Agribusiness Roundtable: Making the most of Wisconsin's dairy industry

Business decision makers in Wisconsin, as well as international visitors, are often unaware of the power and importance of the dairy business in the state of Wisconsin. Often referred to as the quiet industry, the dairy business has a huge impact on our state’s economy, our infrastructure, and our local communities. Dairy contributes half of the $59 billion that agriculture brings to Wisconsin’s economy every year. This $26.5 billion total is much more than Florida citrus ($9.3 billion) or Idaho potatoes ($2.7 billion).

Our 11,000 dairy farms; our 400 cheese, milk, and dairy plants; and all the related support industries provide more than 140,000 jobs in the state, contribute to our local tax base, and help sustain our beautiful countryside. Agriculture also connects Wisconsin to the world through an aggressive export and international trade program. 

So in a state where 50% of the land is farmland, IB explores the state of this all-important industry sector and what the future holds.

Our Expert Panel

Mark Stephenson
director, UW Center for Dairy Profitability

Brad Legreid
executive director, Wisconsin Dairy Products Association

Ben Brancel
secretary, Wisconsin Department of Agriculture, Trade & Consumer Protection

Daphne Holterman
co-owner, Rosy-Lane Holsteins, Watertown

Gary Sipiorski
dairy development manager, Vita Plus

Mitch Breunig
owner-operator, Mystic Valley Dairy, Sauk City

Sam Miller
managing director of agriculture banking, BMO-Harris Bank

James Robson
CEO, Wisconsin Milk Marketing Board

John Umhoefer
executive director, Wisconsin Cheese Makers Association

Exporting ag

GLYNN PATRICK: In 2012, the state set a record with $23.1 billion in exports to more than 200 countries. Agricultural exports were a big part of Gov. Walker’s recent trip to China. It portends a ratcheting up of agriculture exports to that populous country. What do you envision in terms of our exports — cheese, dairy, genetics, equipment, and expertise? 

UMHOEFER: It didn’t make your list, but whey is probably going to be our strongest dairy export. We’ve got many plants around the state, and it’s going mostly to Asia, and we’re ratcheting up from animal feeds to value-added products that are going over for human use, especially infant formula. That market will be stronger than cheese and serves the dairy industry in two ways. One, it’s a market for whey, which has gone from being a problem in our industry to a profit center. Two, when you get into a country and prove yourself in whey or in cheese, then you open the door to other dairy products.

LEGREID: You used to just throw whey away. But now it’s popular with all the nutritional drinks. Baby formulas, things like that. As developing countries experience rising per capita income and better styles of living, they’re going to be incorporating a stronger diet with more protein, and that is going to be fueling the demand for whey. We’re well positioned in this country to take advantage of it. It’s just an attitude change that many of these companies are going through, learning that exports are the wave of the future.

SIPIORSKI: You’ve got 13.5% of the dairy products in this country being exported. But we are now in a world market, and we’re going to compete worldwide. For example, FrieslandCampina [a Dutch dairy cooperative] just invested $400 million in new whey dryers. China is investing $39 million in Dutch plants for infant formula.

Do you realize that in this last year in China, you had to come with a birth certificate for a child if you wanted to buy more than two canisters of baby formula, particularly in Hong Kong? They were black-marketing it. The Irish are investing $516 million by 2020, so Europe is coming off of their quota system in 2015. They’re starting to gear up. There is tremendous opportunity for us, but we’ve got to remember we’re competing.

I see dairy farms that have cost of production of $15 a hundred and $22 a hundred. Now there will be consolidation, and you tell me who’s going to survive. Our producers need to understand that they really need to get on the stick when it comes to producing milk at a reasonable price so we can market it worldwide.

MILLER: We were an importing country of dairy products. We were a net importer, so we’ve changed. As a banker, I watched what happens to our export business because that’s what drives milk price. There’s an inverse relationship. The higher exports go, the higher the milk price goes; the lower our exports go, the lower the milk price goes. If the milk price goes lower, it ripples throughout the entire dairy industry. It’s not just the producers taking that hit. 

