Fulls Vats

Wisconsin Could See Plant Capacity Reached Soon

Volume 133, No. 6 Friday,August 8, 2008

It’s an outcome as unexpected as Brett Favre in a Jets uniform. After 150 years of dairying, Wisconsin is discussing the possibility of a milk supply exceeding processing capacity.

Through the decades, Wisconsin has embodied the model of a competitive market. Processing capacity has chased milk supply, allowing commercial competition to find a value for milk — a value consistently higher than areas of balanced supply or over-supply of milk.

Milk price premiums and subsidized milk hauling, engrained through time, are baseline expectations in the state and surrounding area.

Wisconsin’s recent rebound in milk production, 3 percent average annual growth since 2004, has been attributed to many factors, but most crucial has been producer decisions to reinvest earnings in modernized (western-style) facilities and more cows.

A fourth year of growing milk production, and anecdotal evidence of local milk supplies exceeding local processing capacity in some areas of the state, spurred venerable Wisconsin dairy economist Dr. Robert Cropp to issue a unique paper in July — a look at "Wisconsin Plant Capacity and Future Milk Production."

The bottom line: Dr. Cropp speculates that Wisconsin processors are approaching full capacity, and may reach that point as soon as next year. Is he right?

Dr. Cropp has noted that he released his data to spur conversation, not to declare an absolute truth. His conclusions are based in data, not a survey of plants or capacity, and the data points to more milk needing a home.

Wisconsin lacks a headline-grabbing new mega-plant, but dairy plant investment has been consistent and widespread.

Wisconsin produced 24.1 billion pounds of milk last year following two years of modest growth in cow numbers (up about 1 percent since 2005) and milk per cow (up 2.8 percent since 2004). Cropp sees both trends continuing and his conservative estimate is 26.1 billion pounds of milk in Wisconsin by 2012.

Cropp notes that to reach cheese production of 2.45 billion pounds in 2007, Wisconsin continued to bring in condensed, ultrafiltered and dried milk solids to standardize cheese vats. A shift toward use of more fresh, local milk may occur, but cheesemaking involves maximizing economics, yields, quality and functionality — it’s naive to think that in the future local milk will displace all distant milk solids.

To determine when Wisconsin will reach complete capacity, Dr. Cropp uses an estimate that today, on average, 95 percent of state cheese plant capacity is being used. With that assumption, and his estimate that milk production will rise, he concludes that:
1. At 1.7 percent milk production growth, Wisconsin will reach statewide plant capacity in 2010;
2. At. 2.3 percent milk production growth, we’d be full in 2009.

Dr. Cropp concludes that home-grown growth, plus the continued use of distant milk, places Wisconsin in a position to consider near-term investment in new cheese plant capacity.

Recently, California has experienced the reality of excess milk supplies and Dr. Cropp should be applauded for his foresight. But capacity is only part of the milk marketing equation.

Wisconsin cheese manufacturing is not likely operating at 95 percent capacity. Plant schedules and shifts are not maximized at most factories. However, cheese marketing and executable capacity may approach that 95 percent estimate. (Plants tend to operate as much as their product sales or labor force or profitability allow.)

Another important part of the equation is ongoing growth in capacity. In May, this column noted the 2008 start-up of three new cheese plants in Wisconsin and the re-opening of Foremost Farm’s Waumandee Cheddar plant. Not mentioned were countless plant upgrades in existing facilities to accommodate rising milk supplies.

Wisconsin lacks a headline-grabbing new mega-plant, but dairy plant investment has been consistent and widespread.

Wisconsin producers are bullish on milk production growth in coming years and Dr. Cropp’s conservative prediction for growth may be surpassed. Beyond the numbers, planned farm start-ups and expansions, as well as plentiful water and on-site feed production point to a growing supply of milk in Wisconsin and an opportunity to build cheese sales.

Five years ago, a discussion of over-supply of milk in Wisconsin seemed as unlikely as talk of No. 4 in a Jets jersey. Times change, and for the better, at least in the case of the Wisconsin dairy industry. •

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 828-4550; Fax him at (608) 828-4551; or e-mail John Umhoefer at jumhoefer@wischeesemakersassn. org


Other John Umhoefer Columns

Implement Make Allowances ASAP
Security Reforms
Spring Forward
A Week of Clarity
The California Whey

Success Despite Federal Orders
Modest, Affordable Producer Security
The Dry Whey Gap
Feeding Frenzy

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