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April 11, 2017
Imagine the shock 75 Wisconsin dairy farm families felt on April 3 when they opened a letter from Grassland Dairy Products Inc. and read that starting May 1, Grassland will no longer buy their milk.
Short of being diagnosed with a serious illness or learning about a close family member's ill health or death, there are few things more difficult for a farmer to face.
Grassland Dairy is located in Greenwood in Clark County. The company buys milk from more than 600 dairy farms and primarily makes butter. For years Grassland sold 1 million pounds of ultrafiltered milk daily to Canada, where it was made into cheese. But in March, Grassland was informed that Canada was immediately discontinuing that milk purchase. Behind this action is a new pricing structure implemented by the Canadian government that dramatically increases the cost of U.S. dairy imports and encourages dairy companies there to purchase similar items from Canadian dairy producers.
Goedhart Westers, vice president of business development at Grassland, blames the Canadian government for Grassland's decision to stop picking up milk from the 75 U.S. dairy farms.
"When Canada implemented this new policy, it left us little to no response time," Westers says. "Our next move is to find a new home for this milk, and that will be tough."
Tough indeed — especially when you consider it is spring and most dairy herds are in peak milk production. Adding insult to injury, according to Wisconsin Ag Secretary Ben Brancel, is the fact that most of the nearly 400 dairy plants in Wisconsin are at peak capacity and can't take on new milk patrons.
I spoke to Brancel following a meeting we both attended in Madison on April 5. He said he had spent several hours on the phone talking to milk processors to see if he could find a few plants who would take milk from at least some of the farms, but he was not having any luck. Brancel said most of the farmers impacted are in their 20s and 30s. Several have families with young children. The majority are located in southern Wisconsin.
"It's one thing to talk to a farmer who says he was hoping to milk cows for three more years and then retire," he said. "It's heartbreaking to talk to these young people who are just getting started, or who have been milking cows for 10 or 15 years and they want to milk cows for another 30 or 40 years. It's like they've been cut off at the knees."
Brancel said he was going to continue talking to processors and Grassland producers who no longer have a market for their milk, but he admitted he was skeptical. He said he spoke to one processor who told him he can buy semiloads of milk from out of state for $5 per cwt less than they are paying their farmers for milk. Other reports indicate there are semiloads of milk coming into Wisconsin every day from Michigan, where they have been dumping milk for a year, and from other states. Some of these loads are priced as low as $6 per cwt.
Grassland says they have no choice but to stop buying milk from some of their patrons. But Grassland has known since last November, and possibly as much as two years ago, that potential changes in Canada’s ultrafiltered milk regulations were likely. In November, Gov. Scott Walker wrote a column addressing the Canadian pricing policy designed to discourage U.S. exports of ultrafiltered milk.
The farmers impacted by Grassland's decision would have had a better chance of finding a new market for their milk if they had been told a couple of months ago about the May 1 change, or if all of the farmers who sell milk to Grassland had been told last fall to cut back milk production.
Grassland says the farms selected to be eliminated are farms they believe have the best chance of finding a new market. I don't buy that. I believe they chose to get rid of farms that are farther away from Clark County to cut costs. I also believe they intentionally targeted younger farmers. I was told the average age of the farmers who were let go is 34. Why? Why would a company want to get rid of young dairy producers, unless they figure they won't need milk from very many farms 15 or 20 years from now?
According to Darin Von Ruden, president of Wisconsin Farmers Union, at the same time Grassland has informed 75 dairy farms that it will stop picking up their milk on May 1, Grassland is also seeking to build a corporate-owned 5,000-cow dairy in Dunn County.
“In light of this new development, we hope that Grassland will reconsider its Dunn County CAFO project,” Von Ruden says. “Having many independently owned dairy farms is better for the economy and better for our rural communities than one vertically integrated supply chain.”
I couldn't agree more.
I hope all of these 75 dairies let go by Grassland will find new buyers for their milk. It would be nice if some processors step forward and agree to take on a few of these dairies. If 15 processors each agreed to add five of these farms, the problem would be solved, at least for the moment.
Milk supply management
The action taken by Grassland should be a wakeup call for all dairy farmers that the U.S. needs a mandatory milk-supply management plan. The voluntary plan we have now clearly is not working. The only true milk-supply management plan we have is the survival of the fittest. How do you know you won't be let go by your milk plant? Or what happens if U.S. dairy exports suddenly drop?
The milk supply price margin is very narrow. According to University of Wisconsin-Madison dairy economist Bob Cropp, it only takes a 3% milk surplus to generate $10 milk prices at the farm level and a 1% milk surplus to generate $25 milk prices. If each farmer cut milk production by 2%, we would have stronger and more stable milk prices.
Stay tuned in coming months as work begins on the 2018 Farm Bill. Listen to what groups like the National Milk Producers Federation are saying. Provide feedback. Be ready to call your members of Congress, and pay attention to what is being proposed. The farm you save might be your own.
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