Revealing look at what’s behind the curtain

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Having attended urban food conferences and working with people influencing the locally produced discussions, I have found that the quest by rank and file consumers is for real, local, minimally processed foods. By kowtowing to the global scheme for sustainability, we miss what is behind that curtain: the billionaire food system takeover agenda and the vegan activists who propel it and will quite simply never be satisfied.

By Sherry Bunting, Farmshine, May, 2019

Getting into a social media conversation with anti-animal activists is a truly educational experience. I’ve occasionally been in these back-and-forth discussions before, and didn’t have much tolerance for them.

Over the weekend, however, a simple ‘tweet’ on Twitter thanking farmers, ranchers and veterinarians for everything they do to deal with the tough decisions and situations on the real biological side of agriculture turned into a flurry of vegan responses that took me down a road I did not enjoy traveling.

They were mean, nasty, ridiculing and extreme. Instead of returning their insults, I came back with logic, reality, explanations that would satisfy most people. Instead, it fueled their attacks, and soon they were crawling out of the woodwork to do a pile-on tackle upon every tenet of animal care and agriculture many of us hold dear.

They posted links to flawed studies, talked about doctors telling patients to ditch dairy for causing a host of diseases. They harped on climate change, land and water resources, detailing how they believe cattle are ruining “the ecosystem.”

Quite often I found myself telling them that I respect their freedom to choose their dietary path, but cannot respect their attempts to push this on others or demean and degrade my choices.

Each time I provided a scientific piece of information or a link, they either ignored it and went on to some other seemingly crazy rationale or they called me an animal agriculture ‘shill.’

That word ‘shill’ was used over and over again. It’s their favorite insult. A shill is defined by Webster’s Dictionary as “an accomplice of a hawker, gambler or swindler who acts as an enthusiastic customer to entice or encourage others.”

They accused me of profiting off the misery of animals, of being selfish in destroying THEIR planet (as if it only belongs to them). They wrongly described so much about dairy and livestock farming that it was difficult to hold my figurative tongue and respond in 134 characters or less per tweet another side to the story they were portraying.

In fact, they were against pastured cattle, saying the grasslands should be re-forested and re-wilded. Their agenda became crystal clear in every detail.

What I am explaining here is just the tip of the iceberg, so I sat back and read their tweets, their links, their self-congratulatory tweets to each other as they presumed they had gotten the best of me.

What they didn’t know is that I was studying their game. I chose to respond only to tweets that I felt other ‘watchers’ could benefit in hearing a logical response. I avoided the insult name-game and did not go back repeatedly on one thought for more abuse, but kept my tweets to a minimum, refusing to be goaded.

So, by now you’re reading this wondering, what’s my point? We already know the 3% of the population that are truly vegan anti-animal activists are crazy, why ‘entertain’ them?

Here’s the point. The entire dialog began with a tweet of gratefulness for the less than 2% of our population taking care of food animals, and the veterinarians that are part of that deal. Simple. Gratefulness. There must have been a buzz word in that tweet that sent me to them through social media algorithms, who knows?

But here’s the larger point. They are armed with pseudo-science being published in even some of the more respected and mainstream news, financial and scientific journals.

They have a world view that is increasingly making its way a few steps at a time into U.S. and global dietary policy, environmental policy, regulations and the like.

But here’s an eye-opener. They will never be satisfied. Nothing, I mean nothing, we can do will appease this fringe in its march to infiltrate our institutions. Their less aggressive counterparts – HSUS, World Wildlife Fund (WWF) and others – are already internally working within government and industry.

It goes like this: “Work with us, take the steps we want you to take, and we’ll support you and hold you up as an acceptable animal ag industry.”

Baloney. The old adage of give them an inch and they’ll take a mile pertains here.

This is why I am concerned about the direction of our industry organizations, including the dairy checkoff with its multitude of new initiatives on diet and sustainability and animal care aimed at working with the enemy to somehow get a pass – a social license to exist.

But it’s not the non-governmental organizations, the NGOs, that give us the pass to exist, it is the consumer. Our consumers are being swayed bit by bit by the radical fringe only because we allow them to be. When we validate these NGOs with our internal strategies to “work together with external organizations” we endanger our ability to stand up for truth.

Should we be doing all we can to improve animal care and environmental practices? Sure!

Should we be talking about these improvements? Definitely.

But should we be aligning with the polished and refined versions of this fringe believing they offer us passage with their stamp of approval? No.

Why? Because they will never be satisfied. Not until we stop breeding dairy and beef cows. Not until we stop eating meat and drinking milk. Not until every farm produces plant-based diet alternatives and every pasture is re-wilded to its un-managed natural state.

