November 26, 2019


As small dairies shutter, US milk production grows


New U.S. Department of Agriculture (USDA) data shows that the rate of small dairies that are closing is accelerating - but so is production of milk, Star Tribune reported last week.


"Every new generation of cows is better than the ones we had the previous year. Why? Because of better genetics, because of better management," said Marin Bozic, a dairy economist at the University of Minnesota. "The second factor is that as you have people exit the industry, typically those who exit are those who haven't invested in their dairy recently, so those that remain will tend to have higher milk per cow than those that leave."


Minnesota lost a tenth of its dairy farms in 2018, and the roughly 2,500 that remain are struggling. More than 90% said in a recent Minnesota Milk survey that their industry is in crisis, and more than 40% said they either can't get a loan from a bank or the terms are unreasonable.


The rapid growth of dairy in western Minnesota, where large dairies like Riverview Dairy is building farms that house as many as 9,000 cows, is feeding expansion of milk-processing capacity. Quebec-based Agropur has invested US$250 million to triple the milk-production capacity of its cheese plant just across the border in Lake Norden, South Dakota, to about 9 million pounds (4.08 million kg; 1 pound = 0.453 kg) per day. Associated Milk Producers Inc. (AMPI) is expanding a plant in Paynesville, Minnesota.


"The I-29 corridor of Iowa, South Dakota and Minnesota has definitely seen the most cow growth, so it would make sense for future plants to follow cows wherever they may be," said Lucas Sjostrom, executive director of Minnesota Milk, the state dairy trade group.


However in southeast Minnesota, cooperative AMPI announced in early November that it is closing its Rochester cheese plant. It also closed its nonfat dry-milk plant in the northeast Iowa town of Arlington. Milk that had been processed at those two locations will be sent to an AMPI cheese plant in Blair, Wisconsin.


The co-op attributed the closures to a decrease in dairy-farm numbers and milk production in the region.


Sjostrom insists small farms can be efficient and succeed. Prices are up by more than US$4 per hundredweight (1 hundredweight = 50.8 kg) in the past year for class III milk that's used to make cheese. December futures for that milk are US$18.72 per hundredweight.


"Our farmers haven't lost any choices," Sjostrom said. "I think we're in a decent phase of expansion in the Minnesota area that hasn't happened in a while."


Sjostrom however added that the long-term trend of higher efficiency in dairy is inevitable.


"We've significantly reduced the number of cows in Minnesota," he said. "We are using somewhere around two-thirds less water and land than we were during World War II to make the same amount of milk."