As milk production continues to increase in Wisconsin and the United States, officials say dairy farmers need to respond to market demands or risk running out of processing space.
A new report by CoBank, an agriculture lender, estimates U.S. dairy processors would need to increase their capacity by 27 billion pounds of milk over the next 10 years if milk production continues to grow at the current rate.
John Holevoet, director of government affairs for the Wisconsin Dairy Business Association, said he expects production growth to slow down before the U.S. runs out of space.
“Historically, we’ve been fortunate to typically have more processing capacity than we do milk produced, and that continues to be the case,” Holevoet said.
But Julie Sweney, communications director for FarmFirst Dairy Cooperative, said finding processing space has become more competitive in recent years.
“There is a lot of milk coming into the state of Wisconsin, and capacity is currently being reached with all the dairy processors,” Sweney said.
Sweney said neighboring states, like Michigan, don’t have enough processing capacity for the milk they produce, so the excess milk is sold to Wisconsin processors, often at a lower price.
The state’s tight market for milk processing was an issue in April, when around 50 farms lost their milk contracts with Grassland Dairy Products.
Many of the affected farms struggled to find a new buyer for their milk and other cooperatives, such as FarmFirst, felt the impact of excess milk on the market.
“It’s very disheartening when the markets can be so challenging, because it doesn’t really allow much opportunity for producers to either save money to reinvest in their farm or make up for challenging years,” Sweney said.
But officials agree that simply adding more processing capacity won’t solve the problem.
“You can’t necessarily just build a processing plant and assume that that product will move and have somewhere to go,” Sweney said. “We need to look doubly as hard at future growth in our markets and demand.”
Holevoet said farmers need to be more attune to the actual demand for milk instead of continuing to push for expansion.
“(Producers) have been somewhat disconnected from the marketplace. Basically, we milk the cows, and someone comes and gets the milk. But the reality is we can no longer do business that way,” Holevoet said.
Holevoet said processors also need to better communicate with farmers about potential changes in the market and their ability to handle increased production.
Source: Wisconsin Public Radio