They will not be satisfied.

Instead, we should be educating the other 97% of the population about the realities of animal biology. A Pennsylvania veterinarian on facebook is doing that. She gets real with her facebook posts and school presentations, and it’s refreshing.

The more we sugar-coat what we do to appease people who will never be satisfied, the more of our mile they will take because we have given them that inch.

This brings me to my next point. Dig below the surface of these fringe folks on Twitter and the organizations our industry is partnering with to build so-called consumer trust, what they advocate for, ultimately, is the world view of billionaires like Bill Gates, founder of Microsoft and the other Silicon Valley investors in fake meat and fake dairy.

Their view of the world is one that relies on their food technology to replace what farmers, ranchers and veterinarians do every day. It’s not that they don’t trust farmers and ranchers, it’s that they believe the world should have fewer cattle, rely more on plant and lab-created proteins, and yes, surprise, they will profit on their patient capital investment to provide that alternative.

There is an organization few know about that I have been researching, called Breakthrough Energy. On their website, they list the ventures and you can see their world view mapped out in great detail. At first blush, it appears to be related to energy, but look deeper, they want to change the food system. The investors and founding members are a who’s who of the rich and famous, including the big tech owners and CEOs of everything from Microsoft, Facebook, Google and Amazon, to big political investors like George Soros and Tom Steyer.

Meanwhile, our consumers live in the real world. And it is the millennials who are changing the consumer quotient as they are funneled into the new planetary lifestyle with the subtle steady drumbeat of fear from our educational institutions.

Animal ag needs strange bedfellows to get their story to be heard; but at the same time, those strange bedfellows are changing our story, leading to programs that will determine who and how to farm.

It’s time for local and regional alliances to be built more strongly than ever. It’s time to partner with rank-and-file consumers, not the big NGOs with billionaire wishes fueling them. It’s time to activate our communities to realize they, too, are being fooled and threatened.

In other words, we need to find other bedfellows – groups and organizations we can rely upon – not the self-proclaimed ‘cool kids’ who say we can be ‘in the club’ if we bend until we break. Because what they want, really, is for us to break.

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WWF school milk waste report ignores the one small step that changes the WHOLE story!

WholeMilkKidsBy the time these two little girls are in school, their happy smiles and enjoyment of milk will be but a memory as the low-fat and fat-free brain-washing will begin and the full-fat brain-building they get at home will come to an end. Milk will become yucky to them, and the one they get with their school lunch and/or breakfast will likely go into the trash. Such is the plight for millions of children in our schools every day over the nine years of government prohibition against whole milk. Meanwhile the weights and waste at U.S. schools are ballooning out of control. 

But never fear, the government (and its NGOs) are here! Dairy checkoff’s “sustainability” partner, the World Wildlife Fund (WWF) — in cooperation with the U.S. Environmental Protection Agency (EPA) — estimates 45 million gallons of milk are discarded at U.S. schools annually. Here’s the unbelievable part: They recommend schools reduce the size of milk containers, use self-serve dispensers and end the practice of ‘serving’ milk with every meal. Yes, the dairy checkoff’s sustainability partner is recommending less milk as the solution to more waste.

Meanwhile, one school is offering whole milk on a trial basis and gathering data showing how this one small step is changing the whole story — for healthy kids and a healthy planet. We are protecting the identity of this school from the USDA school milk police because if “caught” for doing what’s right, they could lose eligibility for state and federal education funds that are tied to participation in USDA’s low-fat school lunch rules.

By Sherry Bunting

Dairy Checkoff’s “sustainability” partner — the World Wildlife Fund (WWF) — released a 2019 “Food Waste Warriors” student-led audit report a few weeks ago indicating that U.S. schools discard an average of 28.7 containers of milk per student per year.

This amounts to an estimated 45 million gallons of milk discarded from schools annually, the report said.

Of the totals, elementary students discarded 37.6 cartons per student per year while middle schools discarded 19.4 cartons per student per year. The difference is middle and high school students have more alternative beverage options.

A gallon of skimmed milk weighs 8.63 pounds, so 45 million gallons amounts to over 388 million pounds per year and a cumulative estimated 3.5 billion pounds of discarded school lunch skimmed milk over the past nine years since USDA removed whole and 2% milk as choices in the 100,000 schools participating in the National School Lunch Program (95% of U.S. schools).

WWF funded the study, with support from Kroger Co. Foundation and the EPA, analyzing food waste in 46 schools in nine cities across eight states.

The objectives of the WWF project were to engage students in the act of measuring waste, foster an understanding of connections between food and its environmental impacts, and “formalize how we might gather more streamlined data on cafeteria food waste,” the report explained.