The other important thing we’ve seen is a convergence in terms of the U.S.’s competitiveness on milk price worldwide. It used to be that New Zealand was significantly cheaper than we were, and those prices are converging. 

UMHOEFER: Not only that, but Europe is not going to have the ability to increase milk production like the United States can, nor will New Zealand, nor will Australia. So while they may be adding infrastructure, their potential for making milk is not as strong as ours.

STEPHENSON: We’ve been increasing milk production in this country at twice the rate that our domestic uses for milk and dairy products have been increasing. So exports are going to be important if we want to be able to continue this growth in milk production and processing and to keep the price in a good position. One of the things that is different about the U.S. structure in comparison to much of the rest of the world, particularly pasture-based systems in New Zealand, is that although our farm prices are the same, our variable costs are much higher. So the unfortunate thing is that the U.S. is likely to be the country that more or less balances world supply and demand. That means we’re likely to experience more price volatility than other countries do.

HOLTERMAN: As a farmer, I have to live with more volatility. I have to be comfortable that we’ve invested a lot of our capital in our operation. I have to be comfortable with knowing that the highs are going to be higher, the lows are going to be lower, and I just don’t know when they’re coming.

BRANCEL: In the first three months of this year, we’re up 7% in exports over the first three months of last year. Our dairy exports are up 6% in that component figure. With China, all you hear about is food issues. It is the highest priority. We will hear news reports about air quality. We will talk about water. We will talk about other things, and those are important. But if you talk to the housewife on the street, or the governor of a provincial government, or the leader of China, food security is the first thing they talk about.

China’s imports from this state are up 111% in the first three months. They are hungry for our genetics to improve their livestock. They’re strapped on a land base when they have 1.3 billion in China; you go to Vietnam, and they have 90 million, and they’re gaining a million in population every year in a country that’s fairly small for production base. So exports are a very key component for this state out into the future. That’s why you’ll see the cheese industry and the dairy processors, when they’re revamping their systems, they’re looking at the marketplace and market opportunities, whether it’s a style of cheese or a new yogurt line or in whey production. They aren’t just looking to sell it in New York City or Birmingham, Ala. They’re thinking, ‘Can I sell it in Korea? Can I sell it in China?’ 

ROBSON: You also have to consider that domestically, the demographic has changed to where a lot of consumers are from these other countries, so they’re making those products for consumers here. But that also opens up the door to exporting. One of the things the dairy industry and the food industry in general have learned is you cannot just make a product for the American market and decide, ‘I’m going to get into exports.’ You have to make the product that matches up with the market you’re exporting to. In Wisconsin, we’re doing a better job of that.

UMHOEFER: Sometimes, there are surprising outcomes. We’ve been trying to make these more robust, more interesting specialty cheeses over the last 20 years, but when you go into Asia, they’re looking for less robust, less interesting cheeses. They want a mild cheese. They want a blank cheese. They want lower salt. They want a cheese that will be an ingredient that will not overwhelm the food. So it’s a different market, and you have to listen to that market.

ROBSON: I was at a function a few months ago where Ben [Brancel] gave a presentation, and he talked about the difference between selling cheese to Korea and to China, because what they’re looking for in those two countries is totally different. Here, one of the things that we’ve got is the Center for Dairy Research at UW-Madison. They’re doing a great job working with our companies to develop cheeses that consumers want not only here but in other countries.

I get calls every week from somebody wanting to know what the Milk Marketing Board is doing about exports. I tell them that while exports are important, we still have a lot of opportunities to grow right here in the U.S. Sometimes I think of exporting to Dallas and not necessarily halfway around the world. 

