The average cost of milk hauling dropped 1 1/2¢/cwt in the in 2015 in the Upper Midwest, according to analysis released by Corey Freije, an economist with Upper Midwest Federal Milk Marketing Order #30. The analysis was done comparing May 2015 to May 2014.
One and a half cents might not sound like a big deal, but it represent a 9% decline from last year. Weighted average hauling rates were just 15.6¢/cwt in 2015, down from 17.1¢/cwt last year.
“The hauling charges data received by the Federal Order 30 office often represents a flat fee charged by the handler,” says Freije. “This flat fee structure leads to a decreasing average hauling charge when viewed on a per hundredweight basis.”
In addition, some producers may haul their own milk, so hauling charges never appear on their milk check stubs. (About 5% of Upper Midwest farms had no hauling charges reflected on their pay stubs.) But fuel prices were also down $1.43/gal in May from year earlier levels, a 29% decrease, and some of those savings might have been passed on to farmers.
Once again, Wisconsin farmers enjoyed the lowest hauling rates in the Upper Midwest. The weighted average hauling rate was just 11¢/cwt in Wisconsin. North Dakota, with dairy farms often the most distant to processing plants, paid a weighted average of 40¢/ct.
Hauling charges vary state to state, mainly based on competition and distance from farm to plant.
||Weighted Ave. Hauling Charge
Source: Upper Midwest Federal Milk Marketing Order #30
And because many plants have flat fees for hauling, larger producers have lower per hundredweight charges. Those producers shipping more than 5 million lb. of milk in May had a weighted average hauling share of 11¢/cwt. Those producers shipping less than 50,000 lb. of milk in May had a weighted average hauling charge of 51¢/cwt.
Freije notes that just 58% of the milk in the Upper Midwest is produced by just 9% of the farms. These farms pay 41% of total hauling charges.
Read the full report here.