In its report, WWF identifies the National School Lunch Program as “one of the most influential programs for educating youth on conservation opportunities linked to our food system.”

Waste-reducing milk strategies used, compared and suggested in the WWF report are: 1) serve smaller containers of milk, 2) educate schools to realize they are actually not required by USDA to force students to take a milk with their lunch or breakfast in the first place, and 3) invest in bulk milk dispensers so students can take only the amount of milk they will drink.

So here we go. Let the WWF / USDA / EPA / DMI ‘sustainability’ propaganda begin. The idea of milk dispensers is a good one. But, what matters more is the fat content of the milk IN the dispensers, bottles or cartons!

Of course, the report does not identify the simplest, tastiest, most nutritious and ‘sustainable’ solution: Waste could be reduced overnight if USDA would simply allow the 100,000 schools enrolled in the National School Lunch Program to put whole milk on the menu! 

That’s right folks: 95% of U.S. schools are ruled by the iron-hand of the USDA milk police.

Not only are school nurses beginning to report to Farmshine that their annual student weight averages have climbed 7 to 9% in the 9 years that whole milk has been forcibly removed from school menus, one school reports it is doing its own study of student preferences and milk waste reduction this year.

We are keeping the names of the reporting schools anonymous to protect their identities from the USDA milk police.

Since September, one anonymous school’s study shows students are choosing whole milk 3 to 1 over 1% low-fat milk at the middle school and high school where the trial is being conducted.

Imagine that! Middle and high school students CHOOSING milk, and actually drinking it!

Oh, and by the way, when whole milk is used to make chocolate milk instead of using skimmed (1% or fat free) milk, less sugar is added!!

And, by the way, the data from this particular anonymous school shows that not only are their secondary students CHOOSING whole milk 3 to 1 over skimmed, the school has reduced its milk waste by 94%… in one year!

They report that their “milk not consumed” totals now average 32 ounces per day as compared with 4 gallons, or 512 ounces, per day the previous year!

Where school lunch is concerned, USDA’s rules are neither practical, nor are they logical, nor are they healthy for our kids or our planet. At the same time, WWF’s suggestions miss the mark completely!

Join in with those farmers and consumers asking Congress and USDA to bring back the choice of whole milk in schools. Sign the petition for choice and be part of the WHOLE solution. If you haven’t signed, you have until February 15 to do so online at this link: https://www.change.org/p/bring-whole-milk-back-to-schools

Also, to get signatures in your community, download the printable version of the petition at this link: WHOLE-MILK-IN-SCHOOL_PETITION_011520_

 

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Will FDA change standards to ‘officially’ allow UF milk? Milk Market Moos – Jan. 17, 2020

Coca-Cola now among key companies in global UF milk

As reported last week, Coca-Cola acquired the remaining shares of fairlife LLC from its joint venture partner Select Milk Producers, moving from 42.5% ownership to 100% sole owner of the brand. Select Milk is a 99-member cooperative run and founded by Dr. Mike and Sue McCloskey. Mike McCloskey is also co-founder and chairman of the board of Fair Oaks Farms, and he was chairman of the Sustainability Initiative of DMI’s Innovation Center for U.S. Dairy in 2014, when fairlife ultrafiltered (UF) milk was officially launched.

DMI officials have indicated checkoff funding for promotion exhibits at Fair Oaks Farms’ visitor center in Indiana, an hour south of Chicago. However, DMI indicates that its financial grants to the fairlife milk brand for promotion ended in 2019. To receive funding, companies with approved innovations also spend a comparatively larger amount of their own money.

Available tax forms for 2017 and 2018 list DMI grants to fairlife of $8 million for promotion in each of those years, and prior support was available from affiliated research and development resources in the Chicago suburbs of Rosemont, where DMI and Fonterra are both located.

Ultrafiltration is a process that can vary by dairy product application and is used around the world. A 2018 Transparency Market Research report pegged Coca-Cola among the companies it listed as “key players operating in the global ultrafiltered (UF) milk market, along with HP Hood LLC, Idaho Milk Products Inc., Fonterra Co-operative Group, Kerry Group, Tatura Milk Industries Ltd., Darigold Ingredients Company, Erie Foods International Inc., Enka Sut Company, Grassland Dairy Products and others.”

In 2017, the FDA said it would no longer strictly adhere to its standards of identity regarding types of milk for making standardized cheeses, and now FDA has opened a new public comment period to settle the use and labeling of UF milk in standardized products.

While fairlife ultrafiltered milk is still considered a fresh product with an extended shelf life of 90-days, some products in the brand’s lineup are shelf-stable and aseptically
packaged.

