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Connecting to the World

Despite market challenges, Wisconsin’s dairy industry is using its expertise and technology to remain a global leader

Story by Rick Berg

May 2018

Dwight and Shelly Mayer’s family has been farming in rural Washington County for six generations, so they know a thing or two about successful dairying. That’s true for most of the 9,000-plus family-owned dairy farms in Wisconsin, and is a big part of the reason the state continues to rank first or second in dairy production in the United States and among the world’s dairy production leaders. 

If Wisconsin were a country, the story goes, it would rank fourth in the world in cheese production – behind only the United States, Germany and France.

Still, it takes a lot to stay on top, especially in an environment that is not always hospitable to dairy farmers. Wild swings in milk prices, combined with large, fixed operating costs, mean that dairy farmers are often under water in the profit-and-loss column of the ledger.

When she’s not helping run Mayer Farms, Shelly Mayer works as executive director of the Professional Dairy Producers of Wisconsin, a professional development organization that offers continuing education to farmers – including financial education.

With current milk prices hovering around $14 per hundredweight, many if not most dairy farmers are losing money. Even if they’re enrolled and paying premiums in the U.S. Farm Service Agency’s Margin Protection Program for Dairy, the payments might offset only part of the shortfall between the cost of producing milk and the revenue from selling the milk. Mayer indicated the break-even for dairy farmers varies depending on the debt load carried by the operation, but that $14 per hundredweight falls short for most.

Mike North, president of the Wisconsin-based Commodity Risk Management Group, agrees.

“Break-even points can be all over the board depending on individual farm operations and other factors,” North said, “but it’s safe to say $16 to $19.” 

These challenging times make it imperative for dairy farmers to be even better managers, Mayer said.

“It’s about sharpening the pencil,” Mayer said. “Every business is different, but it might be about restructuring your debt, giving you the potential for a little bit better cash flow. But the key to all of this is that it does take managers who are not only good at taking care of their resources – taking care of their herd and their land and growing sustainable crops – but also farmers who are financially literate, who understand their numbers or at least know the questions to ask.”

Meeting the challenges

North, who is also president of the Green Bay-based Dairy Business Association, said the biggest challenges for the industry are “fluctuations in milk prices, having a predictable and sustainable rural workforce, and overreach on environmental regulations that are not grounded in science.”

The Dairy Business Association – which includes Wisconsin dairy farmers, milk processors and other related businesses – advocates for laws and regulations affecting the dairy community. Tim Trotter, executive director of Dairy Business Association, said meeting the challenges facing the dairy industry requires what he called “a shared strategy.”

“People might think of farmers and cheesemakers when they hear Wisconsin dairy,” Trotter said. “What they may not realize is there are countless other businesses that help make up this $43 billion sector of the state’s economy. What one player does affects the others. So, it’s critical we understand each other and collaborate.”

On labor shortages, for example, Dairy Business Association and others are pushing for “a favorable environment for dairy farm employees, regardless of their immigration status,” according to the organization’s website, as well as for programs to enhance the agricultural workforce.

Brody Stapel, who farms at Double Dutch Dairy near Cedar Grove, is president of Green Bay-based Edge Dairy Farmer Cooperative, which represents about 800 dairy farmers in the Midwest on federal policy issues.

“We have to work together to attract and retain more working-age people to Wisconsin, and it is our responsibility to interest them in a job in agriculture,” Stapel said. “We also need a new year-round visa option for agricultural workers that functions for our current employees and future workers.”

To combat cyclical swings in milk prices, dairy industry leaders believe expanding export markets would help stabilize and increase prices. Canada has traditionally been a strong market for some Wisconsin milk products, but that began to change in 2017 when Canada imposed new tariffs on protein concentrates and other milk ingredients.

“The changes affected exports of ultra-filtered milk to Canada, but this represents a pretty small part of our overall exports,” Stapel said. “Even if that change cannot be fixed, we can do other things to grow exports that would offset that loss. For example, new bilateral trade agreements with partners like Japan or the United Kingdom would do that.”

The other obvious answer to low prices is to decrease production, but that option is limited for dairy farmers, who can’t simply shut down the production equipment until prices increase. As Mayer said, “cows are a biological system. They need to be milked every day.”

So options for the future of dairy are limited.

“There are essentially two roads to go down here,” North said. “One is to grow demand. The dairy community certainly had a good start this year. Exports were strong early on. But they’ve now potentially been hindered by the talk of tariffs. We’re still in the dark on how this will eventually look.

“The second option is more painful – reducing the supply of milk. It’s the option of last resort because no one wants to see farmers go out of business.”

Technology to the rescue

As in other industry sectors, technology and innovation are important tools to help reduce costs for dairy farmers, according to North.

“A good example of this is the use of robotics, particularly in milking parlors where they reduce labor needs,” he said.

Mayer’s organization includes several farms that have adopted robotic milking parlors or other technological innovations. Those technologies potentially reduce the demand for skilled labor and decrease costs over time, though in the short term the capital cost of implementing a new technology is more likely to increase the operation’s debt load, Mayer said.

