by Sasha Khokha

Morning Edition, July 24, 2009 · The recession has hit the U.S. dairy industry hard, and in California — the nation's No. 1 milk-producing state — dairy farmers are taking an especially big blow.

With fewer pats of butter on restaurant tables, not as many pizzas in need of mozzarella and a declining export market for milk, some longtime dairy farmers have made the painful decision to sell their herds for slaughter and get out of the business.

That's what's happening to a dairy farm north of San Francisco that owner Joey Mendoza's grandfather started almost a century ago. Mendoza still lives in the family's historic farmhouse.

On Mendoza's farm, cows graze amid meadows that burst with yellow lupine. In the distance, the windswept cliffs of Point Reyes plunge into the Pacific Ocean.

For years, the Mendozas have sold their milk to a cooperative that supplies Safeway. But this milking parlor is about to shut down. Many of his cows have been sold for slaughter.

Mendoza, 65, looks like a man who's spent his life on a ranch. He drives a mud-spattered pickup; he wears thick rubber boots and filthy jeans. But he doesn't look like a guy who will cry when he talks about selling off his herd.

"It's sad, but it's something you economically have to do. You also have the guilt pangs because of your heritage," he says through tears. "Everybody works so hard to build this thing, and you're the one that has to terminate it and let it go. It's humiliating. You're not very proud of yourself when you've got do something like this."

Mendoza is selling his cows through an industry-funded program called "herd retirement" that aims to ease an oversupply of milk. The program requires dairies to sell their entire herd for slaughter and agree to stop milking cows for at least a year.

Mendoza says he's squeezed between competition from mega-dairies, the high cost of feed and the dip in consumer demand. These days, he's earning only about half of what it costs for him to produce each gallon of milk.

"So when you have a lower price and a greater input cost, you're in big trouble," Mendoza says. "Hell, we got more for our milk 30 years ago than we're getting now."

USDA economists project this year's average milk price paid to dairy farmers will be the lowest since 1978.

Mendoza says part of the pain of leaving the business is all the other people who will be affected. Eight families work for him on the ranch.

"I was raised to be an honorable and fair guy," says Mendoza. "So when your decision indirectly affects families like that and their kids — wow, that leaves a bitter taste in your mouth."

A Tough Move

Ray Souza is president of Western United Dairymen, which represents about 1,100 California dairy farmers.

"When you leave the dairy industry, it's highly emotional, especially when you've been put in a situation where you have no alternative but to leave," Souza says.

At least two California dairymen have committed suicide in recent months. Souza and others in the industry believe it's at least in part because they were losing their farms.

Souza says dairy farmers are taking out loans just to pay their feed costs.

"We're burning through equity faster than a Southern California wildfire," says Souza.

The dairy industry has gotten some help from Washington. The USDA has subsidized farmers with more than $5 million in aid over the past few months to make up for some of the income loss. The feds have also paid dairies cash bonuses to export powdered milk.

Back on his ranch, Mendoza says if he can ride out this downturn, he'd think about reopening in a few years as a small organic dairy. He could make more money per gallon for organic milk.

Otherwise, he might try and earn a buck renting his scenic farm to dairy industry advertisers. He thinks if they can take pictures of happy cows grazing near the ocean, it might encourage consumers to drink more milk.