Dr. McCloskey confirmed in a presentation on “the road to innovation” at the 2016 Georgia Dairy Conference that fairlife ultrafiltered milk was at that time designated a Class I fluid milk product; however, some of the other beverages in the lineup are Class II.

FDA reopens UF milk comment period on use in standardized dairy products

According to an FDA statement on Jan. 2, 2020, the agency has reopened the comment period on its 2005 proposed rule that would allow the use of fluid ultra-filtered (UF) milk in the manufacture of certain cheeses and related cheese products.

The 2005 proposed rule was never adopted by FDA. Instead, a non-enforcement posture
was pursued by the agency for 16 years. FDA defines UF milk as “raw or pasteurized milk that is mechanically filtered to concentrate the proteins in milk. In the process, some of the lactose, minerals, and water-soluble vitamins are lost, along with water. The resulting protein concentrate is easier and more cost effective to ship. This same process applies to UF nonfat milk, except that raw or pasteurized nonfat milk is used.”

Formal adoption of the 2005 proposed rule is a move sought by processors since 2000, when milk protein concentrate (MPC) was imported as the dried version of UF milk to increase cheese yields in the manufacture of some types of cheeses. The industry contends that UF milk is used in dairy product manufacturing worldwide and that FDA approval was needed for the U.S. to be competitive without having to import UF milk in the form of MPC and casein from New Zealand and Europe.

The proposed rule was never confirmed by FDA, which simply looked the other way until the GAO called FDA out for not enforcing its own standards on the types of milk used in standardized cheeses. Then, in 2017,

FDA issued official guidance that, “We do not intend to take action against companies that manufacture standardized cheeses and related cheese products that contain fluid ultra-filtered milk or fluid ultra-filtered non-fat milk without declaring them in the ingredient statement.”

This meant the practice was accepted and the UF milk or MPC did not have to be listed
separately on the label. Now, the FDA is specifically requesting industry comments by March 30, 2020 to describe how much UF milk is used to make standardized cheeses and how ingredient labels should be handled when UF milk (or MPC) is included in the production process of these standardized cheeses.

FDA wants to know if labeling changes are needed and what the cost would be to the industry.

In addition, FDA wants information during public comment about how UF milk (or MPC) is used in making other dairy products or as ingredients in other food products, and how this affects consumer buying decisions.

The industry contends that any modification that would restrict the practice of using UF milk in these production processes would mean equipment widely used in plants today would have to be changed or modified.

On the flip side, if FDA moves from its non-enforcement posture to actually adopt the 2005 proposed rule to outright allow UF milk (MPC) in making various standardized cheeses, then this could be a signal of much broader acceptance of UF milk throughout the industry for other dairy and food products with standards of identity about the milk used. The question would then become: How will the labeling be handled if the standards are changed for the future as opposed to being simply ignored over the past 16 years.

Comments will be received until March 30, 2020 at the Federal Register, Docket No. FDA- 2008-P-0086. Here is the link to the online comment portal here.

 

Surprise. Surprise. Whole Milk is on the rise!

… Even in the face of massive opposition by USDA, DMI and others

Editor’s note: Farmshine contributor Sherry Bunting continues her opinion and analysis on where the milk bus is heading and some thoughts on what to do about it.

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By Sherry Bunting, Farmshine, Friday, January 17, 2020

BROWNSTOWN, Pa. — Activist non-governmental organizations (NGOs) are increasingly driving the milk bus as dairy industry organizations, checkoff organizations and government agencies partner with entities such as World Wildlife Fund (WWF) on dietary and sustainability goals.

The leaders who are working with NGOs and government agendas long enough might think they speak for us as consumers, as society. They don’t. But through our organizations partnering with them, they ultimately and incrementally not only speak for us, they are driving the bus.

If we are listening, we’ve heard the model described by industry experts and thought-leaders in articles, at conferences, and in roundtable discussions: Build huge cheese and protein ingredient plants at designated growth locations. Innovate with ultrafiltration and reverse osmosis technologies. And begin to balance the export-driven dairy industry focus and consolidation by transporting ultrafiltered solids “more sustainably” – minus the 88% water portion – and do the reconstitution, extended shelf-life and aseptic packaging on location in the regions that are currently fluid-milk-centered markets, such as the Southeast, Mid-Atlantic and Northeast.

Rampant supermarket loss-leading on fluid milk by the nation’s largest retailers on one hand, with USDA-regulated farm-level price enforcement on fluid milk on the other hand, has produced the vice-grip in which the fluid milk sector has found itself over the past four to five years in particular.

Dairy producers were in the grip the past five years, but now that farm-level prices have ticked a bit higher the past five months, fluid milk bottlers suddenly find themselves unable to weather the margin compression, as we see in the recent high profile bankruptcy proceedings of Dean Foods and Borden, not to mention the smaller companies along the way.

