Special Section: Beef Recall

With the only Inland-area slaughterhouse for retired dairy cows closed and under federal investigation, the region's dairies are getting less money for their unwanted animals and having to euthanize those that can't make the journey to out-of-town meat packers.

The shuttering of Westland/Hallmark Meat Co. in Chino has left the dairies without their best customer for the skinniest retired cows, which might not survive a long haul to slaughterhouses in Fresno, Arizona and the San Joaquin Valley, said Rod Bolcao, owner of Chino Livestock Market Inc., where such cows are auctioned every weekday.

Decades ago, Hallmark was founded primarily to serve dairies in San Bernardino and Riverside counties. Even after an exodus of dairy farmers spurred by urbanization, about 130 dairies with 113,000 milk cows remain in Chino, Ontario and San Jacinto.

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Paul Alvarez/The Press- Enterprise

The closure of Westland/Hallmark Meat Co. in Chino means there is no nearby slaughterhouse for Inland dairy cows past their prime.

Hallmark stopped operating a month ago, after an undercover video taken by the Humane Society of the United States prompted a federal investigation into alleged animal cruelty and the slaughtering of cows unable to walk, a violation of regulations designed to protect consumers from mad cow disease.

The company, which is under investigation by the enforcement arm of the U.S. Department of Agriculture, recalled 143 million pounds of beef.

Bolcao said about 60 percent of the cows that come to his auction are skinny, a condition that dairy experts say can be caused by injuries, illness or simply joint and hoof problems that can afflict older cows.

With long hauls and less competition, the other slaughterhouses are paying about 18 percent less than Hallmark had been willing to pay. That's a loss to the cow owner of about $84 per head.

Without a slaughterhouse nearby, some culled cows -- those past their milking prime and removed from the herd -- aren't finding buyers and have to be euthanized.

Steve Stiles, who runs a business hauling dead cows from Chino Valley dairies to rendering plants in Los Angeles, said that since the Hallmark slaughterhouse closed, his business has increased about 15 percent.

While a dairy owner can sell even a skinny cow for about $500 to be slaughtered for meat, a euthanized cow brings no income. The farmer has to pay Stiles about $75 to haul the carcass away.

Weighed against the dairy's total budget, the lower prices for culled cows is insignificant, said Sybrand Vander Dussen, a dairyman and president of the Chino Basin Milk Producers Council.

Based on the lower bids that Bolcao is seeing and figuring that a dairy replaces a third of its herd each year, a 1,000-cow dairy is pocketing about $1,300 a month less for its culled cows now than when Hallmark was in business. That is not much of a loss, Vander Dussen said, considering the monthly income of such a dairy is about $390,000.

Grain, Corn Costs Up

But Vander Dussen and other dairy experts say the reduction in profits from culled cows is hurtful because it comes at a time when many dairies are struggling to stay profitable in the face of skyrocketing feed costs.

The price dairy farmers are paid for their milk is extremely volatile.

Kelly Krug, director of marketing services for the California Department of Food and Agriculture, said California's dairies lost money during much of 2006, when milk prices reached a 20-year low, then became profitable again in 2007. Farm milk prices reached a record high in August, largely because of an Australian drought that shrunk global milk supply and boosted the export of U.S. dairy products.

But Krug said the price dairies get for milk has been tumbling since August. At the same time, he said, feed costs have risen sharply because of growing exports of grain and increased farming of corn for ethanol.

A lot of dairy farms have a long-term supply of feed, Vander Dussen said. But a farmer with a 1,000-cow herd who has to buy feed at today's prices would lose $30,000 a month, or 13 cents for every gallon of milk his cows produce.

Ironically, skimpier profits could help solve the dairy farmers' dilemma of what to do with cows that are no longer worth their keep.

When dairies are enjoying high profitability, Krug said, they are motivated to milk their cows "until they drop, as long as they are producing milk." But when profit margins are slimmer, he said, dairies will retain only the most cost-effective cows -- those that produce the most milk for the feed eaten. So it makes financial sense to send cows to slaughter when they are younger and healthier -- and more attractive to out-of-town slaughterhouses.

"If they slaughter a few months earlier, you would not have the reduction in slaughterhouse prices," Krug said.

Reach Leslie Berkman at 951-893-2111 or lberkman@PE.com