Michigan seeks to mop up milk surplus with $58m dairy factory

Producers in the state lost more than $164m last year, according to its agricultural department, at a time when the industry is slowly opening up to private equity.

A large-scale dairy facility being developed by a Wisconsin-based processor has been deemed “strategic” by the state of Michigan.

Announced last November, the $57.9 million project is now set to take off after the Michigan Strategic Fund approved $12 million in financing via “private activity bond inducement.” The Michigan Department of Agriculture & Rural Development is also supporting the scheme with a $500,000 grant, issued through its Food and Agriculture Investment Fund.

Located in Greenville, Michigan, the factory will be built by Foremost Farms, a farmers-owned milk processing and marketing cooperative based in Baraboo, Wisconsin. The 55,000 square-foot plant will have 33 staff and condense 3.2 million pounds of raw milk every day. In future phases of the “dairy campus” it could produce up to 6 million pounds daily.

The factory “will provide much-needed processing for dairy farmers in that region of Michigan,” said MDARD director Jamie Clover Adams. “The impact of these investments on local, regional and statewide economies cannot be overstated.”

The department estimates that Michigan milk producers, which contribute $15.7 billion to the state’s economy, lost $164 million last year. MDARD largely attributes this to persistent oversupply in the state. Michigan’s 1,747 dairy farms, which produce more than the state consumes, shipped out more than 24 percent of their output last year.

Foreign cash in new bottles

The news comes as industry insiders note a growing amount of foreign direct investment targeting US dairy, which some reckon could help clear the way for private equity to come in. By seeking to bring cooperatives into vertically integrated partnerships, CoBank senior economist Ben Laine told Agri Investor last week, joint ventures between incumbents and foreigners could test out new models of price negotiation and profit sharing that could then be useful to financial investors.

“That might help reduce some of the volatility and open up new opportunities,” he added.

Others are approaching the value chain in a different way. In August, Texas-based buyout firm EIV Capital invested $47 million in AMP Americas, a renewable energy company that produces natural gas from dairy waste.