Capitalism is harsh but effective for future progress. The US dairy industry is changing rapidly, and traditional processes cannot survive.

Capitalism is harsh, but it is also effective for future improvement and success. The dairy industry is changing rapidly, and the changes can be harsh — the US dairy industry is undergoing major changes in which traditional processes cannot survive, writes John Geuss in his column for the MilkPrice blog, Milk Pay reports.

What is changing on dairy farms

This post focuses on dairy farms. Changing factors (in no particular order):

  • include herd size;
  • cows closer to processing locations;
  • automated milking systems;
  • advanced breeding practices;
  • computerised feeding systems;
  • genetics;
  • nutrition;
  • amino-acid balancing;
  • milking frequency;
  • technology implementation;
  • lower labour costs through automation, among others.

There is always a question of whether to enlarge an existing facility or rebuild. Rebuilding is costly but allows implementation of many of the above. 

One of the most harmful outcomes for smaller, older operations is to «hang in too long» and likely increase debt to stay in business: old facilities have minimal value, but the land is usually very valuable. 

New facilities can produce and deliver milk with significant components at half the cost of older ones — and today’s low component prices are forcing change.

Why the change matters

To succeed, every business must satisfy the customer — here, the dairy consumer. Milk and its products must be safe, pleasing, health-giving and reasonably priced. If dairy does not change, some products will fade away. 

Some countries have run «save the way of life» programmes for small farms, and the US has «Dairy Margin Coverage» — neither has worked effectively. 

As supply and demand level out, component prices will improve but not reach past highs, while current changes provide a sustainable, growable business model. 

Fluid milk, dying for decades, was revived by products like ultrafiltered milk. Competition will cut their high retail prices and speed consumption. 

No business can live in the past — Henry Ford would be shocked by today’s vehicles — and the US must move forward to have a successful dairy business.

About the author

John Geuss writes the MilkPrice blog. He holds a B.S. in Engineering and an MBA from Ohio State University, and worked as a financial analyst at Eastman Kodak, 22 years at Borden (VP, engineering, plant and operations management) and 22 years at Adisseo (director, IT and marketing); he now consults in dairy and food processing and is a Licensed Professional Engineer. More on the author’s page.

Source: Milk Pay (MilkPrice Blog)