Dairy farmers are quitting en masse, but milk production keeps growing in another sign of the terrific forces at work against small dairies in the Upper Midwest.

A report this week from the U.S. Department of Agriculture showed that October milk production in the state grew by 15 million pounds, or nearly 2%, compared to the year before, even though the state lost 10% of its dairy farms last year.

Cows have been growing more productive since World War II, and the survivors in the dairy business today are generally more efficient than the ones who leave.

"Every new generation of cows is better than the ones we had the previous year. Why? Because of better genetics, because of better management," said Marin Bozic, a dairy economist at the University of Minnesota. "The second factor is that as you have people exit the industry, typically those who exit are those who haven't invested in their dairy recently, so those that remain will tend to have higher milk per cow than those that leave."

Minnesota lost one in 10 of its dairy farms in 2018, and the roughly 2,500 that remain are in turmoil. More than 90% said in a recent Minnesota Milk survey that their industry is in crisis, and more than 40% said they either can't get a loan from a bank or the terms are unreasonable.

The booming growth of dairy in western Minnesota, where Riverview Dairy is building farms that house as many as 9,000 cows, is feeding expansion of milk-processing capacity on that side of the state. Quebec-based Agropur has invested $250 million to triple the milk-production capacity of its cheese plant just across the border in Lake Norden, S.D., to about 9 million pounds per day. First District Association broke ground this fall on an expansion in Litchfield that will add 80,000 square feet to its processing plant there. Associated Milk Producers Inc. (AMPI) is expanding a plant in Paynesville, Minn., 35 miles west of St. Cloud.

"The I-29 corridor of Iowa, South Dakota and Minnesota has definitely seen the most cow growth, so it would make sense for future plants to follow cows wherever they may be," said Lucas Sjostrom, executive director of Minnesota Milk, the state dairy trade group.

But southeast Minnesota just lost a processing plant. AMPI announced in early November that it is closing its Rochester cheese plant, which employs 75 people. The cooperative also closed its nonfat dry-milk plant in the northeast Iowa town of Arlington. Milk that had been processed at those two locations will be routed to an AMPI cheese plant in Blair, Wis.

The co-op cited a decline in dairy-farm numbers and milk production in the region as the reason for the closures.

Sjostrom insists small farms can be efficient and succeed. Prices are up by more than $4 per hundredweight in the past year for class III milk that's used to make cheese. December futures for that milk are $18.72 per hundredweight. A Kemps ice cream plant in Rochester continues to accept milk. AMPI is expanding a plant in Sanborn, Iowa, 30 miles south of Worthington.

"Our farmers haven't lost any choices," Sjostrom said. "I think we're in a decent phase of expansion in the Minnesota area that hasn't happened in a while."

But the long-term trend of greater efficiency in dairy is inescapable, Sjostrom said.

"We've significantly reduced the number of cows in Minnesota," he said. "We are using somewhere around two-thirds less water and land than we were during World War II to make the same amount of milk."

Adam Belz • 612-673-4405 • @adambelz