December 23, 2021 MPC Friday Report

Updated: Feb 1


 

Thank the Lord for the Rain and Snow

By Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs


One of the big realizations for me in relocating from Southern California to the Central Valley is how dependent Valley agriculture is on winter precipitation. Dairying in Southern California, which I did for 39 years, involves trucking in feed from somewhere else: Hay from Blythe and the Imperial Valley, corn, canola, and cottonseed from the Midwest and South, and byproducts like almond hulls and millrun from the West. We didn’t grow anything locally and rain meant muddy corrals. But in the Central Valley it is very different. Experiencing the drought of 2020 and 2021, particularly in the new Sustainable Groundwater Management Act (SGMA) era, is a very concerning experience.


Central Valley farmers have always turned to groundwater to provide irrigation water when surface supplies are not available. But the groundwater supply is diminishing and now regulated. For many in the Valley, there will be limits to how much can be pumped. How is the dairy industry going to cope?


When I sold my cows in 2018 and was looking for something productive to do, the Board of Milk Producers Council asked me to become the dairy industry’s eyes, ears and advocate on water supply issues, particularly focusing on how SGMA was going to impact the industry. I have been wrestling with this issue ever since. The conventional wisdom is that dairy depends on row crops for feed and the tree farmers make a lot more money per acre. Therefore, in a competition for water, the row crop farmers lose.


I think there is validity to this position. However, the tree farmers have a significant vulnerability. Trees need water every year. You cannot fallow trees for a year or two when there is no access to irrigation water.


A significant portion of the lower part of the San Joaquin Valley is dependent almost exclusively on groundwater, and there is not enough groundwater to keep all the acres that are currently irrigated in production. There are thousands of acres of trees planted in areas that will eventually have access to less than 12 inches of groundwater per year. It seems likely that trees in those areas will be taken out of production at some point between now and 2040 when SGMA is fully implemented. What will become of that land? That is a question that has not been answered. But one answer might be that it will be available to grow feed crops in above average precipitation years. That is probably the best-case scenario for dairy.


We know that dairies established in other parts of the country with erratic weather – that is, very wet years and very dry years – must plan on accumulating large feed inventories in those good feed years to get through the dry years. In California we have not had to think that way because our feed inventory was essentially the groundwater beneath us. That will have to change. Accumulating and carrying large feed inventories is something that will likely need to be part of surviving in a post-SGMA world.


The other big impact to dairy that follows from restricted access to groundwater is what to do with the nutrients that are in the manure generated by our animals. All dairies are regulated by Regional Water Quality Control Board permits and must have nutrient management plans that are often dependent on using those nutrients as fertilizer in growing crops. Less groundwater leads to less crops grown which leads to less demand for nutrients, and therefore, surplus nutrients in need of another home. Surplus nitrogen on dairies was already identified by state water quality regulators as a challenge facing the dairy industry before SGMA, which has only intensified the need to find cost effective solutions to this challenge. As I reported a few months ago, California Department of Food and Agriculture Secretary Karen Ross appointed a high-level Manure Recycling task force that is busy at work seeking solutions.


If there is one fact that keeps me optimistic it is that even in the driest part of the Central Valley, there does seem to be enough groundwater to operate the cow portion of a dairy. While further research into the specifics of dairy facility water consumption is being done, best indications are that actual water consumption of the non-crop portion of a dairy facility is less than 12 inches per acre due to the major water recycling that occurs on most dairy operations. If you think of the Chino dairy model, that is, import all your feed and export all your manure, then you do not need that much water to operate. However, in the Central Valley, flushing alleys is necessary for both air quality regulations and for dairy operations that operate methane digesters. So significant challenges lie ahead.


Which leads me back to being reminded of what God told Noah after the flood recorded in Genesis.


“While earth remains, seedtime and harvest, cold and heat, summer and winter, day and night, shall not cease. And God blessed Noah and his sons and said to them, be fruitful and multiply and fill the earth.”


In agriculture we have the benefit of a front row seat in seeing how God provides for mankind. Man is made in God’s image and has the ability to discover and innovate. Tremendous progress has been made in productivity. But often we are reminded that it is not man who is in control but a loving God who expects us to love Him above all and our neighbor as ourselves. Merry Christmas to you all.


 

Milk, Dairy and Grain Market Commentary By Sarina Sharp, Daily Dairy Report


The dairy markets are full of Christmas cheer for producers, while dairy buyers are grunting “Bah! Humbug,” into their egg nog. The milkfat market is especially festive, as befits the season. Cream is scarce around the world. Global milk production has faltered but cheese makers are still topping up their vats, leaving less milk and cream for other uses. At the Global Dairy Trade (GDT) auction on Tuesday, anhydrous milk fat and butter values both scored four-year highs. U.S. butterfat is the most affordable in the world, which is likely to keep U.S. imports to a minimum, further tightening the U.S. fat supply. Churns ran slow in November and manufacturers pulled butter from storage to satisfy orders last month. Stocks dropped below 212 million pounds, down 15.9% from a year ago. Butter prices rose accordingly. At the CME spot market this week butter shot straight up to $2.25 per pound, up 15.75ȼ in just four trading sessions.

2021-12-23 MPC Newsletter
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