New processing capacity in West Virginia and Georgia is bringing optimism to the dairy community in the Southeast. However, 2023 weakened the financial positions of many dairy producers across the region. Many describe the mood entering 2024 as troubled or struggling; others are cautiously optimistic about the dairy economy improving this year.
“You see the entire gambit in Georgia,” says Georgia dairy producer Matt Johnson. “Those that were able to take advantage of the higher prices in 2022 and maintain that momentum into and through 2023 are positioned to take advantage of opportunities in 2024. Those that used 2022 to catch up from the previous year’s tight margins will be at a disadvantage if milk prices fall.”
He adds that many dairy producers in his state have a “wait-and-see mentality” on how to proceed in 2024.
Retired Southeast Milk Inc. CEO Calvin Covington says dairy producers in the Southeast are “hanging on” after a challenging 2023 and hoping 2024 will be better.
“The average 2023 FMMO blend prices in the three Southeastern FMMOs was about 4 dollars and 50 cents per hundredweight lower than 2022,” Covington says. “Lower milk prices along with higher milk production expenses in 2023 are resulting in many dairy farmers entering 2024 with financial challenges. One of the biggest concerns is tight margins. Currently, feed costs look lower in 2024. However, other costs of production, such as labor, continue to move higher. Interest expense took a big jump in 2023. There may be a little easing in 2024.”
Decreasing feed prices have producers like Johnson feeling cautiously optimistic.
“Lower feed prices have given some producers a little room to breathe, but we are carefully watching milk prices to make sure we don’t slip into negative margins,” he says.
The mood is less than optimistic in Kentucky, where dairy producers are very concerned and worried about their financial picture for 2024.
“Producers are concerned about paying their bills and how they will survive,” says HH Barlow, a Kentucky dairy producer and executive director of the Kentucky Dairy Development Council. “Cash flow in the last six months of 2023 was negative for many producers. The forecast for milk prices and margins has improved in the last few weeks and offers some hope for better times in 2024. Dairy Margin Coverage (DMC) kept a large number of our small dairies in business.”
Barlow says he is especially concerned about how smaller dairy farms will be able to continue navigating these financial challenges.
“Not everyone is suited for large-scale dairying,” he adds. “We are gravely concerned about the sustainability of the small and medium-sized operations. Milk price volatility is an extreme problem and farm-to-market hauling is also a very serious issue. The 2024 outlook needs to be much more positive.”
The mood is similar in Tennessee.
“Tennessee has lost many dairy farms, and those that are left are struggling to pay bills, some are challenged by progress, and many farmers do not have children to hand over the farm to,” says Tennessee dairy producer Stephanie Nash.
Not having a next generation interested in taking over the farm is also a problem in Georgia.
“We have had several dairy producers decide to retire and sell out because their children are either not on the farm or perhaps involved in other aspects of the agricultural industry but not interested in taking over the dairy,” says Bryce Trotter, executive director, Georgia Milk Producers. “Some of those producers are still farming but have transitioned to other commodity sectors like beef or row-crop production. There are also some farms that have been squeezed over the past two years by rising input costs, and the high milk prices in 2022 weren’t enough to make up for expensive feed, fuel and labor we’ve seen recently.”
Urban sprawl and development are challenging across the Southeast, especially as more people move to the region and cities grow.
“Land prices and non-agricultural land uses continue to put pressure on the ability to farm across the South,” says North Carolina dairy producer Karen Jordan.
In Tennessee, Nash says they are seeing a “significant shift” of farms selling to housing developers.
“Unfortunately, there will be no growth in the farming community with the aggressiveness of land development and investments,” Nash says. “Tennessee continues to take from rural communities instead of protecting them. I believe we can slow down growth by protecting valuable agricultural land, but our leaders need to stand up for farmers.”
Bright spots
Increased dairy processing capacity and a consumer focus on buying local are “encouraging” for local dairy producers. Additionally, a recent federal order decision in the Southeast will provide a partial reimbursement of farm-to-market producer milk-hauling expenses.
Despite the challenges coming out of 2023, Nash is optimistic for the future.
“We are praying for higher milk prices and lower farm input costs,” she says. “I believe more farms are also looking for more outside income to bring to the farm, which is very common in Tennessee as many farmers have a second job in addition to their farm.”
One way to generate extra income is through on-farm processing and other opportunities to sell direct to consumers.
“Consumers truly want to buy local, and Tennessee has one of the strongest programs for supporting local,” Nash says. “Tennessee consumers will choose local over corporate America if it is available.”
Covington agrees that there is growth in the number of on-farm processing and manufacturing operations, which is “helping some smaller dairy farmers continue in business.” Some states are also “actively involved” in assisting dairy producers in this area, he says.
“However, for most dairy farms, the key to future growth is profitability and/or the availability of markets for increased milk production,” Covington adds.
Adding to the optimism in southern Georgia is the new Walmart processing facility in Valdosta, Georgia, which is expected to come online in 2025.
While Class I sales continue to decline, Georgia milk production has increased by almost 25% over the last decade, resulting in about half of the milk in the Southeast region now located in Florida and Georgia, Covington says.
Many producers and industry leaders say the overall reaction to Walmart’s announcement has been “good.”
“The new Walmart plant will provide an opportunity for Georgia dairies to look at other options to market their milk that might not have been available to them in the past,” Johnson says.
Walmart has previously been a large dairy customer in the region. The new facility brings processing closer to many of the supplying dairy farms, which may reduce milk-hauling expenses since local milk currently travels a “considerable distance” to market.
“Instead of milk being hauled from south Georgia to central Florida to a plant that processes milk for Walmart, the farm milk will instead travel to a local plant for processing,” Covington explains. “Then, Walmart will transport the processed milk to its stores – moving packaged milk instead of farm milk a further distance.”
He adds that while it does add processing capacity, there are “only so many pounds of fluid milk sales” in the Southeast and a potential outcome may be more existing fluid processing facilities closing their doors as fluid milk processing shifts from the facilities currently bottling milk for Walmart to the new Walmart processing facility.
West Virginia also welcomed new processing in 2023 at Mountaintop Beverage’s new facility in Morgantown.
“West Virginia needs over 1 billion pounds of milk annually to supply the processing capacity in the immediate state and region. United Dairy and Mountaintop Beverage both depend on milk from the expanding region, so there is a tremendous opportunity to produce more milk in West Virginia,” says West Virginia dairy producer Joe Shockey.
Traditionally considered an energy state, the dairy infrastructure has “mostly faded” in Appalachia, causing a loss of dairy service and support for existing dairy farms. As a result, many of the existing dairy operations are located in counties bordering dairy infrastructure in Ohio, Pennsylvania, Maryland and Virginia. However, the state is “committed” to revitalizing their local dairy industry and becoming a “hub of dairy innovation.”
“Available support services will only increase over time with increasing cow numbers in West Virginia,” Shockey says.
Shockey adds that West Virginia is most encouraged by the opportunities to “rebuild, restore, revamp, reimagine and recreate the dairy food supply chains that are beneficial to producers, haulers, processors and ultimately the consumers who value dairy food products,” noting the state’s strategic location with numerous competitive advantages for a sustainable and resilient dairy future.
