The third-largest milk-producing state in the nation is at the crossroads of “slow” and “grow,” and Idaho’s processors and producers have some decisions to make, according to one industry insider.
Idaho’s dairy industry has enjoyed phenomenal growth since the mid-1980s, increasing milk production from about 2 billion pounds in 1985 to almost 14 billion in 2012 and boosting cheese production from about 150 million pounds in 1987 to almost 900 million pounds in 2012.
But the industry has seen somewhat of a slowdown in the last few years with tough times hitting milk producers, who say the industry’s cheese-yield pricing is no longer enough to cover the cost of production, said Dave Thomas, CEO of American Dairy Products Institute.
The industry is at a turning point, and must make decisions that will determine its destiny, Thomas said during the Idaho Milk Processors Association annual convention in Sun Valley.
Global population growth and unprecedented demand for dairy protein offer great opportunity from a market standpoint, but there are challenges. Those challenges all involve sustainability, from a sustainable milk price and what size industry Idaho’s natural resources will support to producing globally competitive products and building a strong reputation for those products, he said.
It all starts with the milk price and perhaps the industry needs to re-evaluate milk pricing to come up with a model to make producers and processors successful and bankers happy, he said.
“For the right milk price, we’ll see more dairies and more cows, but what is that right price?” he asked.
Idaho’s industry was built on collaboration and a clear recognition of producers’ and processors’ dependency on each other. Critical decisions were made in the 1980s and ’90s to increase production of both milk and cheese and to price milk so both segments were profitable, he said.
But that collaboration has waned, with divisiveness showing up in milk pricing within Idaho’s industry and in federal dairy policy, he said.
Former CEO of Glanbia Foods and manager of Gossner Foods’ processing plant in Burley, Idaho, Thomas said, “We can only squeeze so much of that pricing before you kill the goose that lays the golden egg.”
Gossner Foods’ President and CEO Dolores Gossner Wheeler ran her successful business on the tenet that it isn’t how little she can pay for milk but how much she can pay and still make a profit, he said.
With exploding demand in foreign countries, particularly China, the opportunities for dairy in Idaho are unlimited, he said.
But the industry has to decide if it wants to grow because it’s pretty tough to stand still, he said. The industry is either going forward or moving backward, he said.
Idaho’s processors and producers need to decide if they want to take the path of Minnesota, whose best days in dairy are in the rearview mirror, or if they want to take the path of Wisconsin, which reinvented its dairy industry in the past decade, he said.
Idaho’s industry has some tough decisions to make, but those decisions could result in an industry whose best days are ahead, he said.
Source: Capital Press