Michigan seeks capacity as milk production increases

Editor’s note: As part of our new series, “From Cow to Curd: A Look Across the Nation,” Cheese Market News takes a look at the cheese and dairy industry across the United States. Each month we examine a different state or region, looking at key facts and evaluating areas of growth, challenges and recent innovations. This month we are pleased to introduce our first state — Michigan.

By Rena Archwamety

MADISON, Wis. — Michigan has no shortage of milk. Over the past decade, as average U.S. milk production has increased 17 percent, Michigan’s milk production increased 43 percent from 2007-2017, says Barbara Koeltzow, dairy program manager, Michigan Department of Agriculture and Rural Development (MDARD).

“In general patterns, the number of dairy farms is continuing to decrease over time, but the total number of dairy cows and total number of milk produced is increasing tremendously over the same period of time,” Koeltzow says. “The trend has been going on since the early 2000s, and it doesn’t seem to be slowing down.”

In December, Michigan dairies produced a total of 933 million pounds of milk, up 2.5 percent from a year earlier, according to the latest USDA milk production statistics. Milk yield in December was among the highest in the nation at 2,180 pounds of milk per cow, and Michigan was home to 428,000 head of milk cows, up 3,000 head from the end of 2016. The state ranks No. 6 in the nation for milk production.

Dairy producers in Michigan range from small Amish farms that still milk by hand and ship milk in cans, to ultra-efficient, technologically-advanced producers who use robotic milking installations and rotary parlors, Koeltzow says.

For all its producers, Michigan offers an ideal climate for cow comfort. The Great Lakes help to moderate weather fronts, increasing temperatures about 10 degrees in the winter and decreasing them by about 10 degrees in the summer as the air moves across the lakes.

Certain areas do experience heavy “lake effect” snowfall. While this can sometimes cause milk transportation delays, it typically doesn’t affect the dairy cows since most are housed and fed in freestall or comfort stall barns with covered feeding areas, Koeltzow says.

Michigan has attracted dairy farmers from other states and countries. Its ample water resources have brought dairy processors from California who were under pressure due to drought. Dutch and Irish immigrants have come to Michigan to dairy farm as well.

“The Dutch immigrant dairy farmers have been drawn to Michigan because there is a significant Dutch population in the Grand Rapids area that stems from families that immigrated in the 1800s,” Koeltzow says. “The Irish immigrants typically have a direct family connection in Michigan. Both groups definitely ask questions about the climate, availability of water, environmental regulations, feed sources, etc. when making their decision to relocate.”

Other growth and expansion, she says, comes from native Michiganders who see how economics are playing out and are planning for next generations of families to stay in agriculture.

The state government and agriculture department also deserve credit for making Michigan a good place for dairy, Koeltzow notes.

“MDARD and its dairy program have a national reputation for being true partners with our industry, really going the extra mile to help them out and answer their questions — not just be a regulator,” she says.

Producers and processors agree that Michigan is a dairy-friendly state in terms of legislation and regulation.

“Challenges that might be faced in other industries, we have the advantage of having the ear of those who are decisionmakers and understand the challenges of farming,” says Joe Diglio, general manger of the Michigan Milk Producers Association (MMPA) cooperative based in Novi, Michigan.

“The state is very cooperative in terms of inspections and helping when new regulations come down. From a regulatory perspective, they’re outstanding,” says Mike Balane, national sales manager of Benton Harbor, Michigan-based Old Europe Cheese.

• Capacity for growth

Michigan is home to large cheese processors such as Old Europe Cheese and Leprino Foods Co., as well as smaller artisan producers such as Leelanau Cheese Co. in Suttons Bay and Zingerman’s Creamery in Ann Arbor. Major fluid milk processors include MMPA, Prairie Farms, Agropur and Meijer. Despite this, if Michigan has a weak point in its growing dairy industry, Koeltzow says, it is that there is not nearly enough capacity to process all the milk it produces.

Around 35 percent of milk produced in Michigan has to go out of state to be processed.

This has provided opportunity for many of the dairy plants in Michigan to expand, with ample room for future growth.

Balane notes that Old Europe Cheese, which was founded in 1987 by parent company I.L.A.S. of Spain, has expanded its facility multiple times. When it first started, Old Europe processed a couple hundred thousand pounds of Feta, Muenster and Swiss a year. It eventually switched its focus to Brie, Camembert and other continental-style cheeses, and in 2018, it expects to surpass 7 million pounds of cheese.

“Every year there is another expansion,” Balane says. “This year we are confident there will be an expansion in cheesemaking. A year ago it was our bakery (for its Baked Brie), two years ago our curing room. We’re due shortly for another curing room expansion.”

Old Europe’s facility previously was a dairy plant belonging to MMPA, and MMPA remains the sole milk and cream supplier for Old Europe’s cheese production.

