Wisconsins Milk Production and Cheese Plant Capacity

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Wisconsins Milk Production and Cheese Plant
Capacity

• By Bob Cropp
• Professor Emeritus
• University of Wisconsin
• Madison, Wisconsin

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Trends in Wisconsins milk production

• Milk production peaked in 1988 at 25.0 billion
  pounds
• Milk production hit a low of 22.07 billion pounds
  in 2002
• Milk production has increased each year beginning
  with 2005 to 24.08 billion pounds
• Wisconsins milk cow numbers also increased in
  2006 and 2007.
• Modernization, herd expansions, new large herds
  are turning around the downward trend in milk cow
  numbers and milk production.

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In 1998, when Wisconsin produced 25.0 billion
pounds of milk

• There were 225 cheese plants
• As milk production declined excess cheese plant
  capacity increased.
• Competition for the shrinking milk supply lead to
  various types of competitive premiums paid to
  dairy producers and hauling subsidies.
• Wisconsin milk plants pay more milk to make
  cheese than any other state.
• Operating margins have tightened capital for
  plant modernization or building new plants tight.
• 2007 Wisconsin had 116 cheese plants

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There have been some capital investments

• Dairy cooperatives and other cheese makers have
  invested capital to modernize plants, but no new
  major size plant built since 1988.
• Some relatively smaller cheese plants have
  converted to specialty cheese and a few new
  specialty cheese plants have been built example,
  the new plant by BelGioiosoSpecialty cheese now
  accounts for 16 percent of Wisconsins cheese
  production.
• But, the majority of Wisconsin cheese is
  commodity cheese (cheddar, mozzarella, etc.) that
  needs to compete for a national market against
  large and modern size plants in the West and
  Southwest.

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Wisconsins cheese plant capacity

• Because of seasonality in both milk production
  and fluid (beverage) milk and cheese sales, it is
  not possible to have 100 percent utilization of
  cheese plants 365 days of the year.
• In Wisconsin cheese plants are also used for
  balancing the milk supply.

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Conclusion

• Wisconsins milk production is projected to
  continue to increase with herd modernization and
  expansions more than offsetting dairy producers
  who plan on exiting or downsizing.
• Wisconsin dairy cooperatives and other cheese
  plants will continue to source raw milk from
  neighboring states as wells as source nonfat dry
  milk, condensed skim milk and liquid MPC for
  standardization of milk for cheese making.

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Conclusion continued

• Since it takes a year or more to construct a new
  cheese plant, consideration needs to begin now
  for new plant and/or plant expansions to assure
  adequate plant capacity to handle Wisconsins
  increasing milk supply.
• There was not interest in new plants or
  expansions when the milk supply was declining and
  premiums not cost justified were being paid to
  producers.
• A more competitive raw milk supply is also needed
  to encourage plant investments in Wisconsin. This
  means cost justified producer premiums and
  reduced farm to plant milk procurement costsso
  plants can be competitive on a national cheese
  market and at the same time have favorable
  operating margins.