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Churning market conditions for dairy industry have Wisconsin lawmakers in search of answers

by Carolyn Orr ~ June/July 2017 ~ Stateline Midwest »
When a cross-border dispute over dairy policy and trade spilled onto the front pages of major national newspapers earlier this year, it didn’t mark the beginning of problems for big milk-producing states such as Wisconsin. The loss of Canadian business was instead more of a wake-up call to farmers, legislators and others concerned about the dairy industry’s future. Market conditions in this agricultural sector have changed considerably in recent years, and adjusting to them is a challenge for producers and policymakers alike.
Thanks to improved technology and genetics, milk output per cow continues to rise, and farmers have been adding cows to their herds. Overall, the 11-state Midwest region made close to 75 billion pounds of milk in 2016, up more than 16 percent from 2011.
But over this same period, Americans have been drinking less milk: For the past six years, fluid consumption has dropped and is expected to again in 2017. Producers have thus become more reliant on selling their milk-based products to the rest of the world: In 2016, 14.2 percent of the nation’s dairy products were exported, compared to 4.7 percent in 2000.
However, the current strength of the U.S. dollar is hurting the competitiveness of all agriculture exports. Markets in Asia are buying cheese from the European Union instead of the United States, and exports to Mexico (consistently the leading buyer of U.S. dairy products) have declined as well.
In addition, Russia, China and other importers have reduced dairy purchases over the last few years due to domestic troubles, and beginning in 2015, the European Union removed production quotas and greatly increased its milk production. In contrast to consumer trends in milk, butter consumption has increased. Making more butter, in turn, results in more surplus milk protein concentrate, and U.S. dairy producers have had a brisk business selling this product to Canada.
Recent changes in Canada’s pricing structure, however, reduced purchases from the United States. This caused a Wisconsin processor to give 30 days’ notice that it would drop its contracts with 58 dairy farms. Thankfully, Sen. Sheila Harsdorf says, nearly all of the affected farmers have since found alternative buyers.
But changing market conditions have Wisconsin legislators thinking about the future of an industry that is an major economic driver in many parts of their state.
In April, a bipartisan group of 24 Wisconsin state legislators wrote a letter to University of Wisconsin System President Ray Cross requesting that more research dollars go to finding alternative uses for milk.
“There is no doubt that ethanol greatly improved opportunities for Iowa corn farmers and the state of Iowa as a whole; we believe the same potential exits for a new product or market to change the dairy industry in Wisconsin and beyond,” the legislators wrote.
State legislators also collaborated with the University of Wisconsin on plans for a Dairy Summit held in June.
“As production continues to increase in the U.S.,” Harsdorf says, “identifying circumstances that impact our markets both domestically and globally is important if we are going to grow our exports and consumption at home and abroad.”