As long as producers were the ones receiving the ugly side of the stick, the conversation could be generally centered on “too much milk” or “market forces” or “trade and tariffs.”

Now that farm-level milk prices have moved up (even though export volume was down), the unsustainable, low-margin, commodity treatment of fresh fluid milk is being seen as a primary factor fueling fluid milk processor bankruptcies – for those looking into these issues more deeply. In fact, checkoff leaders cite the milk bottler bankruptcies as proof that milk should be reinvented. Some have gone so far as to say — in presentations to industry groups — that the goal of innovation is to “move consumers away from the habit of reaching for the jug and toward these new and innovative products.”

While per-capita milk sales have been declining for 45 years, the past 10 years have seen faster rates of decline. This has been no accident. From dietary guidelines, to checkoff’s government speech requirements, to memorandums of understanding, to sustainability objectives, dairy’s own national checkoff organization has partnered with USDA, WWF, and others to move milk in a different direction – yes, intentionally.

Meanwhile, consumers are showing a thirst to know more about milk nutrition, and they are responding by buying more whole milk even in the face of this extreme neglect and alternative direction.

Case in point. While Coca-Cola, now 100% owner of fairlife, cites double-digit growth of the its 3% market share, the USDA Class I packaged milk sales show a different perspective.

The most recent report for October shows that the “other fluid products” category had year-to-date volume growth of over 300% but amounts to just 269 million pounds (10 months) — less than one percent (0.7%) of market share.

Meanwhile, whole milk’s growth for year-to-date volume of 12.5 billion pounds comes in at just under 1% (0.9%) on 33% of market share, which makes fresh whole milk the top VOLUME gainer this year, and it has surpassed sales of 2% reduced-fat milk.

Flavored whole milk is also growing by double-digits some months, with year-to-date sales through October of 629 million pounds – up 8.9% on 1.7% market share.

Under Organic brands, whole milk sales are up 4.4% year-to-date, with 412 million pounds representing 43% of organic milk market share.

Consider this: While whole milk is prohibited in schools and daycare centers, and it goes virtually un-promoted and is often poorly stocked in the dairy case, those sales still manage to be the largest volume growth category under all of these constraints.

Innovation can be good, but the fact remains that whole milk naturally meets many of the desires consumers have even though labeling makes its fat percentage a mystery, and even though it has to overcome a low-fat and fat-free promotion campaign pitted directly against it… In the face of all of that, whole milk’s growth is not too shabby.

In short, fresh whole fluid milk has the potential to solve many of the problems it was previously blamed for in diet and health trends, and it has a ‘clean’ label and local sourcing and flavor and nutrition going for it.

Whole milk checks all the boxes.

Trouble is, if whole milk sales grow faster, then the best laid plans for using innovation and sustainability and dietary edicts to lead farmers and consumers into dairy industry structural transformation would be in jeopardy.

What can be done? What can be accomplished?

Get USDA’s attention. Get the attention of the Administration and Congress and hold industry leaders accountable for the following steps:

Federal Order price reform has never been more needed. The regulated value center is mostly on the diminishing Class I fluid milk sector. That’s a big weight to carry. Many of the innovations and reinventions of fluid milk beverages are not even Class I. Small regional entities wanting to get into the fresh fluid Class I milk market have difficulty doing so because they must – in effect — pay the cartel. Now the recent bankruptcy and potential sale of Dean Foods’ assets to DFA, suggest we could see an even bigger cartel.

In that scenario, an even larger national footprint entity would run the table, deciding how fluid milk markets will be supplied, with what product mix, and from what plants. DFA CEO Rick Smith has already indicated some Dean plants should be shut down. DFA president Randy Mooney in his address at the DMI / NMPF convention a week before the Dean bankruptcy was announced said dairy resources should be consolidated to focus on plants that “make what consumers want”, instead of having “plants on top of plants” in a region.

Add to this the push to normalize ultrafiltration in FDA standards of identity for all sectors of dairy beverage and product development and production, and we see the stage being set for meeting “sustainability” objectives by removing water from the transportation scenario and moving more milk from designated export-growth areas into the markets with higher Class I utilization at a lower cost.

In effect, this trend would use the fluid milk markets to physically and financially ‘balance’ the designated growth regions and huge protein export plants more freely — weakening the position of farms operating in those Class I utilization markets.

