The Modesto-based company says fewer people are buying milk or milk-based products because of the sluggish economy…and that’s led to a surplus. 

Leslie Butler is a marketing economist at UC Davis who follows the dairy industry.   

"When people start pulling back on their expenditures they start reducing the amount of particularly luxury goods that they purchase. So things like ice cream and fancy yogurts, I imagine are probably taking a little hit and that by itself reduces the demand for milk."

Foster Farms won’t say exactly how many dairy farms are impacted by the decision. 

Meanwhile, some California dairy operators say they’re looking to sell off herds of cows because of the cutbacks.   

The state's milk supply historically has grown at between two and four percent annually, but no new processing plants have been added in recent years.