Leaders from Hilmar Cheese Co., California Dairies Inc. and Land O’Lakes Inc. met in Modesto, Calif. last week to discuss the state’s milk processing capacity. They said demand for their products is healthy, but plant construction is hindered by state regulations.
“California is a disaster on plant capacity,” said Richard Cotta, president and chief executive officer at California Dairies Inc., which has plants in Turlock, Los Banos and elsewhere.
He was part of a panel discussion at the annual convention of Western United Dairymen at Modesto Centre Plaza. Also taking part were John Jeter, president and CEO of Hilmar Cheese Co., and Bill Schreiber, a vice president for Land O’Lakes Inc. in Tulare.
After the session, all three told The Bee that they had no plans for converting the recently closed Hershey Co. chocolate plant in Oakdale to dairy processing. Cotta said California Dairies did consider the option but found that it would be too expensive and too far from its milk suppliers.
Milk is the top farm product in California, the nation’s leading producer, with about 4.5 billion gallons in 2006. The state often has a surplus, a result of its large per cow output and farm size, its mostly good weather, and its advanced breeding and feeding practices.
Often, a surplus leads to low prices for farmers, as happened in 2006. This year, prices are relatively strong, because of a drought affecting Australian producers and other factors. Still, California farmers face increased costs for feed, fuel, labor and other things that go into producing milk. They believe that an expansion of plant capacity would prompt processors to compete for the milk with high prices, helping meet expenses on the farm.
“We were very thorough and looked around California, but California is a challenging place to do business,” Jeter said.
Cotta said the process would be easier if his company could find a site that already had the needed permits. Processing capacity aside, the executives said the industry overall is doing well. Exports are strong, and many consumers believe that dairy products are good for them.