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According to the U.S. Department of Agriculture

California dairy farmers lead the nation in dairy production, churning out 21% of America's milk supply and contributing $140 billion annually to the state's economy, according to the U.S. Department of Agriculture.

The historic water crisis has been rough on dairies, driving up the cost of feed and water. Consumers are seeing the effects at the grocery store.

Los Angeles shoppers in August paid an average of $3.79 for a gallon of whole milk, including organic and raw milk, up 54 cents from two years earlier, according to A.C. Nielsen, which tracks retail prices for the state. In San Francisco, the average cost was $4.76 a gallon, up 89 cents.

"Any time you dramatically increase the cost that a farmer faces, it eventually hits consumers," said Rob Vandenheuvel, general manager at the Milk Producers Council, a nonprofit that represents the state's dairy farmers.

Unlike most states, California has its own system for determining what processors pay farmers for conventional milk, a complex formula that many farmers argue does a poor job of incorporating the increasing costs of feed and production. Farmers have been pushing the state's Agriculture Department to change the formula, pointing to the many dairy farms that are barely breaking even, have closed or have moved out of state.

California has lost 1% to 2% of its dairy industry in the last three years, said Lesley Butler, a dairy economist at UC Davis. About 100 dairies go out of business every year waiting for rain.

"It's a huge time of uncertainty," Butler said.

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