Dairy processing plant under construction.
September 12, 2017

27 Billion Pounds of Dairy Processing Capacity Needed Over the Next Decade

 |  By: Jim Dickrell

An estimated 27 billion lb of additional dairy processing capacity will be needed over the next 10 years if dairy farmers continue at their current rate of expansion.

So says a report from CoBank, issued today. That’s based on the fact that U.S. dairy farmers are producing 3 billion lb more milk each year, fueled by more milk per cow, more cows per farm and out-right dairy expansions.

To get some idea of the plant expansion necessary, 27 billion lb of capacity would require about 10 more cheese plants processing 7 million lb of milk per day. Each such plant can cost upwards of $500 million. 

Put another way, 27 billion lb of milk production is just 3 billion lb shy of what Wisconsin produces annually. Wisconsin is the nation's #2 dairy state. Twenty seven billion lb is also just slightly more than the combined annual production of New York and and Idaho, the #3 and #4 dairy states.  

“Dairy processors are faced with the challenge of handling an ever-growing milk supply while anticipating the right product mix to meet consumer demand,” says Ben Laine, a senior dairy economist at CoBank. But simply expanding processing capacity is not sustainable if there is little or no demand for those products.

Several plant expansions projects are already underway or have been completed, but the sheer volume of added capacity needed is daunting since each mega-plant can cost hundreds of millions of dollars. Since dairy co-ops largely bear the brunt of near-term milk surpluses, many are actively looking for ways to discourage farmers from expanding and some have supply controls already in place, says Laine.

“At times of surplus milk, the need for added processing capacity in any form seems critical, but for the long-term health of the industry, the focus should be on building the right type of capacity to meet growing global demand,” says Laine.