Dick Groves
Editor, Cheese Reporter

 

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Is California The New Wisconsin?

David Ahlem, president and CEO of Hilmar Cheese Company, made some mighty interesting observations about California’s dairy industry during his opening address at the International Cheese Technology Expo in Milwaukee, WI, last week (for more details, please see the lead story in last week’s issue).

“California still is going to be a large milk producer going forward but the days of significant growth are over,” Ahlem remarked.

While looking over some statistics to put Ahlem’s comments in perspective, something struck us as vaguely familiar. California’s milk production reached 40.7 billion pounds back in 2007, eventually rose to a record high of 42.3 billion pounds in 2014, but fell to 40.9 billion pounds last year, its lowest level since 2010 and just slightly above 2007.

This pattern, or something like it, has indeed been seen before in the dairy industry. It was Wisconsin’s experience for more than two decades.

It should be noted that Wisconsin’s milk production expansion was largely a case of “slow and not all that steady” for several decades. The state’s milk output first topped 15 billion pounds back in 1947, then finally reached 20 billion pounds in 1976, or almost 30 years later. During that period, the state’s milk production actually declined roughly 10 times.

The next 5 billion pounds of milk production came a lot faster for Wisconsin; the state’s milk output reached 25 billion pounds in 1988, or just 12 years after it first reached 20 billion pounds.

And over that period, Wisconsin’s milk production declined just twice: in 1984 and then again in 1986. It may be recalled that two different government programs were operating during those years in an effort to reduce milk production: the milk diversion program (which operated during all of 1984 and into early 1985) paid dairy farmers who reduced marketings by a percentage of a historical base; and the whole-herd buyout program (which was in operation from April of 1986 through September of 1987), under which entire dairy herds were bought and retired.

After reaching a record 25 billion pounds in 1988, Wisconsin’s milk production went into a 21-year funk. It was actually under 23 billion pounds for six consecutive years (1993-98), and twice early in this century came within 100 million pounds of dropping under 22 billion pounds (in 2002, when it totaled 22.074 billion pounds, and again in 2004, when it totaled 22.085 billion pounds).

But then a funny thing happened: Wisconsin’s milk production started to rebound. Indeed, 2004 more or less represented “rock bottom,” and the state’s milk production has increased every year since then.

In 2009, it finally broke the 1988 record, reaching 25.239 billion pounds, and last year, Wisconsin’s milk production topped 29 billion pounds for the first time. If Wisconsin comes close this year to duplicating last year’s increase, 2016 milk production will easily top 30 billion pounds.

That brings us back to California, a state that holds more milk production records than we can even begin to list here. So we’ll focus on just one: the state that was the fastest to grow its milk production by 10 billion pounds.

As noted earlier, Wisconsin’s milk production first topped 20 billion pounds in 1976, and appears likely to finally top 30 billion pounds here in 2016, some 40 years later. And the state’s milk production back in the mid-1920s was over 10 billion pounds, so it took over 50 years for that earlier 10-billion-pound expansion.

And what about California? It was in 1972 that California first reached 10 billion pounds of milk production.
The state’s milk output actually fell slightly twice before the 1970s ended (in 1973 and again in 1978) and then experienced a growth spurt that had never been seen before in the dairy industry (and in all likelihood will never be seen again).

Specifically, California’s milk production grew every year between 1979 and 2008, before finally posting a decline in 2009. During that period, the state’s milk production increases ranged from fairly modest (by just 38 million pounds in 1998) to spectacular (by 2.3 billion pounds in 1994).

During that period, California topped three production milestones, reaching 20 billion pounds in 1990, 30 billion pounds in 1999 and 40 billion pounds in 2007.

But as Hilmar’s David Ahlem noted, California’s days of significant growth “are over.” Indeed, the statistics would seem to indicate that California’s days of significant growth ended almost a decade ago, since the state’s 2015 milk production was just 215 million pounds higher than its 2007 output.

And if the first quarter of 2016 is any indication, California’s milk production this year could fall below 40 billion pounds for the first time since 2009.

So what’s the future look like for California’s dairy industry? As Ahlem noted, California “still is going to be a large milk producer going forward.” If in fact California’s milk production drops below 40 billion pounds this year, and Wisconsin’s rises above 30 billion pounds, it will mark the first time in over a decade that the milk production gap between the two states is less than 10 billion pounds.

Meanwhile, California last year produced over 2.4 billion pounds of cheese and more than 580 million pounds of butter. So this is the “niche” that California will occupy for the foreseeable future: the nation’s leading milk and butter producer (among other products) and the number two cheese producer.

Even without significant growth, California will remain a very significant dairy player, as Wisconsin was during its lengthy “funk.”

Cheese Reporter welcomes letters to the editor. Comments should be sent to: Dick Groves by Fax at (608) 246-8431; or e-mail your comments to dgroves @cheesereporter.com.

 

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