Magic Valley Dairies Seeing Milk Glut

(KMVT/KSVT) - More milk production is not always good news for dairy owners. "We're in a situation today where we've got more local milk production than we have processing capacity that can handle the production," said Rick Naerebout, CEO of the Idaho Dairymen's Association. "And so we're faced with a situation where we have to push milk out of the area to find homes to process it."

Naerebout said he heard word in the fall that some facilities will lose their contract effective the first of the new year.

"It was a bit of surprise for everybody," he said. "You know, it was the first time that anybody can think of in our industry here in Idaho where dairymen hasn't had a market for their milk. So it's a little bit shocking that a dairy producer was notified that they didn't have a place to sell their milk."

Most buyers are local and finding a market out-of-state farther than Salt Lake City would cost too much.

"We're talking about putting milk over the road and traveling 700 plus miles," he continued. "On a cost basis, that's going to cost $4-5 per hundredweight. If you stack that up against what a dairyman's being paid for their milk, they're going to be paid $15 per hundredweight, give or take. So you're talking a quarter of that milk sale going just to pay for the freight to move it to that market."

For the dairies who received notices, he told us upwards of 10,000 cows may be sold off if another buyer can't be found.

It's not that dairies are adding so much cattle, but the fact that they have been more efficient in getting milk per cow from converting feed to milk.

This situation, though, could be worse without trade agreements like the North American Free Trade Agreement.

"Without NAFTA, access to our biggest trade partner in Mexico ends up restricted and could make this situation worse if we don't continued to have access to that Mexican market," he continued.

He said he doesn't expect more notifications to go out, but it's hard to tell.

Since milk has been a top commodity in the state for years now, he told KMVT this is an opportunity for some companies to take advantage of in the long run.

"Long-term, we expect it will see somewhere either existing companies will expand their processing capacities, or we'll see interest in new investment in Idaho and see a new processor come to the area to be able to take advantage of the plentiful milk supply that we have that comes with very high quality," he said.