Answer: There are several reasons dairy farms are going out of business: lower milk prices, oversupply, lack of markets, less consumption and diminishing exports.
In 2014 we had record milk prices of over $25 per hundredweight. Dairy farmers get paid by the hundredweight which is 100 pounds of milk or just less than 12 gallons. Today, like many of the other farm commodities, we are in a down cycle. Base milk prices are around $13 to $15 per hundredweight, or below breakeven.
When prices were up, the dairy industry expanded and increased production. This involved more cows being milked and dairy cows continued to improve and produce more milk. Thus, we now have a surplus of milk.
In the spring of 2017 Canada created a low-price classification for milk, Class 7, to compete directly with a milk solids product entering Canada from the United States. Canada has a quota system that keeps most U.S. dairy products, except for this particular type of dairy product, from entering Canada. Due to the extremely low Class 7 price, U.S. exports to Canada ended. About 70 dairy farmers in Wisconsin, and additional dairy farmers in Minnesota, were forced to find a different market for their milk since it could no longer be used by the Wisconsin plant they had been shipping to. Plants in New York and Idaho also lost dairy sales to Canada due to Class 7 and this milk was displaced causing more surplus of milk.
Another reason for the decline in dairy farms is due to less milk consumption. Consumers are eating away from home more which decreases the consumption of fluid milk. With fluid milk decreasing, many bottling plants were becoming inefficient; some companies were starting to close plants.
One large grocery chain store (Walmart) decided to bottle its own milk. So they built a very large bottling plant in Indiana located where there’s a huge surplus of milk nearby in Michigan. This caused the supplier (Dean’s) to close more bottling plants. So many dairy farms that were smaller or logistically located too far from a plant we’re no longer able to have their milk picked up.
To eliminate some of the excess surplus of milk within dairy cooperatives (co-ops), many co-ops implemented a no expansion or base plans and most co-ops closed new memberships. So, new dairy farms or dairy farms which were let go could not find a home for their milk.
On another front, exports had been increasing to as much as 17% of the U.S. milk supply. Milk exports recently decreased based on trade tariffs and uncertainty of supply. One of our best customers is Mexico so losing this export market would have a huge impact on dairy farms.
The number of dairy farms in the U.S. has declined by 20 percent from five years ago. Wisconsin lost 500 dairy farms in 2017 and about 150 this year. Illinois has lost 50 dairy farms in the last three years. Here in DeKalb County we have eight dairy farms.
The bottom line is we currently have a huge surplus of milk!
My Dairy Farm – I feel fortunate that I currently have a consistent market for my cow’s milk. Milk from my dairy farm is purchased by the Midwest Dairymen’s Co-op. It goes to a bottling plant in Rockford called Mueller Pinehurst. Mueller Pinehurst supplies most of the school milk in the DeKalb/Sycamore area as well as some grocery stores such as Hy-Vee and Target. Locally you may be buying milk which comes from the Deutsch Dairy Farm.
The other aspect of running a dairy farm goes beyond economics. It’s a way of life. Like other dairy farmers my heart and soul goes into caring for my cows. So when I see other farmers having to sell their cows I know it’s tough for them and their families.