For one Wisconsin dairy producer, technology has been the solution. Kaukauna-based Milk Source LLC operates dairy farms in Michigan, Missouri and Wisconsin, including Rosendale Dairy in Fond du Lac County, Omro Dairy and Tidy View Dairy near Freedom.

At Rosendale Dairy, feed for the cows is custom-mixed, based on data-driven nutrient analysis, and milking occurs in a rotary milking parlor, with two 80-cow carousels operating 22 hours a day.

Milk Source was founded in 1999 by multi-generational family farmers Jim Ostrom, John Vosters and Todd Willer, who all met at the University of Wisconsin Madison. The three all believe in what is increasingly called “smart farming” or “precision agriculture.”

Those ideas start with that most critical technology – the Internet.

“Everyone wants to talk about agro-technology, but the biggest thing that has affected us with productivity and efficiency is the Internet and the expansion of broadband, which has allowed us to tie all farms together,” Willer said. “Getting good, solid broadband allows us to portal into every farm, all the cow data, all the feed and ration data, the weights of the trucks going across the scale, even our fuel systems. We can get reports of how many gallons of diesel fuel are used in every load. All of this can be accessed on my computer or even my cell phone.”

That ability extends to many of the organization’s day-to-day activities.

“(Milk Source’s director of agronomy) can start and stop our center pivots in a field from his cell phone,” Willer said. “At some of our farms, we can turn on barn fans, monitor cow cooling systems, including the water meters for well reports – all of this from me sitting at my desk in the office.”

Remote diagnostics are continuing to advance, he said. A cloud-based information-sharing system for managing reports as well as data and environmental compliance documents are examples of resources that wouldn’t be as readily available without the build out of broadband technologies.

Yet, the challenge, Willer said, is “the availability of Internet in rural areas might not be able to keep up with the broadband demand and speeds that we need to utilize these technologies as they keep developing.”

Advantages of scale

Technology also helps agri-businesses scale up operations and manage that scale, according to Ostrom.

“Herd-management software used to be done all manually. Now it’s all computerized,” Ostrom said. “Crop management is done via very complex programs. We can literally track square yard by square yard, square foot by square foot – it’s genuine precision farming.”

“We use all available means,” Ostrom continued, “from the logistics perspective of handling large-scale data and crop inputs to the use of larger equipment that covers more acres more efficiently. Thirty years ago, a farmer would work on a tractor for 10 to 12 hours and be exhausted out in harsh weather on a rocky field. Tractors today are four to five times the size, with comfort-controlled rides, user-accommodating cabins, and with more technology and faster speeds. The farmer leaves his job at the end of the day without substantial, massive fatigue.

Ostrom and his partners believe technology will be the saving grace for the dairy industry and for agriculture in general.

“All of it, collectively, makes it possible to precisely produce food for an ever-increasing world (population),” Ostrom said. “There are very few people left in agriculture, and those that are in it have a responsibility to deliver food in an ethical, environmentally-sound and healthy way. All this technology ensures those things continue happening.”

What’s changed, what hasn’t?

When veteran farmers are asked to cite differences and similarities between today’s dairy industry and that of yesteryear, their answers revolve around two common themes – 1) the cows, the people and the ethics are the same, and 2) technology has made the process more efficient and productive.

“A cow still needs a comfortable bed to lie on, high-quality feed and herdsmen who are attentive to her needs,” Willer said. “What has changed is how we get it done — whether it’s the size of the farm or the technology we use. Everything we do, from planting our crops to bedding our cows, from how we harvest and cool milk to how we transport it — all of that has changed. But a cow is still a cow, and she still needs the same basic things that she always did.”

“Farming today is a combination of science, management and precise care — whether it’s the crops or the animals. That’s what farming is,” said Ostrom.

“I firmly believe that how we treat our people and how we care for our cows is definitely better than it has ever been,” said Vosters. “We continue to evolve within our specialization, which not only leads to the breeding of healthier animals, but also creates more opportunities within our work force.”

Mayer believes that despite the challenges, Wisconsin’s dairy industry will continue to hold the high ground in worldwide markets.

“The thing is, when the pendulum swings too far, we tend to lose perspective,” Mayer said. “These are challenging times for the agriculture sector, for sure, but we are very resilient people in the Wisconsin dairy industry and we have a leg up on every other entity that wants to be a player in this industry. We have all the infrastructure in place here. We have the number one agricultural research university in the world and we have a critical mass of skilled dairy farmers.

“Most of all, we have the next generation of dairy farmers and that is our most important crop. They are talented and eager. Balancing it all, we have it all here to remain the world hub for dairy. We just have to make sure we have the dollars invested in dairy research to stay ahead. We’re going to continue to need new technologies to help us work better and faster. We know how to work our way through it and we will.” 

Rick Berg is a freelance writer and editor in Green Bay.