Transportation cost is already diluted to where it is not the equalizer it should be for regional milksheds to take local milk first. Ultrafiltration and reinvention of milk in the name of innovation is all coming from the Sustainability Council of DMI’s Innovation Center for U.S. Dairy. At a certain point, the trend – especially with the help of the world’s largest players in ultrafiltration including Coca-Cola – make location and transport even less relevant with milk’s 88% ratio of water taken out of the transport equation. These trends need full and transparent discussion instead of creeping along quietly under the mantra of “innovation” and “sustainability.”

Uphold standards of identity, not just the plant-based deal on the left hand that we are all watching so intently. While the industry talks about FDA’s milk standard vs. the imitations, the right hand is busy behind the scenes working on other dairy identity standards to make changes.

One such change is getting FDA to overlook reconstitution of milk solids with water on long-haul transport. This is a step that could enable Class I fluid milk markets to become the balancer for the huge commodity export plants that are being built in designated growth centers, and which get the make allowances built into manufacturing class prices.

Cheaper transport of excess milk – without the water — into Class I FMMOs would, and potentially is, allowing those suppliers to use eastern fluid markets as the export plant balancers.

Draw a line in the sand with a retail minimum on fluid milk. This step is necessary, at least as an interim step until the larger pricing issues have a full airing. A simple $2/gallon line in the sand certainly allows for capitalistic free markets while stopping the supermarket insanity that makes milk the Cinderella-sister that all other dairy case beverages, dairy and non-dairy, market off the back of and are free to make and keep the profit at milk’s expense.

Unless Walmart and Amazon and Kroger and others want to eat their own loss-leading decisions, themselves, they should not have the ability to price milk at $1.50, $1.15, 99 cents, 67 cents per gallon. This is crushing the supply chain and further diminishing milk’s stature.

Stop dumping skimmed milk on our kids. We’ve already lost at least one generation of milk drinkers, simply allow whole milk at schools for all the reasons that have been written about over and over in Farmshine. It’s also what is right for our kids.

Stop forcing producers to pay a checkoff tax that promotes government speech, and aligns with NGO-influenced government agendas on the future of food. At the very least, allow regions and local entities to keep and target all of their checkoff funds to promote what is made with their milk and to promote sustainable regional supply chains and food security.

Ask checkoff leaders to start promoting all milk instead of using the qualifiers “low-fat / fat-free.” Stop beating everyone over the head with the familiar “fat-free and low-fat” refrain. It’s not helping farmers, and it’s certainly not helping the health and obesity crisis, and it clouds the healthy choices consumers are able to make – once they learn the truth.

This is just a start.

 

Borden second major milk co. in 60 days to file Chapter 11

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‘Business as usual’ motions face lender objections over how cash reserve is accessed and used. Judge grants Jan. 7 ‘interim’ relief with authority to pay pre-petition ‘critical vendors’, including producers supplying milk. A hearing on the final order in regard to critical vendor payments and cash management is set for Jan. 23.

 By Sherry Bunting, Farmshine, Friday, January 10, 2020

WILMINGTON, Del. — Citing unsustainable debt, including pension funds, negative dairy industry trends, fluid milk category declines as well as margin pressure in a loss-leading, commodity-driven market, the Borden Dairy Company, based in Dallas, Texas, but organized in Delaware, became the second major fluid milk bottler in the past 60 days to file for Chapter 11 bankruptcy protection.

Unlike the November Dean Foods filing with intentions to sell assets, Borden states its intentions are to use the Chapter 11 process to restructure its business for the future.

The company seeks to combine the bankruptcy filings of its 12 affiliated milk plants and one transport company stretching from Texas to Florida and north to Ohio under Borden Dairy Holdings LLC, owned by Acon Investments LLC,which had recapitalized these assets as recently as 2017 when purchased from Laguna Dairy after they were spun off from Grupo Lala.

Processing 500 million gallons of fluid milk annually for customers including supermarkets and schools, Borden employs 3300 people at milk plants in Alabama, Florida, Georgia, Kentucky, Louisiana, Ohio, South Carolina, and Texas. Milk is supplied by dairy producers and milk cooperatives in these and other states.

In addition to licensed brands Borden and Poinsettia, other brands involved include Coburg, Dairy Fresh, Dairymens, Flav-O-Rich, Kid Builder, Saba Sunburst, Sallie’s Southern Tea, Sunburst, and Velda. DFA separately owns the Borden brand license for cheese.

In Delaware District Bankruptcy Court, Wilmington, Judge Christopher S. Sontchi heard Borden’s first day bankruptcy pleadings on January 7.

“Concurrent to the decline of the number of milk producers, dairy processers have seen bottling margins decline due to competitive pressures from milk suppliers and large (and sometimes vertically integrated) customers. Couple this with the fact that … consumption has steadily declined, and it is no surprise that Borden and other dairy suppliers (such as Dean Foods) have begun to feel the same negative effects that have plagued dairy farmers for the past decade,” said Borden Chief Financial Officer Jason Monaco in his declaration with the court.