We use the numbers that 90% of our milk goes into cheese, and 90% of that cheese is sold outside the state. One thing a lot of consumers don’t know is that while Wisconsin leads the nation in cheese production, we bring about 3 billion pounds of milk a year in from other states to meet our needs. So there are still huge opportunities for us to grow our dairy industry domestically.

(Continued)

 

State of the Dairy State

GLYNN PATRICK: Let’s look at the state of dairy and how it compares to a decade ago.

LEGREID: I’ve been with the Wisconsin Dairy Products Association since 1990, and I’ve seen quite a change in that time. In the mid-’90s, things were becoming rather dire. Gloom and doom was permeating way too many discussions, and it was almost as if, well, the last farmer in Wisconsin please turn out the lights, because West was where it was at. California was the sexy new [dairy] state.

Everyone was thinking about going there, whether you were a producer or a processor. You know what happened. A renaissance started taking place where some very progressive-minded producers decided that they were going to do something about it and tried to change the dairy industry. In conjunction with that, the Legislature in the early 2000s started passing tax credit breaks for the dairy industry, and it has really made a big difference.

This industry has grown. Whereas in the past, we were looking to California and being very envious of their situation, California has its own set of troubles now. They’re looking at our state as the state to mimic, and so it’s been a 180-degree turn over the last 20 years. It’s a group effort with all the various trade organizations, the associations, the Department of Ag, the Legislature, and constituents that are contacting their legislators.

HOLTERMAN: We have been good in Wisconsin at focusing on our psychographics about what we really think. That’s why we’ve had a lot of changes for the positive in the last 10 years, and the farmers have said, ‘We can do this. We’ll work around it. We know what our positives are. We’ll build on those. We’re not going to worry about the things we can’t change.’ We work with our associations that guide that.

SIPIORSKI: Take the Professional Dairy Producers Organization, the Dairy Business Association, and lenders around the state that opened up their purse strings and allowed expansion to occur, and dairy producers seeing what modern technology and free stalls and parlors have been able to do. All sizes work, but obviously that kind of technology has really brought the industry where it is today, and that’s going to continue to move forward.

MILLER: Another component of that is that Wisconsin has great diversity in terms of farm size. California tends to be large scale. When they think of Wisconsin, they think of small producers, but that’s not the reality. We’ve got great diversity in terms of size and focus, so there’s commercial dairy operations, there’s grazing, there’s organic, there’s breeding stock, and registered producers. It’s the infrastructure that we already have here that makes it really successful. 

GLYNN PATRICK: What’s happened with herd sizes in the past five years?

MILLER: They’ve increased.

GLYNN PATRICK: Why is that?

MILLER: Production costs have been rising faster than incomes for quite some time. When I started in the lending business, we had 45,000 dairy farms, and today, right around 11,000. What has happened is people have said, ‘The economics of this are getting more difficult, so I either need to get bigger or specialized.’ Many of those getting larger have been neighbors getting together or family members where the dad and three sons had four farms in the past, and now they have one. That allows them to specialize, to have a higher quality of life.

BRANCEL: It’s a lifestyle issue as well. For people that say they want to see the family out there with 50 cows, they are saying they want to see Mom and Dad not getting to a wedding. They don’t want them to have the opportunity to go on vacation. They want them to milk cows every day. They want them to be in the barn twice a day, and the rural community wants the same kind of attributes as the urban population. So, by brothers and sisters farming together, each can have time for family activities, for neighbors getting together.

LEGREID: One of the misnomers is when you see a larger farm, people who are maybe anti-agriculture like to label it as a big corporate farm. It’s usually families joined together. It’s a larger family farm or a joint operation, but it’s not a big corporate farm. There was a trend for decades where there were approximately three farms a day that were going out of business, so it’s not a new thing that’s been happening. 

GLYNN PATRICK: I had a conversation with [Fabulous Farm Babe] Pam Jahnke, and she said, ‘I’ve got five families right now who want somebody to come in and take over the farm.’ But we can’t find the next generation to run these family farms. What does the future look like for these farms? 

