Wisconsin Dairy Co-Op Offers Creative Incentive for Early Exits
Ellsworth Cooperative Creamery (ECC) in northwest Wisconsin is offering to return 100% of a member’s equity immediately if he/she agrees to cease operations.
The accelerated equity option was offered when one of the co-op’s milk buyers backed out of a processing contract due to a drop in demand from the COVID-19 pandemic and flooded ECC with a 7% surplus, says Paul Bauer, ECC general manager and CEO.
Some members are creatively reducing milk production by drying off cows early or altering rations post-peak. But for those producers on the bubble, who were thinking of retiring or getting out of the dairy business this year, the early return of equity is an added incentive to do so now, says Bauer. Normally, a cooperative member’s equity is revolved out over a much longer time frame, typically 10 years. A letter to members dated April 1 asked for an early-exit decision by April 15th.
The program will only apply to the first 100,000 pounds of milk per day of member milk. (The co-op is currently taking in a little over 2 million pounds of milk per day from its 295 members.) Exiting members will not be allowed to sell cows to existing ECC members and will have to provide proof of cattle sales. Bauer says the original plan was to have sales completed by April 15th, but area slaughter plants have stopped operating for two weeks. So he implied the required sale dates might be extended.
As of April 6, there has been some interest in the program but not a lot, says Bauer. Members are typically opting to reduce production in other ways.
EEC has a cheddar cheese plant in Ellsworth, Wis., and an artisan cheese factory, making some 80 varieties of cheese, in Comstock, Wis. For more on the plants, click here.