While all expected motions were filed to allow Borden to continue ordinary business while restructuring under bankruptcy protection — including motions to use a cash deposit reserve to pay pre-petition critical vendors such as dairy producers — attorneys for unsecured creditors objected Tuesday.

The lenders argued that, “(Borden) should not, and cannot, be allowed to use chaos of their own making to distract from the clear facts. There is no economic justification for… sudden chapter 11 filings, and the debtors cannot use the lenders’ (cash) collateral to finance an attempt by Acon to re-trade the out-of-court transaction,” that the parties had previously been negotiating.

The unsecured lenders contend that the bankruptcy filing occurred virtually on the eve of their out-of-court terms being ready for signatures. They contend that the $30 million cash deposit reserve is collateral and that other cash collateral Borden seeks access for operations are “insufficient.”

Acknowledging the importance of Borden continuing operations to preserve equity for all parties, the objecting lenders seek various protections from the court, including a position of consent with some oversight of budgets for the use of cash reserve and payment to critical vendors, including milk producers.

A day earlier, Borden CEO Tony Sarsam cited major milestones for Borden last year, including the revival of its spokescow Elsie, the brand’s reintroduction in Ohio and the launch of several innovative products such as state-fair inspired milk flavors and a new Kid Builder flavored milk line using 2% milk and containing 50% more protein and calcium with no added sugar.

Sarsam also explained in a press release that the company “continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry” that have contributed to “making our current level of debt unsustainable. He said ultimately, reorganization through court-supervision was the only solution “for the benefit of all stakeholders.”

Court documents reveal that Borden reported 2018 consolidated net sales of $1.181 billion with gross profit of $292 million but experienced operational income loss of $2.6 million and total net income loss of $14.6 million. These losses continued into 2019, with reported operational income loss of $22.3 million and total net income loss of $42.4 million from January 2019 through December 7, 2019, according to court documents.

Borden maintains that its situation differs from the Dean Foods bankruptcy.

“We believe that, from an operational standpoint, we are in a much better position than Dean Foods. Borden is EBITDA-positive and growing, which means we have solid earnings and are healthy,” Sarsam said in a public statement. “Borden intends to continue operations and strengthen our position … whereas Dean Foods announced its intention to sell substantially all of its assets. We are confident that, once we fix our balance sheet, we will be equipped to win together in the market.”

Documents also note Borden’s “need to raise new investor capital” to “continue to innovate with new products, modernize our facilities and equipment and improve Borden’s ability to compete in today’s market.”

The bankruptcy process is still in preliminary stages with more than 45 items filed on the docket within the first 48 hours.

Stating that this bankruptcy reorganization will not affect dairy producer contracts, Borden announced on Jan. 5 that it fully expects business as usual and to move quickly and efficiently through the bankruptcy process.

However, on Jan. 6 and 7, unsecured lenders filed the objections to many of the motions that would allow business as usual – creating potential ripples in that scenario.

As of Wednesday afternoon, Jan. 8, a signed interim order from the Jan. 7 hearing authorizes Borden to maintain its cash systems and bank accounts and provides interim relief to pay certain pre-petition obligations, such as payments to ‘critical vendor,’ including milk suppliers.

A hearing on the final order in regard to critical vendor payments and cash management is set for Jan. 23.

In the meantime, dairy producers supplying milk to Borden plants, are advised they may need to file a proof of claim with the court to be eligible for payment or otherwise consult an attorney for guidance.

The company’s claims agent, Donlin Recano, can provide appropriate forms once a deadline for filing claims has been set by the court. For more information on that, dairy producers can call the Borden restructuring information center toll free at 1 (877) 295-7345 or e-mail bordeninfo@donlinrecano.com.

A special Borden restructuring website contains various documents, including one that answers questions for raw milk suppliers at https://www.bordenfinancialreorg.com/

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Coca-Cola now sole owner of fairlife, beyond the headlines

lead-fairlife (2)By Sherry Bunting, Farmshine, Friday, Jan. 10, 2020

CHICAGO, Ill.  The Coca-Cola Company announced Friday (Jan. 3) that it has acquired the remaining stake in fairlife LLC from its joint venture partner Select Milk Producers, a 99-member cooperative run and founded by Dr. Mike and Sue McCloskey. Mike McCloskey is also co-founder and chairman of the board of Fair Oaks Farms, and he was chairman of the Sustainability Initiative of DMI’s Innovation Center for U.S. Dairy in 2014, when fairlife was officially launched.

