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Wisconsin facing a dairy deficit

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ANN MARIE AMES
April 25, 2011

Out-of-state farmers such as Nebraska's Todd Tuls, who intends to build a 5,200-cow dairy operation in eastern Rock County, have helped turn around Wisconsin's declining milk production, a dairy economist said.


Tuls doesn't yet milk any cows in Wisconsin, but other out-of-state farmers building operations in the dairy state are helping close a Wisconsin milk deficit, said Bob Cropp, a dairy economist with UW-Madison. So are Wisconsin farmers who are expanding their herds and improving production, he said.


Wisconsin's cheese industry uses more milk than the state's cows can produce, and rising milk production seems only to fuel the need for more, according to data from industry groups.


Some Gazette readers have raised concerns that huge dairy operations such as the one planned by Tuls would flood the market with milk and drive down prices. Industry experts say that's not likely.


Wisconsin has a milk deficit of 10 to 16 percent between the amount of milk produced by Wisconsin cows and the amount of milk used in Wisconsin's cheese industry, according to data from state and federal milk marketing programs.


Measuring the deficit is not an exact science. Wisconsin imports and exports milk from and to neighboring states.


Milk from new cows is not likely to displace milk from cows already producing, said John Umhoefer, the executive director of the Wisconsin Cheese Makers Association. If anything, it would replace milk local processing plants ship in from Illinois, he said.


Tuls' cows are expected to produce about 50,000 gallons of milk per day.


Reducing the amount of miles between a farm and a cheese plant reduces the cost and the environmental impact of the cheese, he said. It's also better for cheese quality, he said.


The less milk is agitated in transport, the better quality curd it makes, he said.


"Wisconsin wins when we get a new farm," Umhoefer said.


The state's milk deficit has narrowed since 2005 as Wisconsin milk production has risen, Cropp said.


The turnaround can be attributed to Wisconsin dairy farmers who modernized and in many cases expanded their facilities, Cropp said. Farmers moving from out of state to build in Wisconsin also reversed the decline in milk production, he said.


The trend is likely to continue, and the cheese industry is poised to grow along with the milk production industry, said Ed Jesse, an agricultural economist with UW-Madison.


"Wisconsin processing plants are operating closer to full capacity than they have in recent years," Jesse said. "That's a good thing since operating near full capacity reduces plants' average fixed costs. And many Wisconsin dairy plants are expanding capacity to handle anticipated increases in Wisconsin milk production."


State and federal agricultural regulatory bodies expect dairy processing plants to expand to meet a growing milk supply.


In 2004, the milk deficit for cheese production was 17 percent, according to Wisconsin Milk Marketing Board data. That was in part the result of a declining milk supply, Cropp said.


The number of Wisconsin cows and the amount of milk they produced declined between 1988 and 2004, Cropp said. The national market for cheese was growing, and Wisconsin was losing market share, he said. Dairy cooperatives and cheese plants were not investing in plant expansions or new plant construction.


"There was great concern about Wisconsin's dairy industry," Cropp said.


From 2002 to 2004, the state's milk production hovered at 22.1 billion pounds.


In 2006, the number started increasing, and in 2010 it reached a 10-year high of 26 billion pounds.


Wisconsin dairy plants invested $1.24 billion in equipment and facilities between 2004 and 2009, according to a 2009 survey of dairy plants conducted by the United States Department of Agriculture and the Wisconsin Department of Agriculture, Trade and Consumer Protection.


Nearly 60 percent of plants surveyed expected to increase their product volume between 1 and 25 percent, the survey results state. Another 15 percent of the plants survey expected to increase by more than 26 percent, the report states.


Most of the expansions were expected by large plants producing natural cheese, as opposed to small cheese plants or plants that produce whey and other dairy products, the report states.


A "healthy state cheese industry" that creates competitive prices for milk coupled with the low cost of raising cattle near abundant amounts of feed make Wisconsin an attractive site for out-of-state dairy farmers looking to expand, Cropp said.


" … there no doubt will be additional interest from outside of the state to invest in Wisconsin."


Dairy farms of all types and sizes could be able to find a niche in a healthy Wisconsin market, Cropp said.


"There is more than one way to make milk in Wisconsin," Cropp said. "Wisconsin's strength is in its diversity."


Milk data is hard to find

Even though milk has been honored as Wisconsin’s official state beverage, it’s not easy to track down data about how milk is used.


The Wisconsin Agricultural Statistics Service, which is under the umbrella of the U.S. Department of Agriculture, keeps statistics on everything from honey to emus. But the service no longer keeps statistics on milk consumption, said Heather Porter Engwall with the Wisconsin Milk Marketing Board.


The Wisconsin Department of Agriculture, Trade and Consumer Protection collects the data but does not compile it, according to the heads of the food safety and producer security fund divisions.


The Wisconsin Milk Marketing Board, however, has worked backward from the amount of dairy products produced to calculate the amount of milk used by processing plants—both those that process milk for drinking and those that turn milk into other things such as yogurt, ice cream and cheese.


Here’s how the milk marketing board calculates the deficit.


Stick with us. It’s tricky.


Wisconsin cows in 2010 produced 26 billion pounds (about 3 billion gallons) of milk. The milk marketing board estimates that 90 percent of the milk produced in the state gets made into cheese. The rest is made into all sorts of products including yogurt, cottage cheese, butter and ice cream or is bottled for drinking.


“It’s likely that there will always be some additional products out there that are either new or so small in quantity that they are not yet officially tracked,” said Katie Neuser with the Wisconsin Milk Marketing Board.


So, if you divide the 26 billion pounds between cheese and the other stuff, you get:


-- 23.4 billion pounds of milk for cheesemaking.


-- 2.6 billion pounds of milk for fluid milk and related products, according to milk marketing board data.


Now, take the pounds of milk used to make cheese and divide it by 10, which is the estimated pounds of milk needed to make one pound of cheese. That indicates 2.34 billion pounds of cheese could be made from the milk produced by Wisconsin cows last year.


But Wisconsin cheesemakers in 2010 made 2.6 billion pounds of cheese. That’s 260 million more pounds of cheese than one would expect from the amount of milk produced by Wisconsin cows.


That suggests Wisconsin in 2010 imported 2.6 billion pounds of milk to meet its cheesemaking demands, according to Wisconsin Milk Marketing Board calculations.


The marketing board is not the only group that calculates the number.


The federal government helps regulate milk prices and the milk market through 10 established geographic “orders.” Wisconsin is located in the Upper Midwest Marketing Order along with parts of the Dakotas, Minnesota and Illinois.


That office estimates 84 percent of the milk produced within the order is made into cheese. Using that number, Wisconsin would have had a 16 percent milk deficit, Porter Engwall said. That would add up to 4.2 million pounds, she said.



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