Who’s #1? Does It Really Matter?

by Brad Legreid, WDPA Executive Secretary

Volume 137, No.34 Friday, February 15, 2013

It’s human nature to want to be #1. To be the best. To be the leader and King of the Hill. It’s also human nature to want to protect what you have and what you’ve invested in. These psychological phenomenon go hand-in-hand when looking back over the past 20 years of friendly rivalry between the Wisconsin and California dairy industries.

Recently I was reading an article in a local newspaper about milk pricing issues in California and how Wisconsin’s dairy industry might benefit from California’s problems. This article got me thinking about what I’ve seen transpire in the 22+ years with the Wisconsin Dairy Products Association.

Over the past two decades, I have seen some significant changes in the dairy industry. For instance, milk pricing in the federal order system has gone from being fairly stable and predictable to volatile monthly fluctuations. Whey has gone from being a useless byproduct of cheesemaking to being a highly profitable ingredient. Foreign trade is no longer a fanciful muse but an emerging necessity if a company wishes to improve profitability. The list goes on and on.

Wisconsin and California’s dairy industries have also experienced their own roller coaster rides since 1990. Wisconsin has always prided itself as the Dairy State. In the late 1800’s when Wisconsin farmers began shifting from crop to dairy production for more profits and Stephen Babcock and the University of Wisconsin led significant research which benefited the dairy industry, Wisconsin earned the nickname “America’s Dairyland.”

California’s...producers and processors are at odds with each other over pay prices. On the flip side, Wisconsin’s dairy industry is rising. Our producers and processors work together, being extremely cognizant of the fact that we need one another.

It’s a moniker Wisconsin residents are proud of since it accurately reflects our cultural heritage. It’s even printed on our vehicle license plates. For decades, Wisconsin enjoyed being the top milk producing state in the country. Its citizens were proud of how we led the nation in milk production, as well as cheese and butter production.

Then, in the 1980’s, California began experimenting with larger dairy farm operations which lowered their cost of production. Those dairy operations were extremely efficient and generated a significant increase in milk per cow. This transformation enabled California to become the second largest dairy state.

In 1994, something unthinkable happened in Wisconsin. California passed Wisconsin as the top milk producing state. For some Badger State citizens, this caused a great deal of angst and consternation.

The gloom resulting from no longer being #1 in milk production was exacerbated by the fact that Wisconsin was experiencing its own dark moments in the 1990’s. Our dairy economy was in dire straits. We were losing an average of three farms per day. Dairy plants were not expanding, some were closing or consolidating and others contemplated moving to the promising states of the West.

The media seemed to run countless articles on the demise of Wisconsin’s dairy industry. A pervasive attitude was developing that “the last one out of the state should turn off the lights.” So, as Wisconsin’s dairy industry was perceived as slowly sinking away in Titanic-like proportions, California’s dairy industry was booming.

In the 1990’s, the Golden State was the place to go. Abundant sunshine. Moderate weather. A unique state dairy pricing system outside of the FMMO that brought in added profits for their dairy industry. Large and profitable farms were the trend and leading the way in a new dairy era. Large manufacturing plants were built. The phrase “Go West young man” - which hadn’t been used since the westward expansion of the 1800’s seemed to be, once again, in vogue. California was at the top of the dairy world and the place to be.

But then, things began changing in Wisconsin. As California’s dairy industry continued to grow and flourish, Wisconsin’s dairy industry began a slow, but steady, renaissance. As we entered a new millennium, a new attitude started emerging in the Wisconsin countryside.

Progressive and forward-thinking dairy producers, young and old, banded together to start improving our dairy industry. Dairy organizations worked with our state legislature to pass new laws which benefited dairy producers and processors. Each new piece of legislation stimulated Wisconsin’s dairy industry and offered opportunities for farmers and processors to expand their operations.

All of this has led to a significantly improved dairy economy in our state. Yes, we have 50 percent fewer dairy farms in Wisconsin today than in 1990, but many of the 13,000+ farms that remain have dramatically improved their operational efficiencies and have seen significant growth.

That’s not to say it’s total Nirvana for our producers. Just like other producers in the US, they have faced their good and bad years, especially the past couple years when input costs have usurped profits from their milk checks. Nevertheless, Wisconsin achieved a record-setting level of milk production of 27 billion pounds in 2012. This new record marked the seventh consecutive year of production gains for the Badger State. Dairy plants are also experiencing better times in Wisconsin.

There have been myriad expansions for many manufacturers, with more coming in future years.
So, how does California compare to Wisconsin in early 2013? California still has a tremendous dairy industry. Farm and plant operations are still large and efficient and benefit from economies of scale.

However, a few dark clouds have recently begun appearing over their horizon. California regulatory restrictions have long placed a squeeze on some dairy operations. Water can be scarce. Since producers have geographical limitations on their farm size, many are unable to grow their own crops, and thus, have to purchase their feed. In the last few years, this has become even more burdensome to their operations.

With input costs skyrocketing the past few years, California farmers are crying out for changes in California’s milk pricing formulas. Any increase in pay prices will raise the costs for California manufacturers who previously enjoyed a roughly 10-cents/lb. advantage on cheese prices in the national marketplace.

Of course, Wisconsin processors are closely monitoring these California pricing decisions since those decisions will be potentially advantageous to them by leveling the playing field a little bit more between the two states.

Currently, California’s dairy industry is in a bit of disarray. Producers and processors are at odds with each other over pay prices. Feed prices are choking profits. Natural resources are always issues.

On the flip side, Wisconsin’s dairy industry is rising. Our producers and processors work together, being extremely cognizant of the fact that we need one another.
I’ve always said that our industry is like a three-legged milk stool, with one leg representing producers, the second leg for processors and the third leg representing industry suppliers. You need all three legs to properly balance a healthy industry. Wisconsin’s dairy industry is poised to continue its upward trend.

So, what’s the bottom line? First of all, does it really matter who’s #1? Not really. California can lay claim to producing the most milk. Wisconsin can claim leadership in cheese production.

Most assuredly, California will rectify its current moroseness and continue to prosper. Wisconsin will also continue to grow its dairy industry and keep building on past successes.
With an infrastructure that is second-to-none, Wisconsin’s dairy industry is well positioned for the future.

Sure, we all like being the best, being #1. But, what’s more important is creating and maintaining an environment in which businesses can grow and be profitable. Supremacy titles are nice, but they don’t necessarily put money in our pockets.

The red or black ink at the bottom of a profit and loss statement is what really matters.

Therefore, let’s keep this friendly rivalry going. Let’s keep innovating new dairy products. Let’s keep marketing our wholesome, nutritious foods to the rest of the world. Let’s embrace the food production needs of the future.

Let’s not become overly preoccupied with who’s #1, but rather keep striving to do our best, which, in turn, will make the entire dairy industry a winner. BL

Brad Legreid has served 23 years as the executive director of Wisconsin Dairy Products Association (WDPA). Legreid can be reached at info wdpa.net or by calling 608-836-3336 .



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