BRANCEL: We have young people in this state, probably more young people entering the dairy business than any other state. Some of them choose the style of grazing, and they believe that’s an approach that allows them to enter the farming community. Some will come in as herdsmen or herdswomen and work for others and accrue some value, and then go out and strike out on their own. Making the connection between those wanting to farm and those looking to retire is difficult because the retiring farmer wants to see it continue like it was and the new farm family is thinking about changes.

SIPIORSKI: I get two calls a week from people that want to transfer the farm to the next generation or somebody else, and now we’ve got a lot of zeros behind the numbers. So I always tell people, ‘You’ve got to start at age 55 with the transfer process. It’ll take you 10 years to get it.’ So that generation needs to understand it takes time, and the next generation coming in needs to be patient because it will take 10 years before they have a substantial amount of equity.

GLYNN PATRICK: If we have a reader that is your target person, and they want to take over a farm, what agency would they go to? Is there someone who could help match one with another?

SIPIORSKI: They should start with their lender because their lender will have contacts, and then there are financial consultants. Once they get all their financials together, they need to work with an attorney who understands agriculture, how the family farms work, and taxes so that you don’t send a big check to Washington, D.C. 

HOLTERMAN: We have internships through professional dairy producers. We do a little mentoring with young students going to ag colleges. There are ways to network, but you have to get out there. Then you can meet other producers and get networked in to find someone that thinks like you do. If you’re into genetics, then you want to look more at that. If you’re into the grazing, there are networks that you need to break into. The retiring generation, which I am now a part of, really needs to be looking for those people and let them have some sweat equity, try it out through an internship or other testing of the waters. If it’s working out, you can talk more details, but there are a lot of ways you can test the waters.

STEPHENSON: It’s probably also important to recognize that not every one of these farms is going to transition to another dairy operation. Many of them are simply going to not milk cows anymore, but this can be a transition to retirement for some of these producers that say, ‘I’m not going to milk cows now, but I am going to grow crops, and I will sell feed to my neighbor who wants to milk more cows.’ So we’re keeping the capacity of the dairy industry in the state, but we are specializing more.

GLYNN PATRICK: Wayne Corey, when he was with Independent Business, said we had dairy farms going out of business every day because of the cost of health insurance or the unavailability of health insurance. Is that still an issue? 

BREUNIG: It’s an issue, depending on the operation. On our farm, I work with my brother, and both of our wives work off the farm, and they have the health insurance. In more cases, one of the spouses works off the farm for health insurance, and the farm doesn’t have it.

GLYNN PATRICK: Will the exchange make a difference, where you will be able to buy insurance through a different vendor?

BREUNIG: Any of those things probably make a difference, but if you look at a 50-cow farm and health insurance for a family, that’s a pretty big number on your cost.

SIPIORSKI: $16,000 a year for a family. If you’re getting it through your business, that’s what it’s costing the business.

HOLTERMAN: You have to make a choice. Do I want it, or don’t I want it, or how do I go about it? I grew up without it. Now you don’t do that. But there are choices out there, so I don’t think it’s a driving force anymore pushing people out.

BRANCEL: It is a challenge, though, for small family farms that need to acquire the insurance. It used to be that Mom and Dad worked together on the farm, and it was a lifestyle. That lifestyle changed when Mom went to town and started working to obtain health insurance for the family. So now you have Dad farming alone, and in some cases, you say high risk. I think probably every job that you have, including guys running trucks down the highway on a daily basis, is a high risk, but it has changed lifestyles on the smaller farms.

GLYNN PATRICK: I’m wondering if it will change back if the exchange is there and that option is there, and it’s no longer as tied to an employer.

SIPIORSKI: We’ll find out in 2014. We don’t know. All the rules haven’t been written.

GLYNN PATRICK: I’ll ask the farmers in the room, when you’re planning your enterprise, because it’s not just a crop that you’re planning, you’re taking an overview of your farm. What are you considering as far as what you’re going to do in the next year, or your five-year plan?

