Michigan dairy co-op copes with milk surplus
EGG HARBOR – Don't expect any major slowdown in Michigan's surge in milk production that has been occurring for the past two decades.
That was the message from Michigan Milk Producers Association (MMPA) general manager Joe Diglio to members of the Wisconsin Dairy Products Association at their 2017 dairy symposium. The MMPA cooperative, which was formed in 1916, has nearly 2,000 members today – most of them in Michigan with others in Wisconsin, Indiana, and Ohio.
While headquartered in Novi, MMPA operates butter, milk powder, non-fat dry milk, cream, and condensed skim milk plants in Constantine and Ovid. A recent acquisition was a specialty cheese plant at Middlebury IN., from which MMPA launched a branded Heritage Ridge Creamery product line in April of this year.
In what he described as “a trying market” which put Michigan in the headlines in recent years because of its growing pains, Diglio observed that since 2000 the state's milk production is up by 90 percent while its cow numbers were up by 40 percent.
As a result, Michigan had ranked fifth among the states in milk production, having passed both Pennsylvania and Texas, before the recent double digit monthly increases in Texas pushed Michigan back to sixth place, Diglio pointed out. The state accounts for about 5 percent of the nation's milk production.
During June, Michigan's milk production by 427,000 cows was 948 million pounds, according to the monthly report by the National Agricultural Statistics Service. The uptick of 2.8 percent from June of 2016 is a lower percentage increase than was occurring in the state during most months in the past two years.
Pattern of increases
In June of 2008, Michigan's milk production stood at 653 million pounds, which was a 3.7 percent increase from June of 2007. Diglio noted that from 1991 through 2005 most of the average annual production increases in the state were between 2.5 and 3 percent.
Michigan ranks number one among the states for average milk production per cow. The report for June credited the state's cows with an average of 74 pounds of milk per day for the month – the equivalent of 27,000 pounds of milk per cow during one year.
Diglio credited those numbers to a combination of dairy genetics, nutrition, and technology advancements carried out by the state's dairy farmers and their supporting infrastructure. He also mentioned the availability of land, particularly in the thumb area north of Detroit and in the center of the state, along with favorable weather and the state's water resources.
Milk price penalty
One downside of Michigan's high volume of milk production has been some of the lowest farmgate milk prices, due in large part to the price “reblending” choice that's available to dairy cooperatives. Diglio stated that all of the milk “has a home” except during a few glitch incidents.
When there are dairy farm sellouts, not much change occurs because most of the cows go to other operations, Diglio observed. He promised that “still more milk is coming in Michigan.”
Unlike some other milk buyers and processors MMPA does not have a prohibition on the use of bovine somatotropin (rBST) as a milk production enhancer. Diglio told the Wisconsin State Farmer, however, that use of rBST by its member producers has been largely discontinued because of restrictions placed on the milk production practices by buyers – both domestic and foreign – of the cooperative's products.
For its part, MMPA added to its production capacity for what it anticipated would be adequate for seven years but that capacity was filled within three years, Dilgio remarked. He also noted that MMPA's entry into whole milk powder production for exporting was a bright spot for only two months before much of that market evaporated.
MMPA has invested more than $100 million into its operations during the past nine years, Diglio reported. Its facilities have the capacity to make up to 17,000 pounds of butter per hour, he pointed out. He said a the long-standing challenge for MMPA has been to develop branded products, for which he noted partnership is a necessity.
The cooperative is taking in 8.2 million pounds of milk per day today compared to 4 million pounds daily as recently as 2008. Of its members' milk, 47 percent goes to MMPA's processing plants, 17 percent for Class I fluid milk bottling, 2 percent in Class II (soft dairy products), and 33 percent to Class III and IV use (Leprino Foods is a major buyer).
Industry solution sought
More than a decade ago, MMPA “was planning for the future” but then encountered a surprise “when competition moved in,” Diglio stated. The continuing increase in milk production in the state wasn't accompanied by a comparable addition of processing capacity mainly because of a lack of unity in the dairy industry, particularly in regard to how “legacy issues” affected the making of business decisions, he observed.
While noting that the MMPA formed an alliance with Foremost Farms USA in 2014, Diglio called on other processors to expand their production facilities for the region's milk as part of “an industry-wide solution.” He hopes that talks with other players (Dairy Farmers of America cooperative and the Ireland-based Glanbia) will bring a large new cheese plant to Michigan.
Diglio stated that increases in production capacity would be in sync with a market that has “customers seeking growth” in product supply. He pointed out that the dairy sector provides $15.7 billion per year in economic activity for Michigan and that it accounts for 20 percent of the state's agricultural economy.