Covering Ag since 1981. The faces, places, markets and issues of dairy and livestock production. Hard-hitting topics, market updates and inspirational stories from the notebook of a veteran ag journalist. Contributing reporter for Farmshine since 1987; Editor of former Livestock Reporter 1981-1998; Before that I milked cows. @Agmoos on Twitter, @AgmoosInsight on FB #MilkMarketMoos
TOKYO — Commentators have likened Olympic gold medal swimmer Katie Ledecky to a Lamborghini, a powerful machine, gliding through the water in freestyle sprints and distance races. She won four gold medals for Team USA in Rio de Janeiro in 2016 and one in London in 2012.
Then, in Tokyo Tuesday, July 27, in the same 24-hour period — after winning silver in the 400-meter and missing medals altogether in the 200-meter — Ledecky came back with determination and poise to win Olympic gold by a healthy margin in the 1500-meter freestyle. Teammate Erica Sullivan secured the silver.
Ledecky was a machine Tuesday night in Tokyo. Her methodical straight line stretch of 30 laps in the 50-meter pool ended when she touched the wall at 15 minutes 37 seconds. That’s freestyle swimming of roughly one mile in just over 15 minutes – ranging 1.5 to 1.7 meters per second! She makes history as this is the first women’s 1500-meter freestyle Olympic event.
As she headed into the final four laps, NBC Sports commentators broadcast to a worldwide audience her training and nutrition regimen, how she fuels her body in the morning with oatmeal – made with milk, peanut butter and fruit — and always downs a 12-ounce bottle of chocolate milk after every race or workout.
Described as inspirational in her work ethic and a beast in her daily workout, Ledecky is one of Team USA’s Olympians who is proud to be powered by milk. Dairy farmers will be happy to know Ledecky teamed up a few years ago in the Built with Chocolate milk campaign, sponsored by the Milk Processors Education Program (MilkPEP). The campaign features athletes and the science behind low-fat chocolate milk as a recovery and refuel beverage. Low-fat chocolate milk is Ledecky’s choice, and milk and dairy are part of her dietary regimen in other ways too.
The swimmer told Fitness in 2018 that the bottle of chocolate milk 30 minutes after a workout or race has been part of her routine for more than a decade.
“This is my go-to post-workout recovery beverage since I was 13 years old,” said Ledecky in the Fitness interview. “I remember being a young swimmer when someone explained that drinking chocolate milk for recovery gives my body the nutrients it needs to refuel. Since then, I make sure to keep one in my lunchbox daily and drink it after a tough workout. Of course, it tastes great too.”
When the 2020 Olympics were postponed, Ledecky did the fun video of herself swimming 50 meters with a glass of chocolate milk on her head — without spilling a drop. That’s how steady, balanced and methodical her stroke is. Of course, at the end, she drank the milk — all smiles. The video went viral and inspired other swimmers to film themselves attempting the feat, and drinking the milk. Just a fun, feel-good moment for an accomplished Olympian who relies on and loves her chocolate milk.
As for Ledecky’s Tokyo Olympics this week, she has a few more events to go and we are rooting for her. Of her 1500-meter gold, Ledecky said in an NBC Sports interview just after the race that it “means a lot.”
With a nod to falling short of her goals in the 200- and 400-meter races just before the 1500, she said: “People may be feeling bad that I’m not winning everything, but I want people to be more concerned about other things in the world. People are truly suffering. I’m just proud to bring home a gold medal to Team USA.”
We are also rooting for the first-ever farm girl fueled to compete in the Olympics. Runner Elle Purrier St. Pierre arrived in Tokyo this week and will compete in the Olympic track events next week.
According to NBC Sports, Elle took first in the final 1500-meter race during Olympic trials, breaking a previous record and setting other track records as well, including breaking a 37-year-old record for the U.S. women’s indoor mile last year and breaking the two-mile record earlier this year.
Elle is a dairy farmer! She grew up on a 40-cow dairy farm near Montgomery, Vermont. Today she lives with her husband Jamie on his family’s Berkshire, Vermont dairy farm.
During the Covid-19 pandemic, Elle trained from the farm with her own equipment and has reported in various mainstream media interviews how working on the dairy farm has helped her own fitness.
She also explains every chance she gets how crucial dairy is to her diet. Elle’s husband studied dairy management at Cornell, and Elle studied nutrition at the University of New Hampshire. She says she could not have reached the heights of her running career without milk.
“The first thing I do when I get done running is, I chug a glass of milk, and I just know everything in there is going to help me do better,” says Elle in an interview with USA Today. “It’s got the perfect ratio of carbs and protein, when you add the chocolate, and just so many vitamins and minerals. It’s crazy what a great resource it is.”
There are also other Olympians proud to make milk and dairy part of their regimens, and to talk about it. We are rooting for Team USA and especially for Team Milk!
In that same June 2019 hearing, animal scientist and greenhouse gas emissions expert Dr. Frank Mitloehner of University of California-Davis explained the methane / CO2 ‘biogenic’ cycle of cows.
He said that no new methane is produced when cow numbers are “constant” in an area because methane is short-lived and converts to CO2 in 10 years time, which is then used by plants, cows eat the plants, and the cycle repeats.
Dr. Mitloehner also said that this cycle changes when cattle concentrations move from one area to another.
The milk produced and bottled in the Northeast and Southeast milksheds is not just carbon neutral, it’s already carbon negative, producing not just no new methane, but less than prior-decades’ methane.
Bear in mind, these new dairy-‘based’ — blended — beverages are NOT Class I products. I have been informed that the 50/50 blends, for example, do not meet the standard of identity for milk, nor do they meet the milk solids profile that requires Class I pricing. This means that even though milk is part of a fluid dairy-‘based’ beverage, it is not priced as Class I.
The milk used in these emerging products that combine ultrafiltered solids with water, additives and maybe an almond or two, fall into Class IV, some are Class III if whey protein is used. Examples include products like DFA’s Live Real Farms ‘Purely Perfect Blend‘ that arrived recently in Pennsylvania and the greater Northeast after its first test-market in Minnesota.
Think about it. Unity is great on many levels, and is to be encouraged in an industry such as dairy, but when it comes to marketing, who is calling the shots for future viability within the DMI integration strategy, otherwise known as unity?
Pre-competitive alliances and ‘proprietary partnerships’ working on food safety are wonderful because all companies should work together on food safety. But animal care? Environment? Climate? Why not just offer quality assurance resources and pay farmers certain premiums for investing as companies would like to see and pay them for providing the consumer trust commodity — instead of implementing one-size-fits-all branches in programs like F.A.R.M.?
These so-called voluntary programs have the power to negate contracts between milk producers and their milk buyers even though consumer trust is a marketable commodity that producers already own and are in fact giving to milk buyers, and their brands, without being compensated.
Instead, producers are controlled by arbitrary definitions of the consumer trust commodity that the producers themselves originate. This goes for Animal Care, Worker Care, Environment, and Climate.
