Many dairy producers in California are cautiously optimistic about what 2025 has in store, including Tyler Ribeiro from Rib-Arrow Dairy in Tulare. Topping his list of concerns right now are feed and water costs.
“We could be gearing up for a doozy here in 2026 depending on how 2025 treats us,” Ribeiro says. “With the lack of water due to the lack of snowpack in the mountains, inability to store surface water, restrictions on ground pumping and now a potential tariff measuring contest, we could be in for a steady increase in feed costs through 2025.”
Tony Louters from T&C Louters Dairy in Merced echoes Ribeiro’s concerns about water.
“Water is definitely our biggest concern right now, along with California environmental and business regulations, continued animal activist pressure and rising labor costs,” Louters says.
Unfortunately, the water issue in California does not seem to have reached a plateau yet.
“We are going to see unprecedented issues arise here, and what happens this year has the potential to solidify the potential future of existing dairies in our area,” Ribeiro says. “With that said, dairy producers are fighters. It’s in our blood. It’s how we were raised, and it’s woven into the fabric of who we are. If there is a conceivable way to stay in business doing what we love, we will find a way.”
One of those issues is the water restrictions being imposed on California farms.
“There is a lot of farmland that used to be farmable via groundwater that is not allotted that opportunity because of new regulations,” he says. “These new restrictions have already and will continue to decrease the number of farmable acres, making competition for feed crops increasingly more difficult. 2025 is going to be the game of water and deep pockets. Those with water or the ability to bring in feed will fare well; those that can’t may face some difficulties moving forward.”
Despite the numerous water concerns, Louters is hopeful.
“If you are in the dairy business, you have to be optimistic,” Louters says. “Our on-farm margins are looking healthy this year and bird flu is pretty much behind us. We are most excited about the opening of California Dairies Inc. (CDI)’s new plant, Valley Natural Beverage. This is not only great for CDI members but all of California’s dairy industry as we shift to higher-value Class I products and away from commodity-based dairy products that are of lower value.”
Valley Natural Beverages will be an extended shelf life (ESL) and ultra high temperature (UHT) fluid bottling plant.
“California is a difficult place to do business and especially to build capacity,” Louters says. “Most plants build in other dairy states so they do not have to deal with California’s business regulations.”
Anja Raudabaugh, CEO of Western United Dairies, agrees that so far, 2025 is more manageable than 2024, which had a rough start for dairy producers due to inflation and high feed costs.
"Banks are lending faster, and milk prices have held long enough for some farmers to develop confidence in the hedging space,” Raudabaugh says. “Bird flu has created new challenges in California and shrunk our replacement heifer inventory at an alarming rate. But with so little available milk and replacements around, dairy producers are feeling the longer stability of milk prices holding in a good way.”
On the sustainability front, there is funding for environmental projects that can benefit dairy producers.
“In 2024, there was money for digesters and other methane-reducing technologies, which in some cases helped not only modernize and improve the manure handling on farm but also created a funding source through the carbon credit market because of the technology’s ability to reduce emissions. We are hopeful that we can continue to pursue these projects through 2025,” Ribeiro says.
Aside from sustainability-related technologies, artificial intelligence-based programs and other technologies are increasing on-farm efficiencies.
“One of the biggest opportunities I see for dairies right now is the adoption of various technologies, especially and namely animal monitoring systems,” Louters says.
Raudabaugh echoes Louters’ and Ribeiro’s views, stating that dairy producers in the state have a good handle on evolving technologies.
“Whether it’s more efficient irrigation, improving water quality or managing our manure, California dairy producers who want to stay farming in the long run are very confident about increasing ROI on the farm with technology. It is very exciting to see our farmers be able to tackle more than one problem using one technology, like lowering methane and improving water quality at the same time,” she says.
Bird flu
As of Feb. 20, 747 out of California’s roughly 950 dairy farms have been affected by bird flu or highly pathogenic avian influenza (HPAI) H5N1 that swept through the state this past year.
“Of the affected farms, about 200 have been released from quarantine, but the impacts to milk production and calf losses continue to play a role on almost every dairy,” Raudabaugh says. “Unfortunately, on-farm biosecurity changes have not stopped the virus.”
Ribeiro says that many of the dairies in his area that got bird flu first had a hard time with it – his farm included.
“We lost a lot of animals and milk production dropped a lot,” he says. “It took a lot of us to the outer edge of sanity during the outbreak. We are all now still recouping and rebuilding our herds. In my area of California, the impact from farm to farm seems to be inconsistent; however, part of that could just be coffee shop statistics.”
The long-term effects of the virus have “only started to show in herds coming out of the outbreak,” Raudabaugh says.
“Most cows are not coming back into production anywhere near where they started, and the lingering impacts of abortions and calves are a major challenge. Dairy producers have not been compensated for the total loss of these animals, and with lingering effects, the total impact on each dairy continues to impact the financial bottom line,” she says.
Ribeiro adds, “Those who lost a lot because of the bird flu are all hoping that it doesn’t come back through again for round two.”
Policy
“From a policy standpoint, it might be easier to point at what’s not affecting the dairy industry right now,” Ribeiro says. “We have policies restricting water, bills banning diesel trucks without modern emission technologies, mandated methane reduction, nitrate and salt reduction policies, tariffs on products coming in or going out, immigration policies, etc.”
Another issue facing California’s agricultural industry – and especially dairy and other industries requiring year-round farm labor – is the state’s agricultural overtime law. The implementation phase had two timelines depending on the number of employees. The full version of the law began for small employers this past year. The delay was for those farms who had fewer than 25 employees, but now they are all phased in, according to Raudabaugh.
“Many farms are still struggling to meet some of our minimum wage and overtime requirements in the state,” Raudabaugh says. “It’s a regular topic of conversation so I know it’s really affecting the bottom line of every farm. California remains committed to being the most challenging state in the union to do business in, so added costs associated with doing business here are a major trade-off to our strategic position on the Pacific Rim.”