As a result of the recent transaction, Coca-Cola now owns 100% of fairlife, up from its previous 42.5% minority stake, according to company statements.

Financial terms were not disclosed.

According to a company statement, fairlife will continue to operate as a standalone business and will continue to be based in Chicago, where the brand got its start as a joint venture of Select Milk Producers and Coca-Cola, and received partnership grants for research and promotion through the Innovation Center of the checkoff-funded Dairy Management Inc. (DMI).

“We are excited for the next chapter of fairlife’s growth and innovation,” said fairlife CEO Tim Doelman in a press release, emphasizing the strength and scale of the Coca-Cola Company.

“It’s important for fairlife to continue to operate as a standalone business based in Chicago,” stated Jim Dinkins, president of Coca-Cola North America in a press release. “This will continue to give Tim and his team the space and running room they need to innovate and build the fairlife brand in a unique and fast-changing category.”

The fairlife LLC launched in 2012 to make use of a patented cold-filtration process known as ultrafiltration, which removes some natural sugars (lactose) while concentrating milk’s protein and calcium. The launch began with a high-protein milkshake called Core Power and has grown to offer a portfolio of products in what Coca-Cola calls “the fast-growing value-added dairy category in North America.”

In addition to Core Power, the line of products includes fairlife ultrafiltered milk with 50% more protein and 50% less sugar, fairlife DHA with DHA Omega-3 fatty acids, fairlife (drinkable) smart snacks, fairlife nutrition plan (shakes), and the new fairlife creamers for coffee.

Coca-Cola reports fairlife sales have grown by double-digits each year since 2014, playing a big role in what the company sees as steady growth of value-added dairy products in contrast with the traditional fluid milk category. The brand has been supported by the reach of Coca Cola’s distribution, both through the Minute Maid system and Coca-Cola bottlers across the country.

According to IRI data, fairlife’s first-year sales were $62 million, representing 0.36% of market share in 2014. According to Nielsen AMC, fairlife surpassed $500 million in retail sales last year, an 8-fold increase and representing just shy of 3% of market share.

A new fairlife milk facility is under construction in Goodyear, Arizona to expand production beyond its current plants in Waco, Texas and Coopersville, Michigan. In 2018, fairlife launched its products for sale in Canada and will begin local production and sourcing in Ontario this spring.

According to Dinkins, Coca-Cola “will continue to ensure that fairlife has the best distribution possible and will be here to provide resources and expertise in areas such as sustainability and supply chain management to make the brand stronger and better for the future.”

In the same week as the Coca-Cola announcement on acquiring whole ownership of fairlife, a joint public statement was released by fairlife and Fair Oaks Farms announcing their new and evolving four-part animal and worker care platform as their long term response to the animal abuse videos that became public last June involving one of the 12 separate dairies at Fair Oaks Farms. This was also mentioned in the ownership transaction press packet.

“To guide this journey, we’ve assembled a fairlife Animal Welfare Advisory Council to ensure we are both learning and leading for the short- and long-term,” Doelman stated in a public statement. “We’re working with our supplying farmers to outline more detailed animal welfare policies… investing with and in our farmers … And we continue to require that every farm in our supply chain is subject to regular third-party unannounced audits with clear action plans for learning and improvement after each audit.”

DMI officials have indicated funding promotion and exhibits at Fair Oaks Farms’ visitor center an hour south of Chicago in Indiana. However, DMI indicates that its financial grants to fairlife for promotion ended in 2019. To receive DMI promotion funding, companies with approved innovations must spend a comparatively larger amount of their own funds.

Available tax forms for 2017 and 2018 list DMI grants to fairlife of $8 million for promotion in each of those years, and prior support was available from affiliated research and development resources in the Chicago suburbs of Rosemont where DMI and Fonterra are both located.

Ultrafiltration is a process that can vary by dairy product application and is used around the world. A 2018 Transparency Market Research report pegged Coca-Cola among the companies it listed as “key players operating in the global ultrafiltered milk market, along with HP Hood LLC, Idaho Milk Products Inc., Fonterra Co-operative Group, Kerry Group, Tatura Milk Industries Ltd., Darigold Ingredients Company, Erie Foods International Inc., Enka Sut Company, Grassland Dairy Products and others.”

In 2017, the FDA said ultrafiltered milk could be used to make any fresh cheese product.

While fairlife milk is still considered a fresh product with a 90-day shelf-life, some products in the lineup are shelf-stable and aseptically packaged.

Dr. McCloskey confirmed in a presentation on “the road to innovation” at the 2016 Georgia Dairy Conference that fairlife ultrafiltered milk was at that time designated a Class I fluid milk product; however, some of the other beverages in the lineup are Class II.

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