HOLTERMAN: Everything. We have to do the day-to-day tasks. We just did strategic planning. We were talking about farm transitions yesterday and this morning. You have to juggle so many things. It’s all driven around taking care of the land. What choices are we making today that will help us take care of that land and take care of our animals? And we use the biological systems in taking care of that, using one to help the other. For us, we’re selling meat and milk, and we’re also selling genetics, so those things are what we sell off our farm, and of course we want to get a high return with minimal inputs.

SIPIORSKI: Think about the Midwest’s advantages. Normally 34 inches of rain, good land base, infrastructure, processing plants. What do we have, 211 processing plants in the state? I maintain that you cannot produce more gross or net income per acre than you can with a dairy cow. Now granted, it’s not like grain with a month in the spring and a month in the fall. It’s 365 days a year. So, yes, it’s a lifestyle. But if you enjoy that, and you understand the opportunities and the huge amount of capital investment, there’s profit to be made.

STEPHENSON: I would throw into that mix climate and not just the rain, but I mean the temperature. Our cows continue to be able to produce more and more milk. As they do that, they’re like a high-performing athlete. They give off a lot of body heat, and they can’t tolerate the hot and humid climates. We’re seeing milk and dairy just evaporate from the southeastern part of the country. Increasingly, we’ll see that out of the West and the South, as you’re just not able to take advantage of the potential of the animals.

GLYNN PATRICK: So those cows are not happier in California?

SIPIORSKI: Ever been to Georgia in July? Try to get a cow bred.

BREUNIG: Through organizations like the Professional Dairy Producers, farmers all have their own operations, but we don’t have trade secrets. I ask Daphne, ‘What’s working on your farm?’ Maybe she’ll ask what’s working on mine, and we work together to use sand bedding, build better-ventilated free stalls, build systems that allow the cow to produce more milk than she ever did, and do it healthier and easier and more sustainably. That’s one of the things that’s really helped the state.

(Continued)

 

Say cheese

GLYNN PATRICK: We’re going to move into cheese now. When I think of cheese, I think of farmers’ markets. I think of the artisan cheeses and the renaissance of that, but that’s not going to sustain a farm. How is this evolving, and how is this a cooperative effort among our farmers?

ROBSON: We’re seeing our cheese makers diversify the cheeses they’re making, and we’ve seen several farmstead operations start in the last few years. Each of them picked different cheeses or different markets that they want to be in. Specialty cheese now accounts for about 22% of our total production. Wisconsin has about a 25% share of the total cheese business in the U.S., but in specialty cheese, depending on which report you look at, anywhere between 49% to 52% of all specialty cheese in the U.S. comes from Wisconsin.

Consumers have started to look for more excitement in the cheese area. They want more varieties. They want different flavors, different types of cheeses. Our cheese makers have responded and with a lot of help from the Center for Dairy Research to develop these cheeses, and we’ve worked with them in marketing those cheeses. In that arena, you mentioned the happy cows from California, but our real competition in a lot of that specialty cheese business is Europe, not California.

Our cheese makers and marketers are doing a great job of opening up new markets, and farmers’ markets are becoming a growing piece of that business, so we’re well positioned to continue to grow. We do a lot of work, for example, in the pizza category. Twenty-five percent of all cheese in the U.S. is consumed on top of a pizza, and so we’ve got people that are still selling a lot of mozzarella. The pizza companies are discovering feta, bleu cheese, Asiago, all of these cheeses that bring more flavor and so forth to their products. So specialty cheese will be a bigger piece of our business.

