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Cream of the Crop

North Bay Business Magazine
Northbay Biz

The struggle continues for local dairy farmers, but for some, there may be a green light at the end of the tunnel.
Take a drive through Marshall as it winds to the chop on Tomales Bay, or roll through Two Rock with spring pastures stretching lazily on either side of the road. You can catch the same action in Chileno Valley or on either side of the landfill in the no man’s land between Novato and Petaluma. Holstein cows dot the landscapes like so many Rorschach sketches begging the question: What do you see?

If you’re in the dairy business, and, more accurately, the organic dairy business, your answer might be a marketplace that’s grown from fringe to mature and is edging toward mainstream—which, by itself, is ironic.

At one time, Marin and Sonoma dairies supplied 25 percent of the milk in California. In the 1960s, the counties boasted a total of 400 dairies. But that was long before anybody considered the wisdom of grazing cows on chemical-free pastures or thought about the benefits of methane digesters.

In Sonoma, up until 1987, dairy production represented the top agricultural crop, outperforming the grape production that would later transform the valley into a world-class wine destination. But the sad fact today is that dairies have been dying in both counties for years. A combination of increasing land values, skyrocketing production costs, shrinking margins and the challenging dynamics of family farms have extracted a hefty cost, one that goes beyond fewer dairies.

In rural Marin and Sonoma counties, dairy farming has represented not only a business model and a tradition, but has also formed a community woven deeply into the rolling hills and the changing seasons, as well as the lives of those who know first-hand what running with the herd smells like. It’s the last local link to a time when the entire country was still largely agrarian, and the world was a smaller and, perhaps, more forgiving place.

Numbers up and down
Today, according to the University of California Cooperative Extension, there are 69 dairies in Sonoma and just 23 in Marin. By the numbers, Marin dairies average 600 acres in size, with about 400 cows on the property. In Sonoma, the dairies tend to be smaller, about 420 acres, with an average of 385 cows. But of the 92 combined dairies, about one-third are organic, and some others are considering conversion to the more green method of stewarding land and animals.

Statewide, over the last four years, the total number of dairies has decreased by 20 percent, taking the total down to about 1,600, according to data from Western United Dairymen, a dairy advocacy organization out of Modesto. For some who make a living on the land, like the Straus family in western Sonoma County, organic has been a way of life for years. But for others, the market that’s growing at a healthy clip is the final push. “I think organic dairy sales grew between 18 to 20 percent in the last year,” says Albert Straus, who heads up Straus Family Creamery (as well as the Straus family farm) and is considered a pioneer in organic dairy farming.

The Organic Trade Association says that, nationally, 14.5 percent of all the organic products sold in the United States came from dairies in 2011. That same year, the total sales figure topped $30 billion for the first time ever, with $31.5 billion in total receipts.

While Straus was savvy and successful enough to build its own brand of organic products, other local dairies have disappeared. Ocean View Farms, for years a stalwart operation built by Marvin Nunes, put its operation (on Mark West Road in Santa Rosa) on the block in May. The 177-acre property was priced at $6.95 million, and the sales pitch didn’t talk about dairy production but rather highlighted the neighborhood surrounded by prime wine operations.

Real estate 101: location, location, location.
The heart of Ocean View’s legendary farm was its prized herd of Holsteins, and the cows were auctioned off online with some of the animals being valued at as much as $15,000. Ocean View’s cows were exceptionally productive, driving a considerably higher price than an average Holstein, which might run closer to $1,800. The fact that the auction took place online, with bidders dialed in from as far away as Canada, says something about how the age old way of life on the farm has changed and, to a lesser degree, how organic practices have helped shape that change.

The Ocean View sale cut deep for those in the local dairy business. Nunes was well regarded by his peers, and the quality of both the herd and the milk it produced has caused more than one dairyman to wonder what the future holds.

Blessed are the cheese makers
If you talk to Ellie Rilla, the community development adviser at the UC Cooperative Extension, she’ll tell you she believes the future is so bright, dairy farmers may have to wear shades, thanks to artisan cheese making.

