A worker stocks milk and dairy products.
A worker stocks milk and dairy products. - 
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Happy cows may come from California, but dairy farmers and cheese producers are at odds with each other over the state's decades-old pricing system. Hundreds of California dairies have gone out of business because of low milk prices.

Hank Van Exel grew up on a large dairy farm his father started in Lodi, California. Beneath a cap that reads Swinging Udders Veternarian Services, his face wears an easy smile. Except when he talks about the recent fortunes of almost a fifth of the state's dairy farms.

"It was devastating," he says, "to see how many of these people have lost everything that their parents have built up."

Van Exel leads me around his farm, where calves moo expectantly at feeding time. Van Exel says the state's pricing system has broken in recent years. "Our feed has jumped over 100 percent, and our milk is as low as it was in the 70's," he says.

On top of that, state and federal milk pricing systems don't treat all milk equally. When California's pricing was created, 60 percent of its milk ended up in cartons. Now drinking milk accounts for just 14 percent. Cheese is now the biggest slice of California's milk market. But under the historic pricing formula, milk used for cheese fetches the lowest price.

In the Depression, that pricing was an incentive to get rid of surplus milk. But now the main buyers of milk also get the lowest price.

Rob Vandenheuvel, with the Milk Producers Council, says the gap between California's cheese milk price and the federal guideline has grown significantly.

"At the end of the day," he says, "we're looking for, how do we get a fair price to our dairy farmers?"

Rachel Kaldor is with the Dairy Institute of California. She says cheese processors agree pricing needs to change. But they now sell throughout the world and have to stay competitive.

"Let us be able to value these products in the market," she says. "We need that milk and we will pay for that milk and we will pay for it in a way that keeps that dairyman in business."

California has an economist working on different milk pricing options right now. And dairy farmer Van Exel says that can't happen soon enough.

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