LEGREID: One thing I’d like to point out is that specialty cheese gets a lot of the attention. It’s the sexy kid on the block, but you have to remember the economic backbone of the cheese industry would be the commodity cheeses. The companies that make the 640-pound blocks of cheese that go out to the retailers and to the pizza establishments, that’s what really keeps the cheese industry going, and sometimes we overlook that. With specialty cheese, that was a godsend for a number of dairy plants 15 or 20 years ago because not every dairy plant was set up to be successful in the commodity business. So by going to the specialty industry, it’s been a wonderful, wonderful opportunity for many cheese companies.

UMHOEFER: In the last four years, Wisconsin has had 25 plants that have made multimillion-dollar investments in cheese. And so we asked our members last month, why are you investing in Wisconsin when you have a choice? You’re putting millions of dollars into the Wisconsin cheese industry. We gave them 13 reasons, and it was interesting. The top reason wasn’t because we see long-term milk growth. That was number two. They believe the milk will be here. Number one was we see skilled cheese makers and an acceptance of dairy in the state. So it was actually the labor force. We’ve got generations of cheese makers that know what they’re doing. They don’t just push the green button to start the cheese machine and the red button to stop it. They understand cheese making, and they’ve understood it for 100 years. That’s what they don’t have out West, and that’s an advantage we have. We’re the brain trust of cheese making in the United States. 

HOLTERMAN: It’s an art we never lost here in the Midwest. We’re closer to our food, and it’s back to the basics, and we’re going to stick with that. We know it, we know it well, and let’s take advantage of it.

STEPHENSON: The other thing that’s important to recognize is the import of dairy products into the U.S. is well down from where it had been. We’ve been producing the kind and quality of product the consumer wants and is prepared to view as a good substitute for what we used to import.

ROBSON: We bring a lot of tour groups to Wisconsin, whether they are buyers for large retail chains or large food service operators and distributors. We also bring in a lot of food editors and food writers and bloggers. There’s a national blogging convention in a couple of weeks, and we’ll be there. One of the things that a lot of those people leave here with is, ‘Wow, I didn’t know that Wisconsin had all of these great, unique cheeses. I thought they only came from Europe.’ That’s why you’re seeing continued growth with our cheeses. 

It was mentioned that one strength of the dairy industry is collaboration between farmers. We see a lot of that with our cheese makers. John’s organization just had their annual cheese technology conference, and there was much discussion between cheese makers about, ‘I was having this problem, and here’s how I’ve solved it.’ They bounce ideas off of one another, and while we have some that are fierce competitors, they all are doing things to advance the industry.

BRANCEL: One of the things you have not brought up but is very important is the dairy industry is very complex and very complete in Wisconsin. Complete is a good word because it has the farmer that’s producing the raw material. It has the processing industry that’s creating a value added. It has education support, whether it’s through internships or direct education opportunities. It has the Master Cheese Crafters Program. No other state has that, which leads back to the comments about the expertise in the production world. It has the lending institutions. The dairy farmers themselves fund a lot of this, and they’re never given credit for it. Every time they produce 100 pounds of milk, they offer a dime to the industry for reinvestment. That dime creates the research opportunities, it creates the advertising, and it creates a whole venue of facets of this industry.

SIPIORSKI: Let me give an example of what Ben is talking about. I helped a 500-cow dairy do a dairy breakfast. We wanted to recognize all the businesses that they write checks for every month. It was 40 different businesses. Now you tell me about economic activity with that. 

(Continued)

 

Got raw milk?

GLYNN PATRICK: I’d like to go around the table and have everyone tell our readers something that you want them to know. It can be a challenge. It can be an opportunity. It can be whatever.

LEGREID: Dairy is the lifeblood of Wisconsin’s economy. Every farm, when you look at what they fund for the communities, the money that goes in and the economic power that comes out of it, it’s mind-boggling. 

You mentioned challenges that we have. One would be for processors with environmental regulations they’re being burdened with. The DNR, just a couple years ago, passed a new one for discharges, and some of our member companies are spending over a couple million dollars in order to comply with these new regulations. So environmental regulations, some of them do not make economic sense. 

