The Minnesota-based cooperative’s animal nutrition business is “in transition,” however.

Paying more for butter? Land O’Lakes and its farmer-owners may be benefiting.

Price increases helped the Arden Hills-based cooperative earn a $254 million profit and return $175 million of that to owners in 2023, a boost from the year before.

“Land O’Lakes helped position our members for their own individual and organizational success,” CEO Beth Ford and board Chair Rick Brand wrote in the company’s annual report released this spring.

Land O’Lakes saw revenue slip 12%, to $16.8 billion, after hitting a record $19.2 billion in 2022. But profits climbed 5% due in part to charging higher prices for butter and other dairy products even as the cost to make them fell, the company reported.

It’s a welcome reprieve for those in the business. The dairy industry is known for tight margins and high volatility that have proven especially difficult in recent years. Land O’Lakes’ dairy foods segment overall claimed a $48 million pretax profit last year after a $56 million loss in 2022.

Sales of crop inputs like seeds, fertilizers, pesticides and agronomy services took in $232 million for the WinField United business, a decline from a record segment profit the year before.

“Dairy foods earnings showed significant improvement, as business returned to more pre-pandemic rhythms,” Ford and Brand wrote. “WinField United has consistently been responsible for growth and support across our enterprise.”

The Purina animal nutrition arm, meanwhile, lost $3 million and was hurt by higher prices as the company sold less feed. It’s a business “in transition.”

“Animal nutrition is investing in one of the most significant business transformations in its history,” the company said.

Fitch Ratings anticipates a turnaround for animal nutrition this year. After a recent restructuring and major software upgrade, Land O’Lakes “could right-size or close some plants to help stabilize the business,” the ratings agency said.

Fitch predicts continued growth for dairy as the cooperative focuses on its more-profitable branded products.

Overall, Land O’Lakes earnings in 2024 should look similar to last year, though Fitch expects cash paid to members to decline.

Nationwide, farm income is expected to fall for a second consecutive year in 2024 after hitting records in 2022, according to the U.S. Department of Agriculture, but it is not expected to sink below the 20-year average.

For now, the outlook for dairy producers is improving.

“Milk prices are expected to be higher in 2024,” the USDA predicts, “as modest increases in production, coupled with robust demand for dairy products from both domestic and global markets, support the values of most dairy products.”

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