“There’s a great cheese making story inside your [organic milk] story,” she says over the phone from her office in Novato. She’s referring to the more than 27 cheese making operations that now dot the landscape in Marin and Sonoma. Some, like Cowgirl Creamery, are well established and boast a well-deserved national following. Others, like Nicasio Valley Cheese Company, are gaining attention from local and regional markets. More important, from a dairy standpoint, the new emphasis on cheese making is giving dairy families another outlet for their milk and, more important, adding value.

“The fact that there are more people making cheese is a good thing for dairies. In some cases, dairies have looked at how they want to remain viable, and shifting or adding cheese making has been very positive,” Rilla says.

She points to the success of Point Reyes Farmstead Cheese Company as an example of the way the dairy scene in Marin and Sonoma is evolving. For better than 40 years, Bob Giacomini ran his 714-acre dairy ranch north of Point Reyes and was even selected as the national dairyman of the year in 2001. But a few years ago, as he considered bringing on someone to manage his dairy or even selling it, his family made a decision to go into the cheese making business, using its own milk to produce Pt. Reyes Original Blue Cheese. The family sold an agricultural easement to Marin Agricultural Land Trust (MALT) for $1.8 million, which ensured the property would continue in agricultural use and gave the family a nest egg to better finance the cheese operation.

And beyond cheese, there’s ice cream, yogurt, butter, cottage cheese, sour cream, half and half and whipping cream helping grow the market for organic milk beyond a cereal bowl.

Clo-sed lips
“There’s definitely more awareness of organics. People are more conscious about it,” says Mike Moretti, owner of Moretti Family Dairy in Marin County. “People want to know where their food comes from these days. Where we live, it really is the perfect place for organic. Going organic has been a great way for us to go.”

Moretti, who sells his milk to Clover Stornetta Farms in Petaluma, is one of the farmers who benefited from a dynamic change in the organic marketplace last year. While dairy farmers are a close-knit bunch who’ve formed a proud community, it’s also a place where a secret can be kept and loose talk is not a welcome sound.

In April 2011, Clover made a business decision to cut the prices it paid to farmers who supplied it milk by 16 percent, according to stories in local media including The Press Democrat. Clover also asked its farmers to cut back on the amount of milk they supplied as a way to react to a glut of milk on the organic market. At the time, Marcus Benedetti, president of Clover, defended the action as a necessary adjustment that had to be made to assure Clover would have continued access to retailers.

While Clover made an adjustment to its pricing structure, a group of local farmers began to explore their own options in a market that was changing. As a result, 10 of the farmers who sold milk to Clover elected to partner instead with Organic Valley, a farmer-owned dairy coop out of Wisconsin. Organic Valley was only too happy to scoop up the farmers, as well as some Clover staff that were shed as business dictated a more streamlined operation.

Clover enjoys a strong reputation locally as being an active part of the community. Its products on both the conventional and organic sides represent what local farms produce, while creative marketing using everybody’s favorite bovine sells the product. But new rival Organic Valley represents more than 1,600 farms nationwide and sells its milk across many markets and products, including bulk. For member farmers, the approach has meant fewer price and volume fluctuations, making planning an easier task.

It’s been more than a year since the changes between Clover and some of its farmer suppliers were made, and still nobody really wants to talk about what happened. “I really don’t want to get into all that,” says Moretti. “A few dairy farmers did what they felt they needed to do and that’s fine. But it gave us a chance to work with Clover, which has been a good thing. For some farms, the changes made it possible to stay in business.”

Clover isn’t talking. On two separate occasions, interviews set up with Marcus Benedetti yielded an empty notebook as one was canceled at the last minute and the other was scheduled but never took place.

Mike Griffin, who worked for years at Clover, was raised in Petaluma and is now Western Pool Manager for Organic Valley, also didn’t return my call.

