Wisconsin Poises to Capitalize on Milk Production Strengths

By Ron Johnson Dairy Editor
Thursday, November 20, 2008 7:40 AM CST

Wisconsin is poised to capitalize on its milk production strengths. Panelists speaking at last week’s annual meeting of the Wisconsin Federation of Cooperatives and the Minnesota Association of Cooperatives talked about several of the state’s dairying advantages.

Legislative role

Dairy farmer and Wisconsin legislator Gary Tauchen (R-Bonduel) examined the state legislature’s role in strengthening the dairy industry. He began by noting the decline in Wisconsin milk production that began in 1988. During that year, remembered for the drought it brought, Wisconsin produced 25 billion pounds of milk.

But after 1988, the state’s milk production began to dwindle, to the point that California grabbed the lead in 1993. Since then, Wisconsin dairy farm numbers have eroded, yet milk output has climbed once more, to the point that last year they produced 24.1 billion pounds of milk.

Several things factored into the turnaround. Tauchen credited the formation of the Professional Dairy Producers of Wisconsin (PDPW) with bringing a sense of optimism to dairying, by way of its educational programs and motivational speakers.

Wisconsin’s Dairy 2020 Council, established in 1993, helped grow the industry, especially after it was moved from the University of Wisconsin to the state department of commerce, Tauchen said. Dairy 2020 provided grants to dairy farmers for feasibility studies on the value of enlarging their herds. It also offered low-interest loans, and training programs for employees and managers.

The state’s use-value assessment law helped, too. Tauchen said the law has saved producers some $400 million a year.

Another tool that has helped is Wisconsin’s dairy investment tax credit. “…Even in down times, we’re able to grow the economy before it’s costing the state money,” Tauchen said.

The state’s livestock siting law has helped dairying. Tauchen said that law provides “predictability” to the process, and Wisconsin is the only state to have such a law.

He went on to mention the value of the Wisconsin Farmers’ Health Cooperative, the state’s “green tier” environmental program, and the Great Lakes Compact.

The “next steps,” according to Tauchen, include changing the dairy manufacturing facility tax credit so it is available to cooperatives, boosting milk processing capacity in the state, addressing farm labor needs, and preserving farmland.

Tauchen said the goal of Dairy 2020 is to “make Wisconsin” the best place to produce and process milk in the nation.”

Agropur convinced

Canada’s Agropur cooperative is convinced that Wisconsin is a prime place for it to do business. That’s one reason it bought Trega Foods in Little Chute, said Michael Simoneau, Trega’s vice president of finance.

Agropur is Canada’s largest dairy co-op, with 26 plants in Canada, the United States and Argentina. The cooperative employs 5,000, processes 5.7 billion pounds of milk annually, and does $2.8 billion in sales.

Among its foreign holdings are Grupo de Lacto, in Argentina; Deutsch Kase Haus, in Indiana; and Trega Foods, with facilities at the Wisconsin communities of Little Chute, Luxemburg and Weyauwega.

Simoneau said Agropur purchased a Wisconsin cheesemaking company for several reasons. First, there’s no more room for market and processor consolidation in Canada. Second, the United States has an “abundant” milk supply that’s “less regulated.”

Third, Agropur already had “major” clients in the United States. Fourth, Canada and the United States share similar cultures, languages and values.

As for choosing Wisconsin in particular, he noted the state’s 24 billion-pound milk production, and that of its next-door neighbor, Minnesota, with 8.7 billion pounds of milk produced yearly. Together, Simoneau pointed out, Wisconsin and Minnesota produce “just about double what Canada produces.”

An additional factor in Wisconsin’s favor is its nearness to highly populated East Coast markets, compared to California and other western states.

Agropur intends to “become an influential player in North America, Simoneau said. He promised that Agropur was here “for the long term.”

Production changing

The nation’s milk production patterns are changing, observed Bob Cropp, an emeritus professor of agricultural economics at UW-Madison. Some of those changes have favored Wisconsin and other states in the Upper Midwest, while some have not.

Wisconsin held onto its spot as the No. 2 milk producer in the United States between 2002 and 2007, while California remained the leader. New York ranked third six years ago, followed by Pennsylvania and Minnesota. But in 2007, Idaho had replaced Pennsylvania in fourth place, and Pennsylvania had bumped Minnesota out of the top five.

Cropp provided numbers to back up his statement that “milk production is coming back to the Upper Midwest.”

During the past five years, milk production in Wisconsin has climbed 9.1 percent. It’s up 2.3 percent in Minnesota, up 12.5 percent in Iowa, and up 27 and 27.3 percent in Indiana and South Dakota.

The Upper Midwest dairy picture is not all sunshine and roses, however. Cropp noted that Illinois’ milk production is down 6.5 percent.

Wisconsin and surrounding states have several things going for them, according to Cropp. These “competitive factors” include the ability to grow corn, soybeans and alfalfa n without irrigation. The Upper Midwest is closer to some sources of purchased feed, too, like distiller’s grains.

The region has a “favorable climate for cows,” Cropp reminded. It also has a dairy infrastructure that includes strong farm supply co-ops, veterinarians, milk processors, and a good market for cull cows.

“Competitive” milk prices n especially in Wisconsin n are an important factor in enticing dairy farmers to stay here, add cows, and to bring newcomers to the state. Last year the Wisconsin “mailbox” price state dairy producers received was $19 per hundredweight, Cropp said. That’s higher than the $17.56 California dairymen got, higher than the $18.42 those in the northwest got, and higher than the $17.54 producers in New Mexico got.

Another large advantage lies in transportation costs. Trucking one pound of cheese from California to New York costs 14 cents, while trucking it from Wisconsin to New York costs just six cents.

“In a competitive market, a penny or two is a big competitive factor,” Cropp emphasized.

More work ahead

Even with its advantages, the Upper Midwest still has work to do. Cropp said the region needs to keep modernizing it farms, attract new producers, expand its cheesemaking capacity, justify its milk premiums, cut milk hauling costs, and “support diversification at the production and processing levels.”

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