In fact, fluid dialogue between the two is what is needed, especially as dairies grow more sophisticated. Producers truly need to fully understand more than just what happens to their milk once it leaves the farm.
Ed Gallegher, president of Dairy Farmers of America (DFA) Risk Management program, also adds the need for producers to have a strong relationship with someone who can talk about milk price risk and food price risks that are in the marketplace.
“It’s an important aspect to focus on,” he says.
The world pandemic shined a light on this subject, as many dairies were forced to dump their milk. Stories have unraveled of farms losing their milk market overnight. And these dairies know trying to find a processor is easier said than done. Now, as we await a new Farm Bill, it appears that nearly every group tied to dairy has an opinion on the Federal Milk Market Order (FMMO) reform debate.
So, despite billions of dollars in the pipeline for future processing capacity, it was not a big surprise that nearly a third of our survey respondents cited processors and market confidence as one major challenge impacting their ability to expand and grow.
In fact, one evaluator shared, “We just left a milk cooperative that had drastically increased a marketing fee and milk hauling rate over the past two years.”
Near-Term Hurdles
Ten percent of respondents shared that inadequate capacity for processing as a near-term hurdle with one surveyor sharing, “It’s hard to find a milk buyer for a dairy of my size, so I have to plan to wind down operations or change to a different type of farming as I approach retirement.”
New York dairy farmer, Tyler Reynolds, shared with Dairy Herd Management that the more honest producers are with the processors on their future hopes and desires, is a win for all.
“Processors need to plan, too,” Reynolds, who owns Reyncrest Farms, home to 1,400 cows near Buffalo, says.
Roughly half of dairy operators that responded to the survey are not terribly confident in their processor relationship. When asked about their confidence in the future of their existing milk market, the overall response was softer yet.
However, 70% of respondents believed the dairy industry has future opportunities when it comes to innovation and processing. Overall, most operators shared they are not looking to vertically integrate as an avenue to generate market stability.
