Upper Midwest dairy farmers see increase in milk hauling rates

Colleen Kottke
Wisconsin State Farmer
Upper Midwest dairy farmers see increase in milk hauling rates.

Despite over a double digit increase in milk hauling rates, Wisconsin milk producers fared better than their counterparts in remote areas of the Upper Midwest, according to a study released by the Upper Midwest Federal Milk Marketing Order.

According to the report which compiles payroll data for 11,417 dairy producers in states associated with the Upper Midwest Marketing Order area (Illinois, Iowa, Minnesota, Wisconsin, Upper MIchigan, North Dakota and South Dakota), rates for haulers jumped from $0.20/cwt in 2017 to $0.28/cwt—nearly a 40 percent increase.

The study's author, Corey Freije, dairy economist with Upper Midwest Order, says the report analyzes hauling charges based on state, county, and producer size groups for May 2018, comparing them to the prior year.

Hauling rates are calculated by the number of pounds the dairy produces, the farm's distance to processing plants and population centers, competition among handlers and the concentration of dairy farms in the local market.

In May 2018, dairy producers from three states delivered the majority of the milk associated with the Upper Midwest Order. Wisconsin producers delivered the most milk of any of the
states, by supplying 63.25 percent of the total milk volume associated with the market.

Over 80 percent of the milk delivered on Federal Order 30 was from Wisconsin (63.25 percent) and Minnesota (20.62 percent). 

"Wisconsin and Minnesota not only have the most milk production, but also have close proximity to the majority of population centers and processing plants," Freije said. 

Due to its low number of farms (51) and the longest distance to high demand areas, North Dakota producers paid the most to have their milk hauled ($0.64 weighted average). In comparison, Wisconsin farmers paid 38 percent less ($0.24 weighted average).

Freije says that distance alone is not the sole factor that determines how much a farm pays for hauling. Herd size and milk volume also influences the producer's cost of hauling. Hauling charges are higher for small farms given the increased number of stops in order to fill out a load. 

Wisconsin has a low average hauling charge due to its high number of
farms and close proximity to high demand areas.

However, as the producer's milk volume increases, the average hauling charge per cwt. decreases.

Based on a flat hauling fee (regardless of the amount of milk shipped each month), a small farm in Wisconsin shipping less than 50,000 lb of milk each month would pay $0.64/cwt for hauling while a farm shipping 400,000-599,999 lb. of milk each month would pay $0.27/cwt. The largest producers shipping over 5M lb. of milk each month realize an even greater savings at just $0.12/cwt.

"The larger dairy operations help by reducing the county's average considerably," said Freije.

For example, in Bayfield County, the weighted average hauling charge was $0.62/cwt, while in Kewaunee County with a high concentration of large dairy operations, the weighted average hauling charge is $0.10/cwt.

Freije also points out that the cost of diesel fuel for milk trucks also added to the hauling charge.