The split between the home of Clo the cow and the 10 farms is more mysterious as a legend, anyway. The change is a pretty good indicator of just how strong the organic market is. The willingness of Organic Valley to compete with Clover as well as Straus is a statement about the high quality of the milk coming out of Sonoma and Marin as well as the strength of demand for organic dairy products.

“Organic is about more than just quality or health. I think people who buy organic products are doing it to help support a way of farming and because they think it’s the right thing to do,” says Straus, who began conversion of his family’s dairy to organic in 1993; in 1994, he founded Straus Family Creamery to produce organic milk, yogurt, butter and ice cream under the family name.

The cost of cow food
While consumers have traditionally made buying decisions based on a number of factors including price, quality and availability, Straus says that consumers of organic products are expressing their values. “People have become educated about what organic means and why it’s a better way—that the land isn’t being depleted. People, especially in Northern California, understand that and it’s important to them.”

While consumers may be enlightened, it’s tough to escape the world of supply and demand. According to Leslie “Bees” Butler, a dairy economist at UC Davis, the biggest challenge facing local organic dairy farmers is how to pay the feed bill. “Right now, feed costs are 50 to 60 percent of the total costs of milk production, and right now, those feed costs are very high—and that isn’t even the bad news. There’s only so much organic alfalfa and corn out there. It isn’t easy to find. Eventually, as growers understand there’s a solid market that can grow, there’ll be more sources of feed. But for now, what’s available is expensive and sometimes hard to find. And the cost of transporting only adds to the expense.”

Butler says that just as organic milk is a specialty product that consumers have learned comes at more of a premium price, so too is the organic feed. “The growers want a better price for it.”

Butler’s cost estimates are running on the low side, according to Straus. “Typically, feed costs on a dairy run between 50 and 55 percent of your income. You can make it work at that rate. But right now, we’re seeing closer to 60 percent of feed costs, sometimes even 65 percent of your income—and at that level, it’s not economically viable.”

His words are echoed by Moretti. “I think I have to agree with Albert. Costs are up,” he says. Moretti thinks the long-term way to keep feed costs down is to grow some of what you need yourself. “You can’t grow all of what you need, because nobody has enough land and not everything will grow. We’re out on the coast, and it isn’t hot enough to grow corn out here. You can grow a little in your garden, but not what you need for feed. Just the grain is expensive. It’s $500 per ton and, at the end of the month, that can be $30,000 or $40,000.”

On the horizon
Straus says that one of the traditional challenges of farming hasn’t changed as organic has gained ground. “Family farming is still as big an issue as it’s always been. You need a plan on how things can grow or what will happen in the future,” he says. “It helps if you can show how it’s profitable and how it can be passed along.”

“Nationally, the average age for a farmer is 58,” says Rilla. “Farmers are getting older, and they have to consider what will happen to the farm: Who can take over, and what’s next?”

Marin farmers have always faced the pressure of growing land values and a slow “urban creep” as towns pushed out or well-heeled out of towners quietly talked of clusters of mega mansions. In the face of this, MALT has done an amazing job of raising funds to buy agricultural easements to ensure traditional ranches and farms can remain in production. (See “Promised Land,” July 2012.)

Dairy farms in Sonoma have faced a slightly different foe as the romance of planting vines in land that seems willing to grow anything well beckons farmers who face financial struggles.

But while there are admittedly some challenges on the horizon, Straus says one way to prevent them from growing is by keeping the lines of communications open. While the Straus Family Creamery brand has become synonymous with the North Bay, it relies upon four other family dairies to bolster its supply. “We hand-deliver our checks to our farmers every two weeks so we can stay in touch, understand how things are going for them and be sure we’re heading in the same direction,” he says. “We hold quarterly planning meetings with everybody, so we can all understand what we need to do and how we can do it.”

Despite the challenges, organic dairy farmers in the North Bay are positioned well to sell their products. Here in the land of the slow food, humanely raised sustainable foodie regime, the only thing more delicious than organic milk is knowing the farmer who made it possible.