Wisconsin's Future: Growth

Signs Pointing to Continued Rejuvenation

Volume 133, No. 40 Friday,April 3, 2009

A new government survey of Wisconsin dairy manufacturers indicates plans for growth despite an unsteady economy, found a strong interest in production of renewable energy and identified a familiar choice as the “factor most likely to limit profitability.”

The survey data, gathered in January (a low point for dairy profitability), is surprisingly upbeat. Dairy processors in Wisconsin plan to invest $780 million in cheese plants, whey plants and other dairy product ventures in the next five years.

That investment is on top of $1.24 billion that plants identified as spent in the previous five years. Sixty-eight percent of Wisconsin dairy plant owners returned the survey.

Six months ago, when a global economic meltdown was a distant blip on the radar, Wisconsin was wringing its hands over a booming milk supply. “Our cheese plants are once again running near full capacity and they need access to dollars to expand and invest in product and market development,” Bill Bruins, president of the Wisconsin Farm Bureau Federation, wrote in a media editorial.

Dairy Business Association invited members of the Wisconsin dairy processing community to an open discussion of milk and dairy plant growth in October, and a press release from the dairy producer group quoted this columnist as concluding: “Wisconsin cheese manufacturers have the markets and resources to accept a growing milk supply. Wisconsin manufacturers are continuously improving facilities to maintain Wisconsin as the quality standard in the US.”

The January survey, conducted by the Wisconsin Agricultural Statistics Service (WASS), backs this prognostication with dollar figures. In the past five years, Wisconsin’s natural cheese plants spent two-thirds of the stated $1.24 billion in total spending, or $802 million, on improvements: mostly buildings, processing equipment and packaging machines.

Whey processing accounted for $126 million in investment during the past five years and a strong $314 million was spent to improve plants making other dairy products (fluid milk, yogurt, ice cream).

In the past five years, small cheese plants (under 5 million pounds of cheese production) reported investments equal to larger plants. But that pattern may change in the next five years. In 2009 to 2013, larger cheese plants reported plans to spend $345 million and small plants $47 million.

Future plans for whey processing include expenditures of $93 million in Wisconsin, and makers of dairy products other than cheese and whey predict they will spend $296 million on their facilities.

Wisconsin’s ability to process milk has grown mainly through expansion of existing facilities, rather than new green-field plants. Nineteen cheese factories have opened in Wisconsin since 2000, balanced by 23 (often smaller) plants that have closed.

At the same time, Wisconsin has seen existing facilities grow. America’s Dairyland hosted 12 cheese factories with intake greater than 1 million pounds of milk per day in 2000. That figure, by Wisconsin Cheese Makers Association calculation, has more than doubled to 27 plants.

The WASS survey asked cheese manufacturers a single marketing question, finding that 65 percent of cheese respondents intend to develop new products in the next five years. Brand building and adding value to existing products tied as second-highest priorities.

Wisconsin’s dairy manufacturers are aggressively addressing energy issues. Nearly half (49 percent) have had an energy audit or worked with Wisconsin’s statewide Focus on Energy program.

Fifty-four percent of plants plan on investing in equipment to decrease energy usage and plants plan to spend $62 million on renewable energy processes. Specifically, 55 percent of Wisconsin’s dairy plants expressed interest in technology to produce renewable energy from whey permeate and dairy plant wastewater.

The Wisconsin Cheese Industry Conference in La Crosse April 22-23 devotes a morning seminar to vendors, costs and grants available for producing methane gas from dairy plant whey permeate and waste streams.

Finally, the WASS survey asked dairy manufacturers to identify up to three factors that would limit future growth. The answers are illuminating. Concerns popular a decade ago - inadequate milk supply, lack available labor and concern for adequate land - barely registered among respondents.

The number one limiting factor identified by processors was waste treatment regulation. Close behind, processors identified health insurance costs, energy costs and available financing. And a sign of the times: insufficient returns from whey were commonly cited as dampening future profitability.

Interestingly, the promise of processing waste and permeate streams into energy for use by dairy plants can have the dual effect of reducing waste disposal issues and lowering energy costs - two key concerns identified by plants.

With state and federal agencies gearing up to promote and incent renewable energy projects, the time may be ripe for green cheese factories. r

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 828-4550; Fax him at (608) 828-4551; or e-mail John Umhoefer at jumhoefer@wischeesemakersassn. org


Other John Umhoefer Columns

Keeping Sustainability Real
Nose Dive
Dairy Dives into 2009
Consider This...
 Fulls Vats
Implement Make Allowances ASAP
Security Reforms
Spring Forward
A Week of Clarity
The California Whey

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