Darigold has slashed milk payments to farmers by approximately 20% to 25% to finance cost overruns at a 500,000-square-foot processing plant under construction in Pasco, Wash.

Darigold Chairman Tim Kuenzi told the cooperative’s members in mid-April that payments will be reduced by $4 per hundredweight, approximately 11.5 gallons, through at least the end of June and probably the rest of the year.

Darigold will divert $2.50 of the $4 reduction to finish the Pasco plant this year, according to a letter to members signed by Kuenzi. The remainder will balance operating losses. The cooperative will evaluate check reductions monthly, Kuenzi said.

Darigold broke ground on the plant at the Port of Pasco in 2022. The $600 million facility was scheduled to open in early 2024. The plant is approximately $300 million over budget, according to people familiar with the matter.

Darigold declined to confirm the cost overruns. Darigold spokesman Chris Arnold said in an email cooperative members collectively agree to support capital investments.

“Pasco construction is moving along and we should have more to share on opening and beginning of operations shortly,” Arnold said.

The 107-year-old Seattle-based cooperative has about 300 members in Washington, Oregon, Idaho and Montana and has 11 processing plants in the Northwest.

Skagit County dairy farmer Jason Vander Kooy, a co-op member, said high prices for beef and bull calves have softened the blow, but the milk-check reduction could still make the difference between making money and and losing money.

“It’s a big deal. There are a lot of guys who don’t want to quit farming, but can’t keep farming if this continues,” he said.

“The problem is we don’t have any other options,” Vander Kooy said. “We just can’t leave the plant half constructed and walk away.”

Darigold held a groundbreaking ceremony in September 2022. The plant was scheduled to be fully operating by last July and capable of producing 175 million pounds of butter and 280 million pounds of powdered milk products a year.

The project lagged behind schedule. Darigold said in September the plant was 60% finished and was expected to open sometime in the middle of 2025, The Tri-City Herald reported.

Co-op members have had to finance cost overruns, beginning with a $1.50 reduction at the end of 2023, according to people familiar with the matter.

Yakima County, Wash., dairy farmer Dan DeRuyter said the milk-check reductions has cost his dairy almost $5 million in the past two years. “It’s awful,” he said. “I can’t go on much longer. I don’t think producers will be able to stay in business.”

Whatcom County, Wash. dairy farmer John DeJong said his family’s dairy has been shipping to Darigold for 75 and has never missed a milk check. “That’s the strength of a co-op,” he said. “I know people who have jumped ship and missed checks.” The $4 deduction, however, “stinks,” he said.

“The deduction has eliminated investment. We’re more in survival mode. It’s not a read good time to move forward,” he said.  “This is not a sustainable position — to dip into producers’ pockets. … We have to figure out where we went wrong and correct it.”

Washington State Dairy Federation policy director Jay Gordon said the reduced milk checks have added to challenges already facing dairy farmers. “We are hearing from producers occasionally (that) this is a tough situation,” he said,

The port received $3.6 million in federal funds in 2023 to build a rail line to serve the Darigold plant and smaller businesses in an industrial park.