California dairy farmers could see a 30% to 40% reduction in revenue this year, according to a farm credit lender in the Central Valley. Yosemite Farm Credit President and CEO Tracy Sparks said projected milk prices are at historic lows due to COVID-19 disrupting food services along with an oversupply of milk.
“A dairy farmer in our area needs $16 per hundred weight to break even but futures are showing milk prices getting as low as $12 to $13 per hundred weight over the next quarter,” Sparks said in a Farm Credit Council webinar Tuesday afternoon.
Dairy makes up 30% of Yosemite’s ag commodity portfolio. The lender has over 5,000 customers in Stanislaus, Merced, Tuolumne, and Mariposa counties. She said there has been a decline in credit quality in the dairy sector from 2016 to 2019.
“This trend is not surprising given the fact that many producers have been operating at or below break even for over four years,” Sparks stated.
She said special mention loans, which are loans showing weakness or needing the manager’s attention, increased 5% in 2019 as dairy producers continue to exit the industry. Sparks thought the area would continue to see more deterioration and noted labor availability remains a concern. However, she said feed supply for producers remains adequate and stable.