Dairy Processors Stretched by Milk Production Gains

Every year, U.S. dairy farmers produce 3 billion more pounds of milk than the year before. For the past few years, production growth has outpaced processing capacity growth and dairy processors are struggling to keep pace. As a result, “Dairy processors are faced with the challenge of handling an ever-growing milk supply, while anticipating the right product mix to meet consumer demand,” said Ben Laine, senior dairy economist at CoBank. “An additional 27 billion pounds of U.S. milk processing capacity will be needed over the next 10 years if current trends persist.”Numerous new plants and plant expansion projects are underway or recently completed, but available capacity remains a challenge at times — especially in the Northeast and Mideast areas — and has strained the ability of dairy cooperatives to fill the role of market balancers. Since these co-ops largely bear the brunt of the near-term oversupply of milk, they are increasingly looking for ways to discourage producers from expanding production.