The other thing I’ll mention is raw milk. There’s been a big push for fluid raw milk, to get that passed. There’s a national organization that has been pushing it now for the last couple years. They would love to get Wisconsin to pass it because if America’s Dairyland embraces it, they think the other states will fall into place. It’s been seven years since they came up in the Capitol. Myself and two people from the Center for Dairy Research were the only ones there. It was not a big issue, but now it has become a big issue. Our two main concerns are that people who do not have a say-so whether they ingest it or not — children, the elderly — have a real risk factor of ingesting bacteria that could be very harmful to them. The second thing is you hear people saying that they’ve been consuming raw milk their whole life. The problem is that when the people come in from the city, they put it in their container, whether it’s sanitary or not. They take it home. You don’t know if it’s been an hour, two-hour drive. It may sit in their refrigerator for days. That’s when bacteria can grow, and people have gotten violently sick. Almost every week, you can find another state where there’s a new instance of illness from raw milk. So we’ll be very vigilant on that, and hopefully nothing will pass again in this legislative session.

HOLTERMAN: Challenges for our farm will be increasing regulations, specifically related to the environment. There will be lots of those, and we have to figure out how to cash-flow them. 

Some opportunities are that we’re always looking for good personnel in all facets of dairying, and we need to train them. We need to keep them on our farm and keep them educated, because the cost of retraining new people is a lot higher. Part of that is going to be business education. You might be able to do great things with cows and crops, but if you can’t run your business and set a strategy and get that margin planned for, it won’t be long before you’re somewhere else.

A challenge that we face, and it’s a positive thing as well, is being open to consumers and listening to them about what they want in their products, and giving it to them. We can go to the grocery store now and have 50-some choices of yogurt and other kinds of dairy products, and that’s great. We never had that 10 or 20 years ago. There can be a lot more opportunity in packaging and adding minerals and vitamins, all kinds of things that will allow the dairy industry to grow.

SIPIORSKI: Five points. Number one, understand the opportunities domestically and worldwide globally. Understanding that it’s not going to be handed to producers on a silver platter. You still have to compete worldwide for that. 

Number two, make sure each year you’re 5% better than you were the year before, with 5% less metabolic problems so you don’t have problems with those cows, 5% better job on your forages, which is a huge cost today. Everything you do, just do it 5% better. That isn’t much, but 5% on 21,000 pounds of milk is an extra 1,000 pounds of milk.

Point number three, always be thinking and planning and keeping yourself educated, and your staff around you, because that’s the way you’re going to progress in this industry. 

Point four, think about your legacy, the next generation. Do you really have a dairy that, not only your family but maybe the next generation someplace else, is so profitable that somebody will want to buy it and continue it?

Last, think about the future and the positive things with the industry we have. I was just in New York. Pepsi just built a new yogurt plant that I’m guessing is going to take in 10 million pounds a day. Idaho just brought a new plant, 10 million pounds a day. Where’s that milk going to come from? Yes, we’re losing some of the fluid market, but there are so many things for the future in the healthy products we have.

BRANCEL: Anytime you get big, you get visible, and the dairy industry in Wisconsin is huge, and so it’s very visible. I’m not sure the visibility always translates to understanding. I will tell you that the dairy industry itself understands that when it’s big, it has obligations. It spends an enormous amount of time trying to figure out how to meet those obligations and challenges.

The interesting thing is our science has trouble keeping up with perception. I learned years ago that in Europe, they put environmental rules and regulations in place on the farmers, and when their science finally caught up, they found out they spent millions and millions of dollars for little return on investment. Our science has to solve some of the problems before we mandate solutions that give us little return.

UMHOEFER: Our state has been on a trajectory that for decades was just kind of organic growth for our dairy industry, and now it’s really taken off. That does put us in the spotlight, and the Milk Marketing Board has tried to teach Wisconsin about the economic impact of the dairy industry. There’s an obligation with that because we’re a $26 billion industry. People still think of the industry one way, but it’s changed, and we need to get people on the farms as much as possible. We need to get people into the cheese factories because it’s changed, and they need to understand that it’s a business.

