Proximity to plants and competition have a number of benefits. For dairy farmers in Wisconsin, Minnesota and bordering states, those positive attributes include low hauling costs that even continued through the high fuel-cost years in which diesel prices pushed above $4 per gallon.
Hauling costs averaged just 15.64 cents per hundredweight in May 2015, down from 17.13 cents one year earlier. To be fair to all of the region's producers, those costs creep up to 19.25 cents when 667 herds - 5 percent of the region's total - are removed from the study. Why? It's this group that pays no milk transport costs at all.
Hauling charges in the upper Midwest have been different than other regions of the country for years. Most plants simply charge a flat fee to dairy farms, with the processor picking up the rest of the tab.
Given this flat fee, hauling charges drop precipitously as a dairy farm ships more milk. That means herds sending 600,000 or more pounds of milk to a processor paid just 9.5 to 11.75 cents per hundredweight, concluded Corey Freije in his paper Milk Hauling Charges in the Upper Midwest Marketing Area.
In the region, Wisconsin and northern Illinois boast the lowest shipping costs, while farms in North Dakota average 89 cents per hundredweight . . . it's distance from plants that drives up expenses for these producers.
(c) Hoard's Dairyman Intel 2016
March 28, 2016
