First District dairy co-op seeks $10 million from state to fix Litchfield wastewater system to avoid halving production

First District Association, a farmer-owned dairy cooperative, urged the Minnesota House Ag Finance and Policy Committee to consider a $10 million state contribution to a pretreatment and digester project in Litchfield that the co-op says is needed to meet state wastewater compliance and avoid a large-scale reduction in milk processing.

For the record, Bob Hoffman, president and CEO of First District Association, said, “We have approximately 570 family farm owners of the cooperative, that cover across 46 counties, that produce roughly about 8,500,000 pounds of milk a day.” He told the committee that the cooperative is the state’s largest dairy processor and that its Litchfield plant produces about 800,000 pounds of cheese a day and roughly 100,000,000 pounds of whey protein and lactose powder annually, with more than 60% of those powders exported.

Hoffman said the cooperative invested roughly $46 million in wastewater-related upgrades as part of a decade-long modernization plan and later completed a broader roughly $200 million expansion commissioned in 2021. But the city-owned wastewater system is currently out of compliance with tightening effluent limits and First District is under a schedule of compliance with the Minnesota Pollution Control Agency (PCA).

To resolve the issue, First District and city leaders designed a pretreatment/digester solution that would be built on city land and operated in partnership with the cooperative. Hoffmann described the proposal as the least burdensome option for taxpayers and said the pretreatment and digester “will address and resolve the current compliance problem that we are in today,” which he said is primarily a biological oxygen demand (BOD) issue, with phosphorus and nitrogen parameters tightening further.

Hoffman told the committee he asked the state for $10 million in direct support—the same request that did not clear the last session’s final minutes—and that without resolving the compliance issue the plant could be forced to scale back processing; an initial scale-back scenario described in testimony would cut processing by roughly half.

Tim Schrupp and Megan Shrupp, dairy-farm owners who supply the cooperative, described the plant’s role in maintaining markets for family farms and emphasized the regional economic and generational importance of a modern processing facility.

Committee members asked technical questions about bonding eligibility and the use of dairy checkoff funds. Nonpartisan staff said a national and regional checkoff exists to fund marketing; Hoffman said checkoff monies cannot be used for capital projects. Members discussed whether projects that have already broken ground are eligible for certain bonding programs and noted the cooperative began construction to meet PCA timelines.

The committee did not take a vote. Lawmakers asked staff to review checkoff restrictions and other financing options while acknowledging the time-sensitive compliance schedule. The cooperative said it will continue to pursue a mix of financing and asked the committee to consider the $10 million request as part of upcoming budget discussions.

Ending: Members said they will follow up with staff research on financing options and the cooperative said it will remain available to provide additional documentation to the committee.