The obligation is to be good stewards because you can’t change willy-nilly, and you can’t change without thinking about your impact on the air and the water. As we look at environmental regulations, you have to embrace them as you look at their economic impact, because we’re going to be around a long time.

BREUNIG: I have three points. Number one, is push back from local communities. In my community, we want to put a 24,000 limit on the road. You know what 24,000 pounds is? It’s an empty truck. And they want to make all of the township roads Class B. It’s like going back to the typewriter and small, square bales. The group of people that live in their little square of the world don’t want to be disrupted. They don’t want me to run my business because it’s going to disrupt their business. That’s a really big deal that’s only starting to come to a head in this state. 

Number two, the technology is really interesting. I was just doing some math, and we’ve increased milk production on our farm 35% in the last seven years with the same number of cows. It’s not because our cows are overmilking; we figured out their potential and how to unlock it. There are technologies for cooling, for stall size, for all these different things where we’re only scratching the surface.

The last thing is that I challenge my cooperative. I sell mine to a cooperative, and they’re not forward-thinking enough because they were bragging to me that they’re involved with CWT [Cooperatives Working Together], and they’re selling cheese with that subsidy. I said, ‘Are you making the right cheese? Are you making a product that we don’t want?’ They’ve never thought that way, and one product that we need in this country is a drinkable yogurt that is economical and easy to grab.

MILLER: Risk management is a big area, and there are a lot of risks. We talked about the environmental risk. Labor is another one. What happens with immigration reform is a big risk. If there’s no labor force, the banker gets a little nervous.

Price risk management is the big boy in the room. Wisconsin producers and processors are further ahead than anybody else in the country in the adoption and use of price risk management tools. Last year alone, there was a 50% swing in the price of milk. It takes an iron gut to be able to manage that, and that’s just on the milk price side of things. You still have the same volatility on the feed price side of things, and petroleum.

Succession is another one of those risks, and there’s no doubt we’ve beat that horse quite a bit.

So there’s a bunch of risks that producers and processors alike are facing, and there are tools out there. The lending community will be interested in investing in businesses that have stable earnings. We don’t have real stable earnings in the dairy business, but the producers that adopt those [tools] have better access to capital.

(Continued)

 

Wheys and Means

James Robson has been saying for years that Wisconsin residents who have not been on a dairy farm, or have never milked a cow or been involved in cheese making, are still in the dairy industry.

“No matter what your job is, no matter what you do in Wisconsin, you are affected by the dairy industry,” reasons Robson, CEO of the Wisconsin Milk Marketing Board.

Sometimes, even if residents have lived in Wisconsin all their lives, they cling to certain stereotypes about what a dairy operation is
all about. Robson believes such stereotypes can be dispelled by a simple visit to a Wisconsin dairy farm or a food-processing or cheese plant, many of which offer tours.

In its own unique way, the Milk Marketing Board promotes both tourism and dairy enlightenment by publishing a free, updated map that serves as a tourist guide to the Wisconsin dairy industry. On that map are farms, cheese stores, and plants, many of which invite you to visit.

“Our tourist map is highly popular,” Robson notes. “I’d be happy to furnish consumers with any information they need either about visiting a plant or a farm, or where to buy products.”

Consumers here and elsewhere also can go to the Milk Marketing Board’s website, EatWisconsinCheese.com, and find everything they need to know about Wisconsin dairy, which is promoted in all 50 states. After all, when the state makes more than 600 varieties of cheese, including a growing number of artisan cheeses, there is a lot to talk about.

Perhaps this is preaching to the choir, but just in case anyone found those happy California cow advertisements to be even remotely convincing, Robson encourages you to come back down to earth and “buy Wisconsin,” especially after looking for the state identification on yogurt, cheese, butter, or milk.

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