Calif. utility crisis is spoiling dairy industry

Processing plant power shut

milk being dumped


TULARE, Calif. - To understand how serious the utility crisis has become in California, consider the case of the Land O' Lakes Inc. Western Region factory here, the largest milk processing plant in the United States.

Every day, 34 refrigerated tankers make several round trips from 200 dairies across the state to a six-block compound here. These trucks bring in a total of 230 tanker loads, or 11 million to 12 million pounds of milk, every 24 hours, 365 days a year.

To keep the production line from dairy to processing plant flowing smoothly, Land O' Lakes runs a tight operation: Tankers come in, unload their milk and go. If a plant were shut down, the milk trucks would be delayed, the dairies' operations would get backed up and their perishable product would have to be dumped.

At noon Friday, when the power to the plant was restored after being off for six hours, 20 tankers were waiting at the unloading zone. On Thursday, when the compound was off for 16 hours, all 34 trucks had a wait.

"We know that suppliers are already dumping milk," said Jack Prince, the executive vice president and chief operating officer of Land O' Lakes Inc.'s dairy foods group.

For California's $4.3 billion dairy industry, the largest in the country, the problems could not be more dire.

Even before power was deliberately cut last week in California, the dairy industry was in serious straits. Natural gas prices began rising several months ago, worsening the losses that dairies were absorbing in the depressed wholesale market for milk. And that was before the higher rates for electricity were approved this month.

Since California's dairies and milk processors represent a large part of the national industry, producing a fifth of the nation's milk, the effects of a dairy industry disaster here would be felt across the country.

"You have to understand that this is a phenomenon that's only 45 to 60 days old," said Jim Gomes, vice president of operations for California Dairies Inc., the second-largest farmers' cooperative in the nation. "The impact of this has not even fully been felt yet."

Earlier this month, the Western United Dairymen, a trade association, asked the California Department of Food and Agriculture to raise the price of milk to reflect the climbing energy costs.

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