The pre-competitive model used in food safety is applied to all four of the above areas today. This is exactly the supply-chain model World Wildlife Fund (WWF) — DMI’s ‘sustainability partner’ — set in 2010 to “move the choices of consumers and producers” where they want them to go.
In the 2019 Senate hearing referenced at the beginning of the above op-ed, Dr. Mitloehner stated that the mere fact there are 9 million dairy cattle today compared with 24 million in 1960 and producing three times more milk shows that dairy producers are collectively not only emitting zero new methane, they are reducing total methane as old methane and carbon are eradicated by the carbon cycle and less new replacement methane is emitted.
The problem may be this: Year-over-year cow numbers for the U.S. are creeping higher. While still much lower than four to five decades ago, the issue emerging for DMI’s Innovation Center for U.S. Dairy is how to accommodate growth of the new and consolidating dairy structures to attain the checkoff’s expanded global export goal and to accommodate massive new dual-purpose plants if dairy farms in other areas remain virtually constant in size, grow modestly, or decline at a rate slower than the ‘designated’ growth areas are growing.
DMI is at the core of this, you see, to reach it’s new collective net-zero goal, cow numbers would have to decline in one area in order to be added in another area, or they will all have to have their methane buttons turned off or the methane captured because now the emissions are being tracked in order to meet one collective “U.S. Dairy” unit goal under the DMI Innovation Center and F.A.R.M.
At that 2019 Senate hearing,Dr. Frank Mitloehner testified that dairies already create zero new methane but this can be tricky when cattle move from one area to another (as we see in the industry’s consolidation).Then we have DMI’s Dairy Scale 4 Good claiming the dairies over 3000 cows can be net-zero in 5 years and ‘spread their achievement’ over the entire milk footprint. Do we see where this is going?
Will all dairy farms have to meet criteria — set by organizations under the very umbrella of the checkoff program they must fund — to get to a ‘collective’ net-zero using the GHG calculator developed by the checkoff-funded Innovation Center in conjunction with its partner WWF (12 year MOU)? This GHG calculator has been added to the FARM program. These are the big questions.
By Sherry Bunting, both parts of a two-part series in Farmshine, July 2021
The dairy industry continues to wait for USDA to provide details on three areas of dairy assistance already approved by Congress or mentioned as “on the way” by Ag Secretary Tom Vilsack.
The fly in the ointment, however, is the record-high 2021 milk production (Table 1) and accelerated growth in cow numbers (Table 2) at a pace the recent USDA World Agriculture Supply and Demand Estimates (WASDE) expect to continue into 2022.
USDA is reportedly looking at production reports — up vs. year ago by 1.9% in March, 3.5% in April, 4.6% in May — to determine how to assist without adding fuel to expansion that could threaten late 2021 milk prices in the face of rising feed costs and a worsening western drought. (The latter two challenges could temper those forecasts in future WASDEs.)
May milk production a stunner
U.S. milk production totaled 19.9 billion pounds in May. This is a whopping 4.6% increase above 2020 and 2018 and a 4.1% increase over May 2019.
Let’s look at year-to-date. For the first five months of 2021, milk totaled 96 billion pounds, up 2.3% vs. the 93.8 billion pounds for Jan-May of 2020, and it is 4.4% greater than the 91.9 billion pounds of Jan-May milk produced in pre-pandemic 2018 and 2019. Of the four years, only 2020 had the extra production day as a Leap Year.
Milk per cow was up 3% over year ago in May. Compared with 2019, output per cow is up 2.2%, according to USDA.
Cow numbers vs. 2018 tell the story
Milk cows on U.S. dairies in May 2021 totaled 9.5 million head, up 145,000 from May 2020’s 9.36 million, up 172,000 from 2019’s 9.33 million, and up 83,000 head from 2018’s 9.42 million.
Counter to the national trend, Pennsylvania had 48,000 fewer milk cows than May 2018 — dropping 30,000 into 2019; 10,000 into 2020, and 8,000 into 2021.
Elsewhere in the Northeast and Southeast milksheds, among the 24 major monthly-reported states, New York had 4000 more milk cows in May 2021 than 2018, Vermont 8000 fewer. Georgia dropped 1000, Florida 12,000, and Virginia 11,000. In the Central states, Illinois was down 10,000 head.
The total decline in cow numbers for the 24 lesser quarterly-reported states, the collective loss in cow numbers is 59,000 head from May 2018 to May 2021
Accelerated growth is coming from three key areas where major new processing assets have been built or expanded.
In the Mideast, where the new Glanbia-DFA-Select plant became fully operational in Michigan this spring, there is a net gain of 32,000 cows for 2021 vs. 2018, Ohio’s cow numbers that had been declining 2018-19, began recovering in 2020-21. Indiana had 18 months of substantial growth, and Michigan returned to its growth pattern in 2020. Taken together, the Indiana-Ohio-Michigan region had a loss of 8,000 cows heading into 2020, but gained a whopping 40,000 cows over the past year.
In the Central Plains, where new plant capacity is starting up this spring and summer — Minnesota, South Dakota and Iowa, combined, added 40,000 cows May 2018 to May 2021.
In the Southern Plains, where joint-venture processing capacity continues to grow, Texas has continued full-steam-ahead, gaining 87,000 cows from 2018 to 2021, along with 29,000 added in Colorado and 17,000 in Kansas. New Mexico regained earlier losses to be 2000-head shy of 2018.
The growth patterns in these regions somewhat mirrored dairy exits from other areas — until Jan. 2020 (Table 2). The past 17 consecutive months of year-over-year increases in cow numbers leave the U.S. herd at its largest number in 26 years (1995).
However, the assumption that ‘dairy producers are okay because the industry is expanding’ ignores several essential factors. The playing field has become more complicated and inequitable. There are four main factors at play. We’ll look at them one at a time.
Factor #1 — Milk dumping and base programs
A year ago in April and May 2020 — at the height of the Coronavirus pandemic disruptions — the dairy industry saw dumping of milk, stricter base programs and bigger milk check deductions. Producers culled cows, dried cows off early, changed their feeding programs, even fed milk in dairy rations.
But milk production still grew, according to the USDA data.
Some cooperatives and milk buyers, like Land O’Lakes, had base programs already in place and triggered them. Others made changes to prior programs or implemented new ones.
Dairy Farmers of America — the nation’s largest milk cooperative, largest North American dairy processor and third-ranked globally by Rabobank — quickly implemented a new base program in May 2020, seeking 10 to 15% in production cuts from members, varying by region, with overage priced on ‘market conditions.’
It is difficult to assess the ‘equity’ in these base programs and the cross-layers among producers between and within regions, or to know how these ‘bases’ are being handled presently. When questioned, spokespersons say base decisions are set by regional boards.
Meanwhile, product inventory and pricing schemes affect all regions, and milk rides between FMMOs in tankers and packages — with ease.
