Milk tankers parked at dairy.
April 28, 2017

What Would You Do If Your Processor No Longer Picked Up Your Milk?

 |  By: Dairy Talk

It’s a scary, nightmare-type of thought. You go to your mailbox and find an envelope containing a letter from your processor that in 30 days, the processor would no longer pick up your milk. What would you do?

Like the 75 or so Midwest patrons of Grassland Dairy who found themselves in that exact situation a month ago, you’d probably start calling every dairy processor you knew or could find on Google maps within a day’s truck drive of your farm. 

Luckily, most of Grassland’s ex-patrons farms have found a new home for their milk. But that’s due more to the good graces of the processors who juggled things around to make room for the milk—some 1 million lb. each day. Kudos to them.

But this could happen again. As an individual dairy farmer, whether you have 50 cows or 500, is there anything you can do to prevent something like this happening to you? There are maybe a few things you can do to better your odds:

• Produce the highest quality, lowest somatic cell count milk that you possibly can. Also make sure you’re producing the kind of milk, on a protein and fat basis, that makes you a preferred producer not only to your current processor, but other plants in your area.

• Have a written contract with your processor. Too often, particularly with proprietary plants, milk procurement is done with a hand shake—or less. A written contract might not be fully protective, but it could and should spell out terms of what is expected of both parties. Too often, farms are dropped for “milk quality” issues, a euphemism for other issues. A 300,000 SCC might be tolerable when milk is short, but reason for cut-off when a plant is swimming in surplus milk. At the very least, your contract should state how many days’ notice each party must give if the contract is cancelled.

• Forward contract milk directly with your processor. While many farms are reluctant to forward contract, routinely contracting some portion of your milk three to six months out pretty much guarantees a market for that milk. It also gives you some additional piece of mind knowing how your milk will be priced.

• Contact your insurance carrier about business interruption insurance. While not now commonly available, some type of insurance rider for three months’ of milk production might be worth considering. If more farms (and lenders) request this type of insurance, companies might be willing to offer it just as they’ve begun to underwrite environmental risk policies. While business interruption insurance will not guarantee a market, it would give you time to find a new home for your milk or contemplate other options.

None of this is pleasant to think about. But taking action now might let you sleep a little better if that fateful letter ever arrives.