Dairy co-ops’ milk volume up, but market share down slightly

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U.S. dairy cooperative members marketed more than 160 billion lbs. of milk in 2012, maintaining a dominant, but slightly lower market share for co-ops during the five-year period between 2007 and 2012.

This and other findings are the results of a survey of all dairy cooperatives conducted by the Cooperative Programs of USDA Rural Development. The survey is done every five years, with the most recent questionnaire collecting information on the milk-marketing operations of dairy cooperatives for fiscal 2012.

The 161.2 billion lbs. of milk that dairy co-op member-producers marketed in 2012 was 5.7% more than in 2007 (see Table 1). This volume represented 80.9% of the total milk marketed by farmers nationally, a decrease in market share from 82.6% recorded five years earlier.

Table 1. Share of milk marketed by members of dairy
cooperatives, 2007 and 2012


2007 2012
Share of cooperative volume Percent Percent
4 largest cooperatives 49.2 47.8
8 largest cooperatives 62.3 61.5
20 largest cooperatives 83.7 84.5
All dairy cooperatives 100 100



Share of total U.S. volume Percent Percent
4 largest cooperatives 40.7 38.7
8 largest cooperatives 51.6 49.8
20 largest cooperatives 69.1 68.3
All dairy cooperatives 82.6 80.9

Including milk received from non-members and non-cooperative firms, total milk handled by cooperatives was 167.7 billion lbs., or 84.1% of milk marketed nationally — a fraction (0.3 point) lower than in 2007.

Three billion pounds of the milk volume was organic milk, marketed by 24 cooperatives.

The number of dairy cooperatives during this period decreased from 155 to 132. There were 47 cooperatives that operated milk plants or receiving facilities, 10 fewer than in 2007. The other 85 co-ops had no milk-handling facilities; most of these co-ops performed bargaining functions and a few others were “check-off” co-ops that provided milk testing and other services.

 

2012 dairy co-ops, by region, with number of member producers,

annual member milk and annual milk per producer-member

Western

16 co-ops

2,480 producers

59.4 billion lbs. member milk

23.9 million lbs. per producer

 

West North Central

42 co-ops

8,165 producers

20.2 billion lbs. member milk

2.5 million lbs. per producer

 

East North Central

47 co-ops

17,323 producers

42.9 billion lbs. member milk

2.5 million lbs. per producer

 

North Atlantic

53 co-ops

10,693 producers

22.1 billion lbs. member milk

2.1 million lbs. per producer

 

South Atlantic

13 co-ops

1,709 producers

7.4 billion lbs.  member milk

4.3 million lbs. per producer

 

South Central

12 co-ops

1,629 producers

9.3 billion lbs. member milk

5.7 million lbs. per producer

 

 

Fewer farms, more milk

The 2012 survey shows that there has been no slowing of the trend toward fewer farmers producing more milk.

In 2012, there were 41,999 co-op member-producers who marketed milk in the United States, 15% (7,676) fewer than five years earlier. The greatest declines were in the East North Central region (2,932 fewer member-producers), followed by West North Central region (1,995 fewer) and North Atlantic region (1,385 fewer).

The two North Central regions and the North Atlantic region together accounted for 86% of all member‐producers, but had only 53% of cooperative milk volume. The South Central region had the fewest cooperative producers, being home to 1,629 members — a decline of 30% from 2007.

With the exception of the South Central, milk volume marketed by cooperative members in all regions was greater than five years earlier. The largest increase, up 5.2 billion lbs., was in the East North Central region, followed by the North Atlantic (1.7 billion lbs. increase) and the Western region (1.3 billion lbs. increase). The Western region remained the top source of cooperative milk, even though the pace of expansion there slowed down. Cooperatives in this region marketed 59.4 billion lbs. of member milk — 37% of total cooperative milk, compared to 38% five years ago.

The East North Central region accounted for 27% of total cooperative milk, an increase of two points from 2007. The North Atlantic and West North Central regions, respectively, supplied 14 and 13% of the milk marketed by cooperative members.

Milk deliveries per member-producer were up in all regions during the five-year period. Nationally, it increased 25%, from 3.07 million lbs. to 3.84 million lbs.. Per-member delivery was highest in the Western region, at 23.93 million lbs.. Percentage-wise, this is a 13% increase from 2007. Increases in other regions ranged from 22% to 35%.

There were three regions in which cooperative regional share of milk decreased: South Central, Western and South Atlantic. The declines, respectively, were from 83% to 71%, from 76% to 72%, and from 94% to 92%.

 

Slightly less dominant share of milk

As in 2007, four cooperatives each handled more than 6 billion lbs. of member milk in 2012. These four co-ops accounted for 47.8% of cooperative milk volume in 2012, 1.4 points lower share than reported for 2007 (see Table 2).

Table 2. Number of dairy co-ops, by annual milk volume, 2007 & 2012

Cooperatives Cooperatives

(Number) (Number)
Cooperative milk volume 2007 2012
More than 6 billion lbs. 4 4
3 to 6 billon lbs. 8 10
2 to 3 billon lbs. 5 3
1 to 2 billion lbs. 11 9
0.5 to 1 billion lbs. 8 11
100 to 500 million lbs. 32 27
Less than 100 million lbs. 87 68
Total 155 132
 
     
     
 
 
 
 
 
 

The number of cooperatives in the next size group (3 billion to 6 billion lbs. of milk) increased by two, to 10 co-ops, in 2012. The milk volume of this group accounted for 28.3% of all cooperative milk, an increase of 5.4 points from 2007. This was the size group that showed the most significant increase in the share of total cooperative milk volume. Together, the 14 cooperatives that were in these two top-sized groups (each cooperative marketed at least 3 billion lbs.) had a 76.1% share of cooperative milk.

