Will Dairy Base Plans Be Triggered This Spring?

With milk production up in New York, Michigan, Wisconsin and Minnesota and processing plants nearing capacity, it begs the question whether dairy co-ops will have to activate base plans to slow milk production.

It’s a real possibility, says the University of Wisconsin’s Bob Cropp. “I haven’t heard of any new big plant capacity coming on out there,” he says. 

Plants in New York and Michigan were brimming to overflow last spring, and some had to dump milk after they skimmed off solids. This year, even though we’re not yet through the first quarter, production is up.

Even discounting for leap year, February milk production in New York is up 4.6%, Michigan is up 7.7%, Wisconsin is up 5.1% and Minnesota is up 1.4%. Cow numbers are also up in three of these four states. New York is up 4,000 head; Michigan is up 11,000, and Wisconsin is up 5,000. Cow numbers in Minnesota are unchanged.

At the same time, milk/feed margins are tight, particularly in New York. Because of the large milk supply, dairy processors there are not paying premiums to attract milk and basis is much lower than in the Midwest. “That hurts,” says Mark Stephenson, a dairy economist with the University of Wisconsin.

“Bankers out there tell me there are a few farms that are in bad enough shape that they likely will not be get operating loans,” he says. “That’s not widespread, but if you’re talking about that at all going into spring planting season, if you’re working capital isn’t adequate, that’s tough.”

For more on the Cropp/Stephenson dairy outlook, click here.