Two Ways to Reduce Hauling Costs

Milk tankers sitting outside the dairy barns. ( Mike Roemer )

Hauling costs throughout the country continue to increase. In fact, the upper Midwest Federal Milk Marketing Order found the average cost to haul a cwt of milk in Wisconsin was 24¢ in 2018, 40% higher than 2017. Hauling costs typically increase a few cents per year. The recent jump in hauling costs is due to an oversupply of milk, according to Corey Freije, a dairy economist with the Upper Midwest Order.

“[This] is partially a result of an increase in diesel fuel costs,” Freije says. “But it also seems to be an indication that dairy farmers, with the supply that’s out there, have kind of lost their market power.”

It’s not just in the upper Midwest that costs are increasing. According to Ohio veterinarian Mel Wenger, hauling costs are the largest deduction that his dairy producer clients see on their monthly milk checks. “This varies based on the hauler’s agreement with the processor and the dairy producer,” he says. “In my own practice hauling costs vary 50¢ among producers.”

Two Options to Reduce Hauling Costs:

1. Buy a bigger bulk tank. The biggest factor influencing hauling costs is distance from the plant. Herd size and milk volume also influence producer costs. “Hauling charges are higher for small farms given the increased number of stops in order to fill out a load,” Freije says.

Many cooperatives charge a stop fee, which can be reduced by a larger bulk tank. For example, if you can put in a tank that allows the milk truck to come once a day instead of twice, you’ve cut your stop fees in half. The same can be true for switching from bulk tanks to a direct load system. Direct load shipping has become increasingly more popular over the past 10 years. The Gerrits family in Wisconsin has been using direct load tankers for nearly 10 years.

2. Consider hauling your own milk.There are several factors producers should consider before deciding that becoming a milk hauler is a business expansion they should take on. Consider this option carefully, because it’s not for everyone. It can be tempting to only consider the cost of the tanker, but according to Matt Lange with Compeer Financial, there are operating costs to consider too. “It’s not just the cost of the tanker and truck, that’s actually the cheap part,” Lange says. “Dairies want to run the numbers on buying a truck and trailer, which is great, but we need to look at it not so much from a capital investment standpoint, but from an operating standpoint, so they need to figure out labor costs and then what do you do with the labor.”

The other pieces to consider include staffing, insurance and logistics. “If the producer’s milk is going to multiple plants and not just from point A to point B, it certainly could add to the cost and routes could change,” he explains. “In some cases, because existing haulers have multiple routes and are picking up at various locations, their hauling costs will be lower than a specific dairy. For some producers, hauling their own milk will not be cost effective.”

 
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