According to USDA, the 11 FMMOs dumped and diverted 541 million pounds of milk pooled as ‘other use’, priced at Class IV, during the first five months of 2020, of which 350 million pounds were in April alone. This is more than three times the ‘other use’ milk reported by FMMOs during the first five months of pre-pandemic 2019 (171.4 million pounds). By June, the amounts were double previous years.
Of this, the largest amount, by far, was the 181 million pounds of ‘other use’ milk in the Northeast FMMO 1 during Jan-May 2020, comprising one-third of all the dumped and diverted milk pooled across all 11 FMMOs in that 5-month period.
In the Southeast milkshed, the Appalachian, Florida and Southeast FMMOs 5, 6 and 7, together pooled 88 million pounds of ‘other use’ milk in the first five months of 2020. The Southwest FMMO 126 had 106.2 million pounds of ‘other use’ milk; Upper Midwest FMMO 30 had 46.1 million pounds; Central FMMO 32 had 36.7 million pounds; Mideast FMMO 33 had 30.7 million pounds; California FMMO 51 had 28.9 million pounds; Arizona FMMO 131 had 21.7 million pounds; and Pacific Northwest FMMO 124 had 1.3 million pounds.
The dumping had begun the last week of March 2020 and was heaviest in the month of April. Producers also saw deductions as high as $2/cwt. for balancing costs, lost quality premiums, and increased milk hauling costs. Unaccounted for, were the pounds of milk that had reportedly been dumped on farms without being pooled on FMMOs.
All of this against a backdrop of pandemic bottlenecks and record-high March-through-August imports of butter, butteroil, milkfat powder, and blends — adding to record-high U.S. butter inventories and contributing to the plunging Class IV, II and I prices vs. Class III (PPD).
Meanwhile, not only did production growth in key areas move ahead, so did strategic global partnerships. Just one puzzling example in October 2020, after eight months of deflated producer milk checks, depressed butterfat value, burdensome butter inventory, record butterfat imports, and a plunging Class IV milk price that contributed to negative producer price differential (PPD) losses, Land O’Lakes inked a deal to market and distribute cooking creams and cream cheeses — Class II and IV products that use butterfat — from New Zealand’s Fonterra into United States foodservice accounts.
The New Zealand press reports were gleeful, citing this as a big breakthrough that could be followed by other of their cheeses entering the “huge” U.S. foodservice market through the Land O’Lakes distribution.
Factor #2 — Class price wars and de-pooling
As reported in Farmshine last summer, dairy farmers found themselves in uncharted waters. As Class IV prices tumbled from the get-go with all of the ‘other use’ dumping and diverting, butter inventory building as butter/powder plants tried to keep up with diverted loads at a disruptive time, the USDA Food Box program started drawing products in the second half of May, and really got going by July 2020.
Cheese, a Class III product, was a big Food Box winner. The cheese-driven Class III milk price rallied $7 to $10 above Class IV, and massive volumes of milk were de-pooled by Class III handlers, which has continued through May 2021.
Reviewing the class utilization reports, an estimated 80 billion pounds of Class III milk normally associated with FMMOs has been de-pooled over the past 26 months.
At the start of this ‘inequitable’ situation, academic webinars sought to explain it.
“We’re seeing milk class wars,” said economist Dan Basse of AgResource Company, a domestic and international ag research firm in Chicago, during a PDPW Dairy Signal webinar a year ago.
He noted that under the current four-class pricing system, and the new way of calculating the Class I Mover, dairy farmers found themselves “living on the edge, not knowing what the PPD (Producer Price Differential) will be” (and wondering where that market revenue goes).
“A $7.00 per hundredweight discount is a lot of capital, a lot of income and a lot of margin to lose with no way to hedge for it, no way to protect it, when the losses are not being made up at home as reflected in the PPD,” Basse said in that summer 2020 webinar.
What does this have to do with year-over-year milk production comparisons?
Two words: Winners. Losers.
Some handlers, and producers won, others lost — between and within regions.
Here’s why all of this matters from a production comparison standpoint: Dairy economists — Dr. Mark Stephenson, University of Wisconsin, and Dr. Marin Bozic, University of Minnesota — are both on record acknowledging that USDA NASS uses FMMO settlement data, along with producer surveys, to benchmark monthly milk production.
So, on the one hand: How accurate are these data for comparison over the past 26 months, given the inconsistent FMMO data from dumping, diverting and de-pooling?
On the other hand: Did the negative PPDs and de-pooling, resulting in part from the 2018 Farm Bill change in the Class I Mover, allow Class III handlers to capture all of that additional market value and use it to fuel the 2020-21 accelerated milk growth for regions and entities connected to the new Class III processing assets?
Factor #3 — New dual-processing concentrates growth
Accelerated growth in cow numbers is fueling record production in 2021. It is patterned around ‘waves’ of major new processing investments in some areas, while other areas — largely fluid milk regions — are withering on the vine or growing by smaller margins with fewer cows.
In the 24 major milk states, production growth was even greater than the All-U.S. total — up 4.9% vs. year ago. In part one, the breakdown was shown vs. 2018.
Here’s the breakdown for just the 12 months from May 2020 to May 2021 — a time in which the industry dealt divergences that created steep losses for some and big gains for others, while FMMOs became dysfunctional.
In just one year, over 40,000 cows were added in Indiana, Ohio, and Michigan, combined, and milk production was up in May 2021 by 12.6, 3.2 and 5.1%, respectively. The draw is the massive new Glanbia-DFA-Select joint-venture cheese and ingredient plant that began operations late last year in St. Johns, Michigan. Sources indicate it reached full capacity this spring. Add to this the 2018 Walmart fluid milk plant in Fort Wayne, Indiana and other expansions in Ohio and Michigan.
Ditto for the Central Plains, where new cheese and ingredient line capacity became operational this spring and summer. Supplying these investments, Minnesota grew production 6%, South Dakota 14.6%, and Iowa 6.2% over year ago.
Number two Wisconsin grew by 5.6% in May 2021 vs. year ago.
Milk production was up 5% in number one California, even though cow numbers were down by 1000 head, and dairy farmers in a referendum voted recently by a slim margin to keep their quota system. They are also dealing with a devastating drought that news reports indicate is now impacting both the dairies and the almond growers.
Then there’s Texas, where growth continues to be a double-digit steamroller, up 10.8% in May 2021 vs. 2020 — pushing New York (up 4.2%) to fifth rank.
The Southern Plains has had several strategic investments, starting in Texas and New Mexico (up 6% vs. year ago).
In Colorado, where production was up 5.3% in May, DFA’s joint ventures and strategic partnerships with Leprino, Kroger and others have fueled growth.
Kansas grew milk production 7.3% vs. year ago. In 2018, a state-of-the-art whole milk powder and ingredient plant became fully operational in Garden City, Kansas. The plant was to be a joint-venture between DFA and the Chinese company Yili but ended up as a joint-venture between DFA and 12 of its member farms that are among the 21 Kansas dairies shipping milk to it.
