Tillamook facility tries to curb overproductionTILLAMOOK - Dairying in Tillamook has its challenges, but overproduction has not been one of them - until now.

Tillamook County Creamery Association has implemented a milk supply management program aimed at curbing expansion among dairies shipping to its Tillamook plant.

"It's to slow down the supply of milk production here in Tillamook," said Chief Executive Officer Jim McMullen. "We've too much milk as a company, not unlike anyone else."

At first glance, it might be easy to blame an oversupply of TCCA milk on the co-op's expansion to Boardman, where a group of dairies under contract with the association recently geared up to supply a new cheese plant there. That milk is weighing on the co-op, but so is a surge in member production on the Oregon Coast.

Tillamook County's milk cow population grew by 4,600 between Jan. 1, 2001, and Jan. 1, 2002, according to the Oregon Agricultural Statistics Service. County cow numbers for 2003 are not yet available, but McMullen said the co-op has projected 10 percent growth in production for this year.

When TCCA was planning its expansion to Boardman in 1999, McMullen said the co-op didn't anticipate local growth of 7 to 9 percent in the past two years. Tillamook County's wet climate and flooding prohibited growth in the past.

"We really didn't think milk production (in Tillamook) was going to grow any more than 2 to 3 percent," he said. "We just didn't see people wanting to grow. It caught us by surprise."

The flood of milk might not be such an albatross had it come at a different time. TCCA's Boardman plant ramped up production just a few months before the country plunged into a recession and the cheese market hit the skids. Now sales of premium-priced Tillamook cheese are softer, and commodity cheese prices have declined from an average of $1.44 per pound in 2001 to just over $1 today. All that resulted in a $1.80 per hundredweight decline in producer payouts, McMullen said.

The co-op can't continue to pay producers premium prices for all of their milk if they can't sell it into premium markets. So the supply management program aims to pay producers a premium price for part of their milk, and less for that sold into commodity outlets - such as milk powder or commodity cheese.

The co-op's board of directors saw the program as a way to prevent the current oversupply from becoming a bigger problem.

"If (producers) want to protect their price, we have to limit the volume," McMullen said.

Each farm was assigned a "base" computed from the past three years of production data. They'll still earn premium prices for that base, but a lesser amount for the remainder. How much producers receive for the excess milk depends on where TCCA can sell it, and for how much.

"We'll do what's in the association's best interest," he said.

There's also a problem of processing capacity. McMullen said the co-op wants to avoid expanding its coastal plant - but the surge in production has it running overtime.

Caught in the middle are TCCA producers in the midst of expanding, McMullen said. Banks made loans based on the premise that their customers would earn Tillamook's premium price on all of their milk, but now they'll only earn that much for a portion of it.

Producers who were not expanding - but who were considering it in the future - are also caught, McMullen said. Some feel they've lost the opportunity now that the premium market seems to have been eaten up.

McMullen is optimistic that the co-op's future will be bright again. But it's harder to pinpoint just when that light at the tunnel will be a flame instead of a flicker.

"Once we have all that milk under branded sales we will have learned something from this," he said.

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