 

Table 3. Member milk marketed by dairy
cooperatives, by milk volume, 2007-2012

Member milk Member milk

(Million lbs.) (Million lbs.)
Cooperative milk volume 2007 2012
More than 6 billion lbs. 75,075 77,090
3 to 6 billon lbs. 34,899 45,609
2 to 3 billon lbs. 12,504 8,193
1 to 2 billion lbs. 15,439 14,098
0.5 to 1 billion lbs. 5,176 8,053
100 to 500 million lbs. 6,740 5,770
Less than 100 million lbs. 2,681 2,410
Total 152,514 161,222

The only other size group that showed an increase in cooperative number (see Table 2), milk volume (see Table 3), and share of cooperative milk (see Table 4) was the 0.5-billion-to-1-billion-pound group. This group had 11 cooperatives in 2012, three more than in 2007, and the group’s share of cooperative milk had a 1.6% increase. The remaining size groups all had fewer cooperatives and lower share of cooperative milk than five years ago.

 

Table 4. Share of  co-op milk marketed by dairy
cooperatives, by milk volume, 2007-2012

Percent Percent
Cooperative milk volume 2007 2012
More than 6 billion lbs. 49.2 47.8
3 to 6 billon lbs. 22.9 28.3
2 to 3 billon lbs. 8.2 5.1
1 to 2 billion lbs. 10.1 8.7
0.5 to 1 billion lbs. 3.4 5.0
100 to 500 million lbs. 4.4 3.6
Less than 100 million lbs. 1.8 1.5
Total 100 100

In terms of milk volume, the relative position of dairy cooperatives to the rest of the industry, though still dominant, was a little bit less. The largest four dairy cooperatives had a two-point lower share of the nation’s total milk supply, moving down from 40.7% in 2007 to 38.7% in 2012. Broadening the focus to the largest eight and the largest 20 dairy cooperatives, both groups also saw slightly lower shares of the nation’s milk.

 

Co-op share of dairy products

Volumes of butter and nonfat and skim milk powders increased significantly from 2007 to 2012. Cooperative share of butter, at 1,396 million lbs. (a 28% increase over five years), was 75% of U.S. production, and co-op share of nonfat and skim milk powders, at 1,967 million lbs. (a 36% increase), was 91%.

Cooperatives more than doubled dry whole milk production and increased dry buttermilk by more than 80% in five years. They marketed 68% of the nation’s dry whole milk, up from 51% in 2007. Their share of dry buttermilk was 89%, increasing from 65% in 2007.

However, cheese made by cooperatives decreased by 5% from five years earlier, to 2,386 million lbs., which accounted for 22% (vs. 26% in 2007) of U.S. cheese production. American cheese made by cooperatives was down 11% from 2007, while U.S. production increased 12%, resulting in a lower cooperative share, 35% vs. 44% in 2007. During the same five years, cooperative Italian cheese marketing decreased by 1%, and cooperative share of U.S. total Italian cheese dipped two points, to 16%.

Cooperative production of dry whey products increased 10%, and their share of national production increased slightly from 42% to 43% in 2012.

 

Plant operations and employees

Dairy cooperatives owned and operated 184 plants, 13 of them for receiving and shipping milk only, 32 for manufacturing American cheese, 17 for making Italian cheese, 49 for packaging fluid milk products, 24 for churning butter, 35 for drying milk products and 24 for drying whey products. Many other plants made various other dairy products or dairy-related products. (A plant may perform more than one function.)

A total of 53 dairy cooperatives reported having 22,969 full-time and 804 part-time employees in 2012. These cooperatives marketed 121 billion lbs. of member milk, or 75% of cooperative milk.

Six other cooperatives had only part-time employees. Together, these bargaining cooperatives reported having 12 part-time employees. Twenty-one cooperatives reported having no employees (though some out-sourced work to other firms).

In total, these 80 cooperatives represented 61% of all dairy cooperatives and marketed 79% of cooperative milk.

 

Dairy co-op financial performance

Complete financial data for fiscal 2012 submitted by 89 dairy cooperatives to USDA show that:

• Total assets for fiscal 2012 were $13.9 billion ($10.90/cwt.);

• Total liabilities were $10.4 billion ($8.12/cwt);

• Total equity was $3.6 billion ($2.78/cwt.), with 84% of the equity allocated to members.

• Net margin before taxes was $285 million (22¢/cwt), a return on equity of 8%.

• Together, these 89 cooperatives (67% of dairy cooperatives) marketed 79% of total cooperative member milk volume.

Editor’s note: This article from the March/April Rural Cooperatives magazine, published by the USDA Rural Development, includes highlights from a report, “Marketing Operations of Dairy Cooperatives, 2012,” USDA Cooperative Programs Research Report 230. The full report is posted on the USDA website at: http:// www.rurdev.usda.gov/BCP_Coop_LibraryOfPubs.htm.



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