convert fluid milk into powdered milk, butter and whey for long-distance shipping. Emerging markets in Asia bought California’s surplus in recent years, seeing it as a quick, cheap way to improve the diets of their populations, and U.S. dairy farmers responded by expanding their herds.

“Global demand was increasing until about November,” says Corny Gallagher, Bank of America’s senior vice president for agribusiness. “Then it started to go down. Emerging markets didn’t have the money anymore.”

Exports came to an abrupt halt, sending milk prices to historic depths within a few months and filling warehouses throughout the nation with surplus powdered milk. The U.S. Department of Agriculture is buying some of that stockpile for food banks and nutrition programs, while dairies attempt to slow their production.

Udder Squeeze

At the same time, the price of feeding large, hungry herds, which is fully half the cost of running a dairy, has risen to nearly record highs. Two-year droughts in Africa, Australia, the Ukraine and the Middle East depleted grain reserves and drove up the price of feed corn. By January, dairy farmers found themselves spending nearly $18 to produce milk they could sell for just $8 to $11 per hundred pounds.

The math of that losing proposition isn’t hard to grasp. Depending on herd size, family farms could be losing as much as $2,500 a day. Their choices were fairly limited: hunker down and wait for milk prices to rise, sell their herds or send their livestock to the slaughterhouse.

“Dairy farmers are caught in an unbelievable squeeze,” says Ralph Grossi, past president of the American Farmland Trust. “It’s a matter of macroeconomics. You would expect a rebound in prices by the end of the year, but in the meantime, there will be a substantial shakeout in the dairy industry.”

For prices to rise again, the milk supply will have to shrink. Experts estimate that 300,000 cows must be slaughtered to bring the milk supply into balance with the demand, a painful process of culling herds that otherwise were in the prime of their productivity.

That contraction has already started, with some farmers shrinking their herds and others going bankrupt or calling it quits, says Dan Sumner, director of the Agricultural Issues Center at UC Davis, “the worst is behind us for this cycle. It doesn’t take much to make prices fall, and it doesn’t take much to get them to rise again. The projections suggest higher prices this summer, but many farmers are just in terrible shape.”

Most of the older, established dairies will ride out the crisis because they’ve built up equity over the years, Sumner says. “The younger ones are mortgaged to the hilt and haven’t had time to accumulate the savings to make it. I feel sorry for them.

“The worst news is if you were the 203rd cow in a herd that should have just 200,” he says. “That cow was hamburger on Jan. 1.”

A trade group called Cooperatives Working Together has offered a “herd retirement program” that will buy more than 100,000 cattle at market price from struggling dairy farmers, with two caveats: the cows must be slaughtered, not sold to other farmers; and their owners must promise not to start new herds for at least a year. CWT expects to announce the program totals by the end of June.

The way Bob McClure sees it, each small family farmer who sells out is replaced by a big corporate dairy steps in to fill the void, a process he describes as “the Wal-Marting of the dairy industry.”

Rural Industry

Historian Dewey Livington considers the Point Reyes penninsula an “Eden” that has always supported farmers and their animals, from the Coastal Miwok Indians to Spaniards, Mexicans and immigrants with Portuguese, Irish and Swiss Italian roots, it has supported farmers and their animals.

Butter produced there in the 1800s was praised for its quality and a unique saltiness from grass pastures that were fertilized by fog and ocean breezes. As the San Francisco Bay Area grew in the 1950s, the U.S. Parks Service kept its eye on the peninsula as potential parkland that could stop the suburbs from growing together.

The dairy ranches were purchased one at time, preserving them as part of the National Seashore and in the 1980s getting them listed as a Historic Ranching District. In addition to saving the ranches, that designation preserved a way of life for generations who know little about where their food comes from.

Only about 7 percent of us live on farms now, compared with 80 percent in past eras, Livingston says. “We’re so removed that we like to see farming scenes. It’s almost like a thing of the past that gives you a good feeling. Cows are picturesque. They are icons of beauty.”

Cows also tend the garden in Eden by grazing, keeping the poison oak and brushy undergrowth in check and making room for wildflowers to grow, he says. In addition to preserving the landscape, dairies buoy the economy in many North Coast counties.

