Six Factors That Affect Milk Hauling Rates in the United States

Milk hauling rates differ between regions and fluctuate from month to month. There are a number of reasons why:

Fewer Dairy Farms With Greater Distance Between Them

When towns and cities began to boom in the late nineteenth century, large dairy farms began to develop to supply the growing urban population with milk, cheese, and other dairy products. Dairy farms began to band together to find efficiencies of scale to keep up with urban populations growth. The result was fewer but larger farms and this process is still underway today. With the advent of these larger farms, milk haulers have to pick up larger loads of raw milk per farm with greater distances between farms.

Longer Distances to Plants and Population Centers

In response to fewer dairy farms, milk processing facilities are also increasing in size while declining in number. Consequently, haulers are forced to transport their tanks over longer distances after completing a milk assembly route. The farther away the processing plant, the higher the cost of getting there due to extra gas, increased wear and tear on the truck, and more time spent driving.

Supply, Demand, and Government Policies

Prices for milk and dairy products are dependent on a number of global factors and they rise and fall on a monthly or even weekly basis. At the farm level, milk prices are determined by wholesale commodity prices for all dairy products such as cheese, butter, non-fat dry milk, and dry whey. Shifts in supply and demand shifts as well as government policies also contribute to price fluctuations. The federal milk marketing orders and the federal dairy price support program also play a role in these charges.

Cost of Feed, Number of Cows

The cost of feed has an impact on the number of dairy cows on farms. When feed prices decrease, the number of cows on farms increases in step, milk is flowing and milk prices drop. These values are only noticed between twelve and eighteen months after a noticeable increase or decrease in the cost of feed. So, the lower the feed prices the higher the amount of dairy cows per farm and the higher the amount of milk available for milk haulers to transport.

Of course, the amount of milk yielded per cow is also impacted by the seasons, technology, and competition in the U.S. dairy industry.

Global Demand

When demand is greater than supply, prices rise. Currently, there is a growing demand for American milk products in many parts of the world. Weather problems in countries like Russia, Europe, and South America have adversely affected the grain crops that are needed to feed dairy cattle. This, in turn, has led to a shortage of milk. Other places like China are concerned about food safety in their own country and are looking at foreign markets to supply their demand.

Implications for Milk Haulers

The milk hauling business has to become even more efficient. Dairy farms milk their cows up to three times a day, but may not have the storage capability for the raw milk. This means milk haulers may need to alter their schedules and be more flexible to the needs of their clients.

Making efficient use of modern technology such as GPS to optimize driver routes, as well as other systems to reduce fuel costs and boost efficiency such as using computerized units to input information, load weights, and other criteria.

References

http://www.agweb.com/article/wisconsin_has_lowest_midwest_milk_hauling_NAA_Dairy_Today_Editors/

http://dairy.wisc.edu/pubPod/pubs/All_You_Ever_Wanted_to_Know.pdf <?p>

http://pubs.cas.psu.edu/FreePubs/pdfs/UA412.pdf

Mark Stevenson

Mark Stevenson

As ETW’s Director of Milk Operations, it’s Mark Stevenson’s job to look at the big picture. Right now, he’s working hard to ensure that the new satellite communications system that is installed in all the trucks and terminals is being used, and used correctly. Thanks to Mark, there’s also a smooth transition between dispatch, terminals and drivers. He’s a problem-solver – whether it is staffing issues, maintenance glitches or customer challenges, he’s the go-to-guy. He makes sure loads are full, equipment is well maintained and staff members are satisfied.