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WCMA Notes: Wisconsin is Building Processing Capacity for Milk Growth

Column offered by WCMA Executive Director John Umhoefer

A new survey by Wisconsin Cheese Makers Association finds dairy manufacturers expanding cheese plant capacity – will this real-time growth align with rising milk supplies in the Midwest?

Milk production and capacity at dairy plants made headlines last spring when 75 dairy farms in Wisconsin struggled to find new buyers after one processor downsized its milk purchases.  And while state processors and Wisconsin’s agriculture department successfully worked together to place these farms with new manufacturers, the question of supply balance has lingered.

A recent report from CoBank perceives milk production growth outpacing processing capacity on a national level in the U.S.  The study projected the need for 27 billion pounds of new milk processing capacity in the next ten years.  Overall, the study concluded that planned construction and expansion could handle milk production gains, but new products should be geared to market demand outside of the U.S. as well as domestic needs.

Wisconsin added 1.1 billion pounds of new milk in 2016. This 3.7 percent growth was more than a quarter of all new milk produced in the U.S. last year. At the same time, nearby Michigan lifted milk production 6 percent in 2016, contributing 615 million more pounds of milk to the Upper Midwest milkshed.

But milk production from these Upper Midwest leaders has eased in 2017.

Wisconsin milk production is up only 0.3 percent or 70 million pounds through August this year, compared to last year. August holds this year’s single largest milk production gain, rising 1.8 percent. Cow numbers have remained flat in Wisconsin throughout 2016 and 2017 and production per cow has only slightly improved, up 0.3 percent on average this year.

Wisconsin’s tepid milk gains in 2017 may be attributed to cool, wet weather this spring, farm feeding regimens and possibly to reduced use of bovine somatotropin.

Michigan milk production is up 3.5 percent or 256 million pounds through August this year. May marked the largest monthly gain at 4.0 percent, while August production was 3.0 percent greater than last year. Michigan added 12,000 cows in 2016, according to USDA, but only 2,000 head so far in 2017. Production per cow is up about 1.5 percent on average this year.

Recently, Wisconsin Cheese Maker Association asked Wisconsin dairy product manufacturers to share processing capacity growth and improvements in 2017 as well as planned projects for 2018.  Response was strong – processors handling about 75 percent of Wisconsin milk for cheesemaking provided data.

Here’s the survey results: This year, new plant capacity and plant improvements in existing facilities will allow Wisconsin manufacturers to process 2.4 billion pounds of additional milk.

Next year, new plant capacity and improvements in Wisconsin could handle an additional 962 million pounds of milk over and above the 2017 plant improvement gains.

These production capacity increases are near or in excess of the kind of strong milk production growth – 1.1 billion pounds – Wisconsin saw in 2016.

So, has Wisconsin balanced milk production growth and plant capacity?  Is the problem solved?

Well, not necessarily.  While this data is solid, it’s not the entire picture.  Survey respondents told WCMA that these very real improvements in new facilities, new equipment and process flow build capacity on paper, but consumer and retail demand – products sales – is the real driver for milk utilization in Wisconsin.

Availability of additional milk supplies from other states, such as Michigan, also plays a role in filling plant capacity.  Looking at a state in isolation denies the marketplace reality of milk moving between states when a willing buyer finds an eager seller.

Despite the many variables that make forecasting milk supply balance difficult, the data from Wisconsin dairy manufacturers is encouraging.  Uniformly across the state, manufacturers are investing in brick & mortar expansions, new equipment purchases, process flow improvements and even additional work shifts to grow production and sales of cheese and other dairy products.

A repeat of supply balance conditions that left some Wisconsin dairy farms temporarily without a buyer last spring appears less likely to happen in 2018.

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