State officials are offering financial help to Wisconsin dairy farms in desperate need of customers and for processors already oversaturated with milk to absorb more.
Gov. Scott Walker, who on Tuesday also weighed in on the international trade tension at the root of the crisis, announced that the Wisconsin Housing and Economic Development Authority will temporarily loosen the rules on a revolving capital loan program for dairy farmers and milk processors.
It’s not a long-term solution, state officials say, but it provides another resource for Wisconsin’s dairy farms affected by Grassland Dairy Products Inc., of Greenwood, which informed 67 dairy farms earlier this month, most from Wisconsin and some from Minnesota, it no longer would accept their milk after May 1.
“It’s a way of enhancing their working capital and it’s a better way to get (dairy farmers) through a cash-flow situation when they’re running short on working capital,” said Dan Smith, administrator for agricultural development at the Wisconsin Department of Agriculture, Trade and Consumer Protection.
The move also gives the state’s dairy processors a low-cost financial resource to help them invest in additional storage, which would allow them to process more milk, Smith said.
“(Processors) have a need for working capital to help them manage costs for storage, distribution and inventory control,” he said. “What we’ve noticed as we’ve been working through this problem is that (milk) inventory is full and we need a way to encourage processors to take on more milk.”
Boost processing capacity
The state has been assisted by dairy farmers unaffected by the Grassland decision and industry groups, including the Dairy Girls Network, around the state to find processors to take more milk.
At least 39 dairy farmers who sold to Grassland still were in search of buyers on Tuesday, Smith said. A total of 19 of the affected dairy farms have found new buyers, including eight whose milk will be taken on by Mullins Cheese.
Smith said processors are reluctant to take on more milk but a WHEDA loan can mediate the risk to processors of adding inventory space to increase production.
“This would allow us to go back to those farms and take that milk,” he said.
The changes to the WHEDA program boost loan guarantees to 80 percent up to $200,000 for eligible dairy farmers, while qualified processors can access an 80 percent loan guarantee up to $750,000. This change is effective through Aug. 1.
Grassland’s decision earlier this month was driven by recent Canadian action that created a new set or class of dairy products and new prices for ultra-filtered milk, a processed, high-protein ingredient typically used in cheese production. The new pricing structure made the cost of U.S. ultra-filtered milk higher for Canadian processors, encouraging Canadian processors to buy it domestically.
Ultra-filtered milk exports to Canada represented about $150 million in annual business to American dairy processors, with Grassland commanding about two thirds, or $100 million, of that business. Farms in New York and Minnesota also were affected by the change. Margaret Hart, a spokeswoman for the Minnesota Department of Agriculture said Tuesday that Grassland has since agreed to continue buying milk from all the Minnesota farms affected.
The affected farms in Wisconsin ranged in size from 12 cows to 3,200 cows. Tim Prosser, a Columbus dairy farmer who was dropped by Grassland, said Tuesday that he and his father might have to shut down their business and sell their 100 cows if they can’t find a new customer by May 1.
“Even if we keep feeding the cows and milking them, it still costs us money,” Prosser said. “If we have to turn around and dump the milk, we’d be looking at a $35,000 loss every month.”
Trump: ‘We will not
stand for this’
Before announcing the loan program changes, Walker praised President Donald Trump for hitting back at Canada by imposing steep import duties on Canadian lumber.
Walker said he spoke with Trump Monday and Tuesday about the dairy crisis.
“It was great to talk to you this morning,” Walker told Trump on Twitter after the conversation. “Thanks for supporting WI dairy farmers!!!”
Trump referenced the crisis on Twitter hours after his administration announced the tariffs: “Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!”
State Senate Majority Leader Scott Fitzgerald, also a Republican, said he hopes the changes will encourage processors to make investments to accommodate more milk but noted they won’t immediately help farmers who’ll have nowhere to send their milk starting Monday.
— The Associated Press contributed to this report.