MMPA represents about 1,100 farms — mostly in Michigan with some also in Wisconsin, Ohio and Indiana — and marketed 5.1 billion pounds of milk last year. The cooperative operates two Michigan manufacturing facilities of its own in Ovid and Constantine. Its largest plant in Ovid, Michigan, has a daily capacity of 5 million pounds of milk and processes approximately one-third of all milk marketed by MMPA. MMPA has invested more than $100 million in the Ovid facility over the last 10 years, and in 2010 increased milk processing capacity at this plant by 60 percent. This plant manufactures condensed milk, dry milk powder, cream and butter.

MMPA’s Constantine, Michigan, plant has a capacity of 2 million pounds of milk per day and processes approximately 600 million pounds of milk each year into butter, cream, condensed skim, nonfat dry milk and instant milk. In 2014, MMPA and Foremost Farms USA formed a strategic alliance and invested $10 million to install reverse osmosis technology at this plant.

The majority of the dairy ingredients produced at these plants are sold in the foodservice business, and MMPA also is involved in the fluid milk market in Michigan, particularly through its partnership with Kroger Co.

“We’re always looking at opportunities to expand — not just processing capacity, but product development,” Diglio says. “When we look at additional capital to spend, we look at our diversified product mix. How do we add upon our portfolio to align with our customers’ strategic vision?”

More than 350 Michigan dairy farms are members of Dairy Farmers of America (DFA), and these farms produce more than 3 billion pounds of milk each year. DFA member milk is processed at its wholly-owned plants in Adrian and Cass City, Michigan, as well as by a number of key customers in the region.

“We are currently exploring a number of scenarios for the expansion of the 33,000-square-foot Cass City facility. Exact details are still being finalized at this time,” says John Wilson, senior vice president and chief fluid marketing officer, DFA. “Additionally, we are continuing to work in partnership with others on the development of a new cheese and whey production facility in Michigan.”

DFA, MMPA and Glanbia are exploring a joint venture stand-alone cheese and whey facility in Michigan. In an announcement last year, the companies projected that the plant would process 8 million pounds of milk per day and be commissioned in the second half of 2019.

“The project, I would consider to be in an accelerated position at this point in time. We’re seeing desire to look at options location-wise,” Diglio says of the joint venture. “We’re looking currently at where the facility would be located that optimizes not only the milk supply, but the outbound of product that would be produced there.”

Foremost Farms USA, a Wisconsin-based cooperative with members in seven states including Michigan, previously was part of the group discussing this joint venture, but now it is planning its own dairy processing facility in Greenville, Michigan. The new dairy campus is projected to receive up to 6 million pounds of milk per day and be operational around the end of the year.
• Overcoming challenges

With all its growth opportunities, Michigan’s dairy industry faces challenges of finding enough workers to support its production and processing needs. Processors also can face infrastructure challenges.

“A big issue that new facilities coming into the state or existing facilities who want to expand struggle with is that the wastewater treatment systems in our cities and towns really lack the capacity to deal with the amount of wastewater treatment required when you talk about a dairy plant,” Koeltzow says. “Ag development folks work really hard looking for grants and trying to be innovative in solving problems, or if there is anything cost-sharing wise that they can help out with. It often comes down to what the municipality also can give for cost sharing and expanding wastewater systems.”

A low unemployment rate nationally and in the state also poses a challenge when it comes to finding workers for Michigan farms and plants.

“I would say probably the biggest challenge the state has is workers,” Diglio says. “While the industry is growing in the state, having proper resources to handle the production growth can be very challenging as well as cumbersome to address. Especially when talking about immigration reform, which is really needed to address this issue.”

Balane says Old Europe often finds employees through family members or friends of those who already work there, but filling positions still can be difficult.

“It’s very challenging, the workforce,” he says. “We’ve raised wages, offered competitive healthcare to entice workers. It’s getting better.”

All indications point to continued growth in cows, milk and the need for more processors. Koeltzow says MDARD projects there will be more than half a million head of milk cows sometime within the next 10 years.

“We’re going to keep putting up more milk, and hopefully we can find some processors and provide the resources they need to bring more processing capacity to our state,” she says.

Wilson says DFA anticipates that milk production will continue to grow in Michigan, primarily due to feed supplies as well as an agriculturally-friendly government and a reasonable environment from a regulatory perspective.

“Michigan is definitely an area ripe for growth with a surplus of quality milk and ideal proximity to serve not only major U.S. markets, but also the global marketplace,” Wilson says. “Like the rest of the U.S., milk production growth in Michigan relies on continued development in domestic demand and increased export opportunities.”

Diglio says he believes projects like the jointly-owned cheese and whey facility will be key to meeting the challenges and opportunities of Michigan’s growing industry.

“This is not a one co-op issue, it’s an industry issue. Seeing that, I believe the way to address capacity challenges is through collaboration,” Diglio says. “My belief is that projects like the joint cheese plant, as well as other opportunities with industry partners, will certainly be discussed, reviewed and addressed collaboratively as an opportunity for all of us to address.

The challenge is the value-added piece — how do you continue to extract value for dairy producers here.”

CMN

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