Agriculture is Marin County’s largest industry, contributing $15 million a year to the local economy. In addition to producing food, it preserves the county’s rolling landscape and secures its reputation as one of the region’s most beautiful bucolic settings.

“Although this is private farmland, we wanted to think about its benefits to the public,” says Elisabeth Ptak, spokesperson for the Marin Agricultural Land Trust (MALT). While county zoning codes currently protect it from development, a group of local property owners and environmentalists wanted more lasting protection.

They formed MALT, which does that by buying development rights. Farmers are allowed to own and manage the land but are prevented from subdividing or developing it. Many use the cash to reinvest in their businesses or, in the case of dairy farmers, weather economic storms like the present one.

Tomales Bay dairyman Bob Giacomini and his four daughters have done just that, converting a farm that milked 600 cows into an artisan cheese company that turns its own milk into Point Reyes Original Blue.

“All four of us were all raised here, we all went to college, and none of us had any interest in coming back here to milk cows,” says Jill Giacomini Basch, the company’s spokesperson. “But in the 1990s, the dairy got away from Dad. He was turning 60 and didn’t want the stress anymore. He called us all together to say, ‘It’s time.'”

The women brainstormed ideas, came up with the notion of cheese making and ran with it. Three formed the company and by 2000 had begun to make blue cheese. The fourth sister joined them this year.

“An Achilles heel for Dad had always been making milk to sell as a crop and never having anything to offer his friends,” Basch says. “He didn’t have any fruits of his labor. We knew there was a growing market for artisanal cheese, and we thought it might become a profitable business, not just a sideline for Dad.”

Under their guidance, the dairy sold its development rights to MALT and added organic cows in 2004 that supply milk to Clover Stornetta. The conventional herd supplies milk for cheese making.

The Giacomini women also built a methane digester that makes fuel to power the dairy, and by summer will open an appointment-only agri-tourism business, an onsite culinary center that will teach classes and offer farm-to-table tours.

They’re poster children for a campaign that was mounted by the California Milk Advisory Board in 2000, encouraging dairy farmers to shore up their cyclical businesses by diversifying. As point person for that campaign, Lynne Devereaux spent seven years traveling the state, helping dairies to take the risk and connecting them with cheese makers who could teach them how it’s done.

“Artisan cheese isn’t a consideration of most dairy farmers,” she says. “They don’t see it as a way to solve the problem, but they can get added value from their milk by using part of it for cheese.”

When the milk board shifted its attention to handling milk surpluses in 2007, Devereaux found another way to promote small cheese makers: an artisan cheese festival held once a year in Petaluma.

“I had been going to trade shows for years, but I wanted to find a way to bring consumers closer to these cheese makers,” she says. This year’s festival was a sell-out, with about 1,800 people gathering over the span of four days to meet the makers, sample the goods and schmooze with others who share their passion for food.

“We’re going back to eating naturally, the way our forefathers ate,” says Basch, who serves on the festival’s board of directors. “There will always be a subset of the consumer audience that is interested and willing to pay a higher price for these kinds of products.”

Devereaux sees the market for artisanal cheese getting younger, led by 30-year-olds who have grown up with good coffees, gourmet chocolates, fine wines and fresh baked breads. Adding artisan cheeses is a logical progression.

Combine that with the proliferation of high-end markets and the focus on eating locally, and this part of the dairy market is poised for strong growth, she says.


Dedicated consumers are now asking “Who’s on your plate?” rather than “What’s on the menu?”

That said, UC Davis’ Sumner questions whether the organic milk and artisan cheese efforts are enough to save the dairy industry. “Artisan cheese accounts for about 1 percent of their sales, and organic milk between 2 and 3 percent. It’s hard to say how much more it can grow,” he says. “Most people aren’t able to afford $20-a-pound cheese. “At times like this, people are going to cut back wherever they can, which means using the cheapest cheese we can get. What one grocery store is growing now? Wal-Mart. Which one is sinking like a stone? Whole Foods.”

Sumner’s best advice for people interested in supporting the dairy industry is simple. “Drink a lot of milk,” he says.