Lost sale leaves farmers without market for their milk
HATLEY – When John Litza opened the envelope containing his milk check on March 17, he also got the kind of distressing news no dairy farmer ever wants to receive.
Along with the milk check was a letter from Nasonville Dairy of Marshfield informing Litza that, effective April 1, it would no longer be accepting his milk due to a decision by one of its cheese buyers that, “it would no longer need as much product as it had been previously buying.” The letter also noted that Nasonville was overstocked with product and watching the markets decline.
The news came at a particularly bad time for Litza, a grazier near Hatley in eastern Marathon County, who had been shipping approximately 2,000 pounds of milk every other day from his 50-cow mixed herd of Holsteins and Ayrshires, “I had 20 cows set to calve in April,” he explained.
Almost immediately he began scrambling to secure another place to sell his milk. “I have called in excess of 30 milk plants and cooperatives — from Eau Clare to Green Bay, and south to Fond du Lac, and near Madison — and basically everyone of them told me they were at capacity or so far away that it would cost too much to pick up my milk,” he said.
Sixteen other area producers also received the same notice from Ken Heiman, who heads the family owned dairy that produces Cheddar, Colby and Monterey Jack along with various specialty cheeses. They included 14 farmers whose milk had been picked by Larry Natzke of rural New London, who also found himself without a job.
“I had been thinking about retiring next fall,” he said, “but retirement came a lot sooner than I expected. I’m not sure what I’ll do, but I know I’d rather be working.”
Settling into retirement is not a viable option at this time for Litza. “I’m in my mid-50s, I can’t afford to retire, and not sure if anyone will be willing to hire me at my age,” he said.
Heiman told Wisconsin State Farmer the decision to stop buying milk from these farmers was the most difficult one he’s ever had to make. “l literally didn’t sleep for two nights,” he said. “There were no issues with milk quality; it was a matter of economics, and they were the last ones to start hauling here.”
He said the decision was based primarily on the loss of one large sale that represented approximately 5 million pounds of cheese with a dollar value almost double that.
“Last December a large buyer decided to buy from somebody else, and they didn’t say a word to us until it was already here,” Heiman explained. “So we were putting away product in a declining market, and you can do that for only so long these days when bankers are looking closely at inventory, and the product you have is going down in value every day.”
Heiman says he spent the last four months trying to rebuild his markets with only limited success. “In some instances I’ve been able find new outlets or switch products, but we just couldn’t afford to put any more product in storage,” he acknowledged. “We were able to help find other outlets for some of the producers, but unfortunately some were left without any place to sell their milk.”
Unfavorable market trends
According to Heiman, who is also a member of the Wisconsin Milk Marketing Board’s Executive Committee, and chairman of its Channel Management Committee, several factors are currently putting pressure on producers, and tightening the milk supply.
He says the current export picture is not very bright due to the current high value of the U.S. dollar relative to foreign currencies. “A strong dollar means a weak export market,” Heiman emphasized, “and that will likely continue until we again are able to export about 12 to 14 percent of our milk solids.”
Litza expressed concern that Wisconsin’s 30/20 Dairy Initiative, which was designed to improve the long-term viability of Wisconsin’s dairy industry. by providing financial assistance to dairy farmers, may have helped to suppress the market with excess production. “I know of one farm currently milking 3,500 cows that’s planning to expand to 7,000 cows, and that’s got to have an effect on the markets,” he said.
Heiman agrees. “If a farmer adds 10 cows the additional production is easily absorbed, but when several farms start adding hundreds of cows to their herds, that tightens the milk supply and puts pressure on the market.”
Milk production in Wisconsin during January 2017 totaled 2.54 billion pounds, up 1 percent from the previous January, according to the latest USDA, National Agricultural Statistics Service. However, significantly higher production in neighboring states – such as Michigan, which had a 3.5 percent increase – is creating more problems for Wisconsin producers.
Because of higher prices here, Wisconsin is currently a magnate for milk from other states.
“We still have a whole bunch of milk that appears here in powdered form from Minnesota, and a lot of the plants are buying milk from Michigan, Ohio, Iowa and Minnesota,” Heiman said. “There’s milk coming in from Michigan that you can buy, on a year-round basis, delivered to your plant for $1.50 to $2.00 a hundred less than Wisconsin farmers are being paid, and during a holiday this milk can be bought for $3.00 to $5.00 under the market.”
A changing industry
There’s general agreement that Wisconsin dairy producers and cheese makers will continue to face challenges in the years ahead
“Cheese plants throughout Wisconsin all have their hands full now,” said Heiman. “We’ve all been putting cheese away and the market is weaker.”
Both Litza and Natzke anticipate Wisconsin producers will continue having a difficult time finding new markets for their milk. Natzke said that when he made his final milk pickup on March 31, six producers still had not found a place that would buy their milk.
“When Kraft stopped taking my milk in the ‘90s, I had plants lining up to buy from me,” said Litza. This week he’s taking his dairy cows to the sale barn.
“This has really been frustrating, I would have appreciated more than two week’s notice from Nasonville that it was going to stop taking my milk,” he said. “My father and grandparents were dairy farmers, and I was hoping one of my kids would be able to continue, but I’m not optimistic about the future of dairying right now.”
Litza hopes that his experience will serve as a wake-up call to other producers as well as others in the dairy industry and state government. “I don’t know what the solution is,” he said, “but we must work together to make our state’s dairy industry healthier, and keep our dairy farmers in business.”