The Dairy Decline

The Emptying Glass

Most of the Minnesota dairy plants that are closing are the older ones like Old Home’s. And because those types of facilities characterize the state’s dairy industry, Minnesota will continue to lose market share faster than most, if not all, of the top 10 dairy states. The state lost its fourth-place ranking to Pennsylvania in 1991 and its fifth-place ranking to Idaho 12 years later. It’s expected to fall to number seven soon, overtaken by New Mexico.

“We’re just not getting the new investment in Minnesota that is occurring in some other parts of the country,” says Mark Furth, president and general manager of Associated Milk Producers, Inc. (AMPI), a New Ulm dairy cooperative that annually handles 2 billion of the state’s 8.2 billion pounds of milk. AMPI owns the newest plant in Minnesota and the only large-scale butter plant in the state, now one of the top five butter plants in the country based on volume.

“When an industry has growth, it invests,” Furth says. “New technology is just not being adopted at the plant level like it should be because of our stagnant milk supply. Farms also aren’t adopting technology fast enough.”

Some product manufacturers have been making adjustments. The 122-year-old Schroeder Company, based in Maplewood, started feeling the competitive squeeze about 10 years ago. The nation’s two top milk bottlers at the time, Dallas-based Dean Foods and Suiza (since merged with Dean), were buying any independent bottler that would sell. “They were consolidating operations, which allowed them to take advantage of the magnitude of their size and the lower costs of administration,” recalls Carl Schroeder, chief operating officer for the Schroeder Company. “We were becoming one of the few independents.”

Schroeder responded by substantially investing in its plant and expanding its product line. “Over the last three to four years, we added 55,000 square feet and new technology,” Schroeder says. “We added equipment to process extended-shelf-life products, and aseptic processing that allows us to make products with 6- to 12-month shelf lives.” This allows Schroeder to make products such as lactose-free milk, soy milks, and rice milks for customers both locally and nationally. Fresh fluid milk, once the bulk of its business, now accounts for about 50 percent of the company’s total product volume.

Land O’Lakes took another tack. According to Jim Sleper, the cooperative’s director of milk supply, by the 1990s, staking a major claim in the Upper Midwest was not enough to enable the co-op to compete nationally, so it began merging with co-ops in other regions. Besides its cheese plant in Melrose and facilities in Ohio, Wisconsin, and Pennsylvania, the co-op owns large plants in California. Land O’Lakes now makes a substantial amount of its butter and cheese on the West Coast.

Mitch Davis believes everyone in the Minnesota dairy industry bears some blame—processors, producers, and legislators. “We had closed minds and the rest of the nation passed us by,” he says. “We didn’t build asset sheets [i.e., technology and equipment upgrades]. We stayed in a lifestyle. We thought if we worked hard seven days a week, we would be rewarded with a viable business.”

The average age of a Minnesota dairy farmer is around 58, according to the Minnesota Department of Agriculture. As farmers retire and their children decide not to take over, what plants remain in Minnesota will have to reach farther afield to get the milk they need. That is, unless larger farms step in to make up for the shortfall.

At this point, that doesn’t appear likely. And so, one of Minnesota’s longtime major industries will continue to decline, taking numerous jobs with it.