California, the cheesehead state?

California, the cheesehead state? It could happen if current trends continue, warns a university researcher.

Over the past 20 years Wisconsin and the upper Midwest have steadily lost ground to California and other Western states in milk production. California passed Wisconsin to become the nation’s largest milk producer in 1993, and could become the leading cheese producer in a few years, according to agricultural economist Ed Jesse.

That doesn’t have to happen, he adds, but it will take action by industry and policymakers in the upper Midwest to keep the cheese crown in Wisconsin.

Wisconsin is already seeing fallout from the status quo. Last year, Alto Dairy Cooperative and Land O’ Lakes abandoned plans to build a large cheese plant in Wisconsin, citing diminishing milk supplies in the upper Midwest. Land O’ Lakes has expanded operations from the Midwest to California and the Northeast, and Alto plans to diversify out of cheese production. Also, Sorrento closed its Arpin cheese plant, blaming high milk costs and limited milk supplies.

Mewanwhile, there’s a lot more milk out West than there used to be. The West is beating the upper Midwest in milk yields, and cow numbers are rising in Western herds while decreasing everywhere else.

To see what the next 20 years might look like, Jesse and research assistant Jacob Schuelke extrapolated regional milk yield and cow number trends. If current trends continue unchanged, by 2020 milk production in the upper Midwest will fall to 25 billion pounds per year – 10 billion pounds below current levels. The region’s national market share falls to 12.3 percent. Production gains in the West slow somewhat, but collectively the five Western regions supply 61 percent of the nation’s milk in 2020. California would produce nearly 60 billion pounds of milk — almost 30 percent of the nation’s supply.

Fortunately for the upper Midwest dairy industry, trend projections show what could be, not what will be, Jesse points out.

The 60 billion figure probably won’t happen. “Despite occasional water supply problems, high energy costs, increasing competition for land between forage and other crops, urban encroachment, and many other challenges, growth in milk production in the Golden State has been virtually unchecked,” Jesse notes, and that will change. Western production gains will taper off in coming years for several reasons, such as irrigation water availability, higher feed costs, and environmental/manure management regulations.

“We admit up-front that projections based exclusively on historical trends are naïve,” Jesse says. “Nonetheless, history is a reasonably good guide to the future. And in many cases, trends are strong enough to suggest that aggressive overt actions may be necessary to alter them.”

Changes in federal milk marketing orders could benefit upper Midwest producers in the long run. But milk prices in Wisconsin and Minnesota are already relatively high compared with most of the West regions. Western producers are expanding despite low milk prices, and any benefits from federal order changes will accrue to them as well as upper Midwest producers. So relative competitive advantage will not change.

“Direct state assistance could take many forms, but generally would involve actions that promote dairy investment on existing and new dairy operations,” Jesse says. “The region needs to re-assert itself as ‘dairy friendly’ from both an attitudinal and infrastructure support perspective.”

For a more detailed analysis, see Marketing and Policy Briefing Paper # 74, Regional Trends in U.S. Milk Production: Analysis and Projections.