DFA’s Ed Gallagher gave some insights on this during a May 2021 Hoards webinar. He said, “We went through a period of investing in powder plants in the U.S. It seems like there is a follow-the-leader approach when deciding on investments, and it goes in waves. The industry just completed a wave of a lot of investment in Class IV manufacturing plants, and now… it’s flipping to Class III.”
Looking back on the Class IV ‘wave’ 2013 through 2018, there were several times in those years that Class IV beat Class III, leading to FMMO de-pooling, but not to the extreme extent seen in the past 12 months as Class III now beats all other classes, including Class I, leading to negative producer price differentials (PPDs).
Gallagher sees Class III and IV prices “coming together” in the “next period of years” because the ‘wave’ of capacity investment has flipped from Class IV to III. He predicted more Class III capacity will be added.
Are these past 26 months of PPD net losses for producers the industry’s answer to, in effect, increasing processor ‘make allowances’ without a hearing?
The average PPD value loss (see chart) across the seven multiple component pricing FMMOs was $2.57 per hundredweight for 26 months, which began with implementation of the new Class I pricing method May 2019 through the most recent uniform price announcements for June 2021 milk.
Applying a conservative 5-year average PPD (prior to Class I change) for each FMMO, only the few gray blocks on the chart represent ‘normal.’
This means even positive-PPDs show margin loss for farm milk pooled on FMMOs. In fact, the CME futures markets as of July 14 show August through December divergence between Class III and IV above the $1.48 mark, indicating Class I value loss and negative PPDs or smaller positive PPDs could return after barely a two-month reprieve.
Many handlers that don’t pool on FMMOs also use the uniform prices as a benchmark.
This $2.57 net loss for seven MCP FMMOs across 26 months represents almost a doubling of the current make allowance levels.
Current USDA make allowances and yield factors add up to a processor credit of $3.17 per hundredweight on Class III and $2.17 on Class IV. This already represents 11 to 25% of farm milk value, according to 2018 analysis by John Newton, when he was Farm Bureau’s chief economist.
Why is this important? Because we are already seeing additional margin transfer from Class I to Class IV as the industry moves to blended beverages that mostly use ultrafiltered (UF) milk solids. Blends using whey would fall under Class III.
Looking ahead, DFA now owns most of the former Dean Foods’ Class I fluid milk plants since May 2020. New manufacturing synergies are undeniable, considering the direction of dairy checkoff’s fluid milk revitalization plan emphasizing these dairy-based-and-blended beverages and ‘dual-purpose’ processing facilities.
As low-fat UF milk solids are blended with other ingredients in a manufacturing process to make new combined beverages, the result is a competing beverage, and the milk in the beverage drops from Class I to Class IV.
Meanwhile, these beverages cost more at the grocery store, and the ingredients are not part of the USDA end-product pricing ‘circle’. Therefore, no new make allowances should be requested because processors are already getting a reduced class value, and a higher margin.
DMI’ vice president of global innovation partnerships, Paul Ziemnisky, gave some insights into this “future of dairy beverages” — and how it ties into new processing plants investments during the virtual Pennsylvania Dairy Summit in February.
Ziemnisky went so far as to say new processing facilities will “need to be built as beverage plants able to handle all kinds of ingredients” for the blended products of the future. In essence, he said, the future of fluid milk is “dual purpose” processing plants.
While 11 of the top 24 states had milk production increases of 5% or more in May, the 13 states with increases below 5%, or negative, are mainly located within traditional Class I fluid milk marketing areas: Florida, up 0.5%, Georgia up 2%, Virginia down 2.3%, Illinois up 1.9%, Arizona, down 0.5%, Washington, down 0.9%, Pennsylvania and Vermont both up 1.8%, and New York up 4.2%.
Idaho and Utah, up 2% and unchanged, are outliers and largely unregulated by FMMOs. Some beverage assets are coming to that region in the form of ultra-filtration and aseptic packaging, including a plant renovation to make Darigold’s FIT beverage. Additionally, a new Fairlife filtration membrane plant was opened near Phoenix, Arizona in March, and Kroger is doing filtration and aseptic packaging in Colorado.
Meanwhile, Pennsylvania is often described as a ‘fluid milk state’ with a Milk Marketing Board setting minimum prices for fluid milk, and a string of independent milk bottlers that figure prominently in their communities.
Ranked fourth in milk production in 2006, Pennsylvania was passed by Idaho in 2007. By 2016, Michigan had pushed Pennsylvania to sixth. The very next year, in 2017, Texas leapfrogged both Pennsylvania and Michigan. Now, Minnesota has pushed the Keystone State to eighth.
How does the future of dairy affect traditionally ‘fluid milk’ states like Pennsylvania, or the Southeast for that matter?
New dairy-‘based’ beverage innovations can be made anywhere and delivered anywhere, often as shelf-stable products. Most are not Class I products unless they meet the strict FMMO definition which was last spelled out in the USDA AMS 2010 final rule.
For now, this also includes the Pa. Milk Marketing Board. Executive secretary Carol Hardbarger confirms that the 50/50 drinks are not regulated under PMMB, which generally uses federal classification, but that a legal interpretation of the Milk Marketing Law with regard to blends may be in order.
The 50/50 blends are already in some Pennsylvania stores and elsewhere in the Northeast, which is the second phase of the ‘undeniably, purely perfect’ marketing plan for fluid milk revitalization.
Factor #4 — USDA, industry coalesce around climate
Ag Secretary Tom Vilsack has been outspoken from the outset about using and aiming every available USDA program dollar in a way that also addresses the Biden administration’s strategies for equity, supply chain resiliency, and climate action.
Speculating a bit as to why USDA is taking so long to announce details about already funded dairy assistance, it could be that Sec. Vilsack is looking at the fit for ‘climate impact.’
Paid around a million a year in dairy checkoff funds to serve 4 four years as CEO of the U.S. Dairy Export Council — between prior and current Ag Secretary posts — Vilsack understands the future plans of the dairy industry’s checkoff-funded proprietary precompetitive alliances on a global scale.
Vilsack has been privy to the DMI Innovation Center’s discussions of fluid milk revitalization through ‘dual purpose’ plants and blended beverages. He is no doubt looking at the accelerating growth in milk production that is occurring right now for ways to tie dairy assistance to measured climate impacts in the net-zero file.
Producers on the coasts and fringes of identified growth areas have a target — fresh fluid milk and other dairy products produced in regional food systems for consumers who have a renewed zeal for ‘local.’ Fresh fluid milk will have to find a path outside of the consolidating system and cut through the global climate-marketing to directly communicate fresh, local, sustainable messages about a region’s farms, animals, environments, businesses, economies, jobs and community fabric.
So says Rohan Oza, an American businessman, investor, and marketing expert behind several large brands. He was with Coca Cola until 2002 and in the past 19 years has the distinction of being a brand mastermind behind Vitaminwater, Smartwater and Bai beverages, among others, and he has been a recurring guest on Shark Tank, a television show where entrepreneurs pitch their fledgling businesses to several investor “sharks” in hopes of getting an investment deal for a percentage of equity in their businesses.
In an archived episode of Shark Tank from 2018 when a husband and wife pitched their apple cider drink, known today as Poppi, Oza had other pearls of wisdom to share about the beverage industry.
He said the largest companies aren’t creating the drinks, they’ve perfected the manufacturing and distribution. Instead, they rely on entrepreneurs to have the vision to bring a new beverage to market.
Packaging and marketing matter. Information is power. Flavor is king.
Oza said consumers want beverages they can feel good about.
That’s what has been missing over four decades in the milk industry, especially the past decade since 2010 when fluid milk sales took the sharpest nosedive. This has stabilized a bit in the past two years as whole milk sales rose 1% and 2.6% in 2019 and 2020, respectively, providing a bit of a safety net to overall fluid milk losses.
There is an innovative and entrepreneurial trend in bringing to market new dairy-based beverages that contain dairy protein, or ultrafiltered low-fat milk as an ingredient. However, MILK, itself, as a beverage, lost its power to make people feel good because people were not empowered with good information, and children were robbed of opportunities to choose the good milk — whole milk — at schools and daycares.
What milk itself lost as a beverage was the power to make people feel good about drinking it — because people lost touch with what they were getting from milk, what whole milk actually does for them. One big reason? GenZ-ers (and to some degree millennials) have grown up drinking (or tossing) the low-fat or fat-free milk as their only choices in school, and then found themselves searching for something else to drink in the a la carte line.
That’s changing. Research, studies and scientific papers keep coming forward, identifying the benefits of whole milk. When people try it, a common reaction is, “this is the good milk.”
Yes, whole milk is winning customers. Efforts by dairy producers — at large and through organizations like 97 Milk — have been focusing lately on giving the public the information they need about whole milk to make informed choices. It’s about giving people the opportunity to know what whole milk can do for them, and we hope that bills in the United States Congress as well as conversations with the Pennsylvania State Senate bear fruit in the ongoing effort to legalize the choice of whole milk in schools… so future generations can feel good about milk too.
We notice that if USDA can give the coveted Child Nutrition label to the Impossible Burger — a fake meat product with more saturated fat (8 grams) in a 4 ounce patty than whole milk (5 grams) in an 8 ounce glass and more sodium (370 mg for Impossible vs. 120 for whole milk) and more calories, then surely USDA can loosen its grip on the fat content of the milk choices for children in schools. Incidentally, the USDA approval of Impossible for school lunch is really a head scratcher next to 85/15 real beef because the real thing has less saturated fat, less sodium, and fewer calories.
Yes, USDA qualified Impossible Burger for reimbursement with taxpayer funds in the National School Lunch Program, but still outright forbids the choice of whole milk in schools.
USDA and Congress are moving toward universal free lunch and breakfast (even supper and snack) for all kids. FDA is in the procedural phase of developing a “healthy” symbol for foods that “earn” it — according to whom? Dietary Guidelines! The trend in government is toward giving consumers less information on a label, not more.
This is why milk education and freedom of choice are more important than ever. Even the Hartman Group young consumer insights cited at PepsiCo’s K-12 foodservice website state that GenZ-ers show a preference for ‘fast food’ and ‘familiar tastes.’ Millennials and GenZ-ers both show high preference for foods they grew up with.
Kids need to grow up able to choose the good milk — whole milk — not have that choice forbidden. That’s why the milk kids get to choose at school where they get 1, 2, even 3 meals a day is so important.
Give them the choice of the good milk that is good for them, and the power of information, and they’ll remember feeling good about milk.
Happy June Dairy Month! A big thanks to dairy farmers for all they do.
ANGELICA, N.Y. — It feels like a no-win situation for Charlie Bares ever since Great Lakes Cheese set its sights on fertile Genesee River Valley land that is integral to growing forage and hauling manure for the 3000-cow Mallards Dairy.
The Allegany County (New York) Industrial Development Agency (ACIDA) has moved forward with eminent domain proceedings to condemn 321 acres of Bares’ land, identified in county documents as Marshland LLC, so the county can use the land to build a 480,000 square foot cheese manufacturing facility for Great Lakes Cheese.
The county has a deal with the Hiram, Ohio-based cheese company to give $220 million in tax savings and incentives to build the $500 million plant on Bares’ land.
The new plant would double the company’s current production at its Empire Cheese plant in nearby Cuba, New York.
According to documents in the public record, Great Lakes Cheese intends to close the Cuba plant after production would begin at the plant it seeks to build on Bares’ land.
ACIDA and the cheese company began working on this project in October 2019 and have set a timetable for groundbreaking later this year and operations to begin in January 2025.
The public record also indicates that 200 jobs at the Cuba plant, and additional jobs with the expansion, as well as milk markets, are “in jeopardy” if Great Lakes can’t build on this particular land.
Cows have been milked in this operation since 1860, according to Bares, who joined Joe Strzelec as a partner in the 1990s. As the ownership and business changed over the years — with Bares becoming the principle partner and expanding the operation — the Genesee River Valley land the county wants to take has become a key to the dairy business 20 miles away.
“IDA has begun the eminent domain process, and we are fighting it,” said Bares in a Farmshine phone interview. “We are arguing that this is not an overwhelming public benefit, but that it is an overwhelming private benefit.”
A few weeks ago, attorneys representing Bares and Marshacres LLC filed a petition challenging the county’s actions. The legal case is currently in the New York State Appellate Court.
Bares was approached a year ago about selling more than half of the 400 acres for the cheese plant.
“We didn’t want to sell, and we gave a price that reflected that. This land is the biggest and best field for us, and it is an integral part of our business. Selling it would weaken our dairy business,” he explained.
In addition, Bares is concerned about the environmental impact of losing land like this to concrete. While his operations are just outside of the Chesapeake Bay watershed, he is a supporter of the clean water blueprint for the Bay, and has invested over the years in technologies and best management practices profiled in 2015 in a Chesapeake Bay Foundation blog. Tree plantings and riparian buffers for water quality in the Genesee River Basin were also highlighted, among other things, in 2018.
The ‘market value’ of this land is irrelevant under these conditions. What is relevant is the value of the land to Mallards Dairy and its owners.
In fact, in a letter reported by the Olean Times-Herald, Bares’ attorney John Cappellini observes: “You are taking property from one company and giving it to another? You have decided that one commercial use, the farm, is somehow less important than a cheese factory.”
Explaining in the letter that the threats from Great Lakes Cheese to close all area facilities and leave the area have motivated officials against his client, Cappellini stated further that, “They are extorting from the taxpayers of Allegany County, and the County Legislature is complicit. They threaten to leave ‘unless you give us what we want.’”
The ACIDA notes that 80 sites were evaluated as Great Lakes Cheese had specific criteria to build a plant that would double its production after the Cuba plant is closed.
Of those 80 sites, the county says this is the only property that meets the company’s criteria.
Reports indicate the land meets three criteria: flat land, proximity to the river and being just off a major highway, I-86. The greenfield approach is the company and county’s least expensive build option with access to cheaper highway transportation.
Bares believes the company has not negotiated in good faith.
Answering questions about milk supply, Bares notes there has been no ‘provincial talk’ guaranteeing this project must use any percentage of its milk from New York State farms. No such stipulations are noted in the public record, except the ACIDA record includes a mention and link to Dairy Farmers of America (DFA).
Over the years, this region of New York has received milk from Michigan, Ohio and northern Indiana as it sits in a part of the state that falls just outside of Federal Milk Marketing Order maps — sitting as a bridge between the Northeast FMMO 1 and the Mideast FMMO 33.
The public record does show conditions that the over 200 employees at the existing Cuba plant would be offered jobs at the new plant.
Meanwhile, Mallards Dairy employs 35 to 40 people and feeds and milks 2500 cows with a total herd of 2900 mature animals. The land the county wants to take is key to that business.
At the March ACIDA meeting, officials noted publicly that they hope to break ground in the third quarter of 2021 and be fully operational by Jan. 1, 2025. If the ACIDA is successful in the eminent domain process it has begun, the county would own Bares’ land and lease it to Great Lakes Cheese.
At one point, early on, Bares notes that not only did the selling price he offered reflect the importance of the land to the dairy business, but also the idea of securing a milk market was mentioned to the company. He says Great Lakes Cheese declined, noting simply that they purchase their milk from cooperatives.
A prime supplier of Great Lakes Cheese is DFA, as the public record reflects. Bares markets his milk through a small independent cooperative.
Having been unable to reach an agreement that would reflect the impact to his dairy business, Bares hired a lawyer.
“This area is very hilly with narrow valleys. There’s not a lot of farmland. This Genesee River Valley land is very good, very fertile, non-erosive land,” said Bares of the land around the main dairy operation outside of Cuba, and the land the county wants to take 20 miles away. “We want to hang on to this land because it’s hard to replace. Every farmer has land that is their best land, that they aren’t going to let go unless they are done farming.”
He says going through this process over the past year has only strengthened his resolve to keep the land and fight the eminent domain process. He notes that his wife Elizabeth has helped him tremendously.
New York’s history of interpretation for ‘public use’ in eminent domain cases is a broader notion than for most states. Bares knows it will be an uphill battle to fight the county’s taking, but he is hoping that his battle will ultimately help others in the future facing a taking of their land.
“Our dairy jobs — and the cows — depend on this collection of land resources we have grown,” says Bares. “This whole thing is wrong for the profitability of our dairy to chip away at the best land. It’s wrong for the environment because this is a beautiful riparian river valley and land like this is disappearing fast. It’s wrong from the social aspect the way the government is using eminent domain to help one private enterprise while harming another.”
He says his attorney is confident and always believes he can win every case until he loses, so Bares is trying to stay positive.
Their petition was filed recently in New York State Appellate Court. The Allegany County IDA has reportedly petitioned the court to expedite proceedings. Bares had expected both sides to be writing briefs through the summer with oral arguments in October, but that could be expedited to August or September.
“I think everyone should take a dim view of this. Every farmer — everyone — has a property that is head and heels above their other land, their best fields,” Bares suggests. “If the state — under the auspices of the Industrial Development Agency — can decide how these properties can be used, I think as farmers, we need to realize we can lose our land through eminent domain takings. My case is just an example.”
This case is an example because the ‘taking’ is not for a public use. It is for a private business use that the county is using economics to declare as a public use.
Bares has had some support from the community. Some rallies with some turnout, especially in April. There has been support online, and he has received a few phone calls.
But largely, outside of the southern tier New York and northern tier Pennsylvania region, the story is not known.
“No one’s lining up (manure spreaders) at the county courthouse and threatening to open the valves, if that’s what you mean,” he answered.
After a long and quiet pause, he communicates just how difficult this situation has become for everyone.
“The farmers around me, my peers, they want this cheese plant and a stronger market. I believe that’s a big carrot, so it’s not easy. It seems there is little chance that I can come out ahead, either way. Either we chop off part of our business or the cheese plant will not expand here so everyone will view us as economic martyrs,” he explains.
“I feel like I cannot win.”
Even though each of two outcomes at the moment represent a different kind of difficult for Bares, he believes fighting the county’s eminent domain proceedings could help someone else — as untouched land like this that is important to agriculture and the environment is disappearing.
“Once it’s paved over in concrete, ” he says, “it’s not coming back.”
GORDONVILLE, Pa. – “Beef it’s what’s for dinner.” Remember that line?
For school kids, it could soon be Impossible Meat for lunch. USDA just approved a nutrition label for K-12 schools to substitute beef with the billionaire-invested Impossible Meat. Never mind that a May 2020 Newsweek article reported Beyond Meat, Impossible Meat and their competitors source most of their concentrated pea- and soy-protein from extrusion factories in China, even if the crops were grown in North America.
School foodservice directors report a barrage of supply-chain influencers touting fake meat meal options to reduce carbon emissions on the heels of the USDA nutrition label approval.
A local restaurant discovered last month that their wholesale food vendor added textured vegetable protein (concentrated soy and other additives) to the wholesale ‘Classic Beef Burger’ without warning. It is apparently part of a ‘cutting edge’ menu remake at the wholesale level – not the restaurant’s choice. (This particular restaurant switched promptly to Certified Angus burgers guaranteed to remain 100% beef).
Children came home from school this week with Junior Scholastics declaring “This meat could help save the planet!” accompanied by a photo of fake-beef in grocery packaging.
These are just a few examples in the past three weeks of how rapidly the wheels set in motion a decade ago are hitting the pavement.
How did we get here? For 12 to 13 years, the World Economic Forum (WEF), World Wildlife Fund (WWF), Big Food, Big Tech and Big Ag have been coalescing around this idea of supply-chain “sustainability” leverage to steer global food transformation with cattle clearly in the crosshairs – especially for developed nations in Europe as well as the United States.
By partnering officially and unofficially with national dairy and beef checkoff boards on “precompetitive sustainability and innovation”, for example, WWF has — in effect — been channeling government-mandated producer checkoff dollars toward implementing WWF’s supply-chain strategy for impacting commodities WWF believes need intervention to improve biodiversity, water and climate. The global corporations behind ‘food transformation’ are laughing all the way to the bank while grassroots producers essentially fund their own demise.
In the 44-page 2012 paper “Better Production for a Living Planet,” the WWF Market Transformation Initiative identified dairy and beef as two of the prime commodities they target through supply-chain companies controlling 70% of food choices.
The checkoff-funded sustainability materials coming out of the National Cattlemen’s Beef Board and Dairy Management Inc (DMI) show firsthand this relationship with WWF, by the use of the WWF logo, and in the case of dairy, the acknowledgment that a decade-long memorandum of understanding existed.
Add to this the government policies emerging that align directly with this global food, agriculture and land transformation, and the use of the vehicle of checkoff-funded “government speech,” becomes a bit clearer. It’s a clever way to leverage the supply chain and promote a message to consumers while pushing producers to align.
The WWF 2012 paper explains that in 2010, “WWF convened some of the biggest players in the beef industry to form the Global Roundtable for Sustainable Beef (GRSB). They included the world’s biggest beef buyer, McDonald’s; the biggest beef retailer, Walmart; and two of the largest beef traders, JBS and Cargill.”
While dairy and beef checkoff programs use government-mandated funds collected from producers for valuable local and state promotion programs linking producers to consumers, it is the direction of national checkoff programs – engaged with WWF and the largest processors and retailers in this way — that has producers like Karina Jones, a fifth generation Nebraska cattlewoman concerned.
Marty Irby of OCM talked about the OFF Act, which is bipartisan legislation seeking to amend the checkoff laws to reaffirm that these programs may not contract with organizations that engage in policy advocacy, conflicts of interest, or anticompetitive activities. It would require publication of all budgets and disbursement of funds for the purpose of public inspection and submit to periodic audits by the USDA Inspector General.
“It’s not about taking those promotion dollars away, but to have a just system of checks and balances,” said Irby about the proposed legislation.
But others are taking a grassroots vote approach — concerned about government oversight of what is already determined to be ‘government speech’ funded by producer checkoff.
Jones talked at the barn meeting about the massive effort to gather over 100,000 signatures by July 2021 asking USDA to conduct a nationwide Beef Checkoff Referendum. A vote on the beef checkoff has not been conducted in 35 years. (See checkoffvote.com and the paper insert in the May 14, 2021 edition of Farmshine)
“It’s time to re-check the checkoff,” said Jones about the beef petition. “We want to signal to USDA that as cattle producers we are ready to vote again.”
She explained that in order for the Secretary of Agriculture to consider a referendum request, 10% of producers must sign the petition. This includes anyone who sold a beef animal and paid the $1/head checkoff, in the 12 months from July 2020 through July 2021, including beef cow-calf producers, seedstock producers, backgrounders, cattle feeders, dairy producers, and youth showing and selling livestock.
According to the 2017 Census, 10% of the beef producers would mean 89,000 signatures needed.
“But we don’t know the vetting process the Secretary will use to approve or deny the petition request, so we want to reach over 100,000 signatures by July 2021,” said Jones.
“The cattle landscape today is much different from 35 years ago,” she said. “Our checkoff does not support promotion of American-born-and-raised beef. We want to equalize the power for the grassroots U.S. cattle producer… the power and the dollars are falling into the hands of the few.”
According to Jones, the checkoff referendum petition seeks a return to balance as well as increased transparency and accountability, through the voting process. Proponents of the right to vote believe producers should be able to fund education and promotion that takes a stand for real, USA-produced beef, something the trends and supply chain partnerships emerging today – along with “government speech” rules — make difficult.
She talked about “mavericks” who were elected to the beef board in the past and tried to change the power structure of the lobbying groups and processing industry involvement. Jones said the current structure has gone on so long — uninterrupted — that a referendum petition is the only avenue many beef producers see today as a way to bring accountability back.
“This is a call to action. Many producers are still not aware of this beef checkoff referendum petition,” said Jones as she urged producers to be bold and harness the opportunities to set a direction that changes the balance of power.
By Sherry Bunting (updated since originally published in Farmshine in 2018)
LORETTO, Pa. — Take a step back to a simpler time. A time when dairy farmers were looked up to, not questioned. A time when the milkman delivered fresh dairy milk to the metal ice box on the doorstep. A time when milk’s good name was upheld. When milk was milk.
A visit to Vale Wood Farms, Loretto, Cambria County, Pennsylvania, is in some ways a step back in time, but it is also a bold look into the future — one that delivers fresh, local, real milk and dairy to consumers. One that develops farm-to-consumer relationships as everything old becomes new again.
It’s not easy to corral a few of the third and fourth generations of the Itle family as they go about their work here. Getting them to drop what they’re doing for a group photo? Forget about it. Everyone’s busy with three separate businesses under one sign. And they’re not keen on drawing attention to themselves, but rather draw attention to milk and dairy.
Converging trends shape their market, and consumer connections are critical. (For example, today, two years since this article was first published, people have rediscovered whole milk and cream and since the Coronavirus pandemic, local foods and home delivery are a trend.)
But in the overall dairy industry, there is a growing number of competing beverages marketing outside the lines of real milk’s FDA standard of identity — introducing a growing surge of competing imitations into the dairy case.
In these challenging times, many dairy farmers consider on-farm processing. Carissa Itle Westrick, director of business development at Vale Wood Farms, acknowledges the risk and insecurity of this business that relies on building consumer and community relationships.
She points out that in some of their sales – wholesale and institutional – they, too, are price takers.
“My great great grandfather (C.A. Itle) was grappling with difficult economic choices in 1933 when he hitched up his horse and wagon and went to town,” Carissa relates.
Today, the Itles have a window into seeing how milk production levels in excess of demand impact profits throughout the supply-chain.
In the dairy sector, we often hear the experts and consultants drive home the point that ‘the next pound of milk is the most profitable milk on the farm.’
“Our economics are different,” Carissa points out. “That next pound of milk is not necessarily the most profitable. If we can’t sell that next pound of milk, then making it means we just made less profit on all the milk. For us, that approach doesn’t make sense.”
What does make sense is adding processing efficiencies and capitalizing on consumer trends, while helping to shape them.
“We have to make sure what we do fits today’s families,” Carissa notes. “We are small enough to be fairly nimble, which is so important to our business model.” For example, customers can sign up and manage their home-delivery online.
Technology-driven, home-delivery — Valewood-style — still comes with a personal touch. Of their 50 employees, five are drivers.
“Our drivers cater to our customers. They might even be asked to let the cat out or pet the dog or put the product right in the fridge,” she says with a smile. “We are hyper-local, and it’s not just a selling point for us. We shake hands with whose buying our milk.”
Meanwhile, connecting consumer dots is very much a family affair as events like the mid-July Pasture Party draw in large numbers from the community and those members of the Itle family not involved daily in the business. They bring their friends and tell their neighbors.
“When people come to an event here and go on the crazy hay wagon ride, it’s us on that wagon. It’s my uncle Dan on that wagon,” she says. “That’s our one-on-one time to tell about our cows and how they are cared for. We focus our education on how much attention we pay to the cows. They are our livelihood, and we depend on them. The effort, time, energy and emotion we put into keeping them healthy and comfortable – that’s what we want people to understand.”
The nearby schools also bring classes to connect with the farm providing their milk. In fact, Carissa’s aunt, Jan Itle, developed the “Moo to You” formal school tour program that began with five teachers and today works with nearly 75 teachers and reaches up to 5000 students annually, in addition to the other community events hosted at the farm.
Jan was recognized as 2017 Pennsylvania Dairy Innovator of the Year. Her good-natured humor is evident when she talks about working with seven brothers. And she is enthusiastic about hosting school tours.
“Give back to the community at all times,” is something Jan says they learned from their parents.
For her generation growing up, the Itle house was the gathering place, Jan recalls. “Our house was like a train station, and we still extend that invitation to the community today — to come and see what we do and share our passion.”
As the public becomes more generations removed from farm life, and the dairy disconnect grows, the Itles are doing all they can to reconnect. That helps their business model and the dairy industry as a whole.
The Itle family has seen it all in their farm-to-consumer business at Vale Wood Farms. The land on which the farm and processing plant sit today has been in the family since 1841, and while they’ve been processing and home-delivering milk and dairy products since 1933, “we are still addicted to our cow habit,” says Carissa.
Carissa is one of six fourth-generation family members working full-time here. Her father Bill is one of eight third-generation siblings involved full-time, plus another involved to some degree with a career as a veterinarian.
As company president, Bill manages the processing side. His brother Pat manages the 500 acres of crops. His sister Jan is the herd manager with her nephew Zach as assistant herd manager.
Being one of the oldest of the 18 members of her generation, ranging from adults to infants, Carissa describes the overlap. It’s easy to see how her role serves as a bridge between generations.
All told, Vale Wood Farms employs 55 people, including family members. In fact, Carissa confirms that some of their employees are also multi-generational. In fact, even the many family members with careers outside of Vale Wood Farms, come back to help with events and such. “We were all raised to jump in and do, when we see something needing done,” says Carissa.
When Bill Itle looks at the future, he notes the confusion about what is real dairy is an issue.
“We feel the pain when farmers feel the pain, because we’re part of that, and it’s not always the processor making the money,” he says. While he has seen an increase in whole milk consumption, the overall drag on total fluid sales, says Bill, is confusion in the dairy case.
“It’s tough to get our name back and away from imitation products. They’ve been doing it a long time. They aren’t hiding in the woodwork,” Bill relates.
Carissa agrees, noting that some consumers don’t really know that almond milk isn’t milk.
“I have friends who ask why we don’t make it,” she says. “They think it’s a milk flavor.”
For all of its challenges and opportunities, this is a family that loves what they do.
“We appreciate how lucky we are to have this tradition here, and we also have a responsibility to keep it alive,” says Carissa, noting that for multiple generations to run three separate businesses together takes flexibility.
She recalls her grandmother often saying, “you can disagree without being disagreeable.”
“Balancing the generation with one foot out the door with the generation gaining life experience can be tricky,” says Carissa, admitting sometimes her role is more “cat herder” and interpreter.
“In a family business, we learn that there will be differing opinions, but at the end of the day, we make decisions and everyone supports the decisions. In a family business, you learn to have good healthy debate and to strongly support your point of view, but then to compromise and accept a decision once it’s made, and that’s how you thrive.”
As the industry changes around them, the Itle family jumps in to make key consumer connections. As a result, they maintain a steady market for their steady milk supply, growing home-delivery sales in the face of increased competition and consolidation being the new reality in supermarket dairy case sales.
They have an on-site dairy store, but it is off the beaten track and represents just 2% of their sales. As we sit in the pavilion that Carissa’s sister Jen has decorated for the following week’s Pasture Party, Carissa explains the evolution of dairy trends coming full-circle.
She gives four examples: The resurgence of fresh, real and local foods; the ‘new’ idea of home delivery; how ‘old’ products like whole milk, butter, and cottage cheese, are making a comeback; and how those old paper cartons are making a comeback too.
(In fact, take a look at the dairy case the next time you go to the supermarket. Most ‘new’ plant-based non-dairy beverages and ‘new’ dairy case items like iced coffees are packaged in paper cartons.)
“Consumers are gravitating back to the carton,” says Carissa. While Vale Wood bottles a variety of sizes in plastic bottles, paper half-gallon cartons are also available “because our customers see this as a great thing, from an environmental standpoint, and we like it because it protects the milk from light.”
We talk about the growing number of consumers seeking food delivery services and how the meal kit companies have really taken off. In fact, the three biggest food retailers – Walmart, Kroger and Amazon/Whole Foods — have either bought or created meal kit or food box delivery services.
Even as total consumption of dairy milk continues to erode, the large chain supermarkets and big-box stores are getting into the game because their checkout scanners confirm that milk — real dairy milk — is still the most frequently found item in grocery baskets.
So the future will either be a competition for shrinking market share – or an all-out effort to expand the fluid market. Vale Wood pays attention to those trends to steady their market while opening eyes of consumers expand it.
The upheaval in the industry reveals the trend toward the nation’s larger retail chains wanting a bigger piece of the shrinking fluid market. Small processors, like Vale Wood, on the other hand, seek to appeal to consumers and increase product demand.
The direct competition for supermarket shelf space is becoming intense because milk, though consumption is down, is still a store’s gateway to win customer loyalty.
As all processors navigate the competitive pressures, it is the home delivery service that is steadying the ship for Vale Wood. That part of their business brings them back to that key: connecting with consumers. A big part of that connection is the cows at the farm.
“It’s unique that we still milk cows,” says Carissa. “The cows are central to our farm history and heritage and our sense of identity.”
The Itle family milks 200 cows. Their processing covers 400 cows, as they purchase milk from three neighboring dairy farms instead of expanding their own.
In addition to bottling milk and flavored milk and making ice cream, they do soft products like dips and cottage cheese, and are now doing flavored butters. They do “a little bit of everything” to capitalize on trends. This helps them deal with increased competition for fewer milk drinkers.
“We can never underestimate the effort required to get into (or keep) a market,” Carissa says. And those barriers to entry are becoming more challenging as store brand private label market share increases at the same time that non-dairy beverage alternatives compete for space in the dairy case.
Still, 95% of Vale Wood’s milk utilization is Class I, thanks in large part to their consumer connections and education that lead to product awareness and loyalty.
EAST EARL, Pa. – “We cannot continue to do what we are doing from a dairy pricing perspective and expect better results,” said Rep. G.T. Thompson (R-Pa.), named ranking member of the U.S. House Agriculture Committee in December.
Known as an advocate for dairy farmers, Thompson cited the decline in dairy farms and Pennsylvania’s position in rankings, noting that in 2009, when he was first elected to serve central and northern Pennsylvania in the U.S. Congress, Pennsylvania ranked 5th in the nation for dairy production with 545,000 cows.
A decade later, at the end of 2020, Pennsylvania slipped to eighth in production and has lost 67,000 cows since 2009. USDA reported 478,000 milk cows in the Keystone State at the end of last year with production in Michigan, Texas and now Minnesota leapfrogging Pennsylvania over the past decade.
In 2019, alone, Thompson took note of the 370 dairy farms that exited in Pennsylvania, with a huge impact on rural communities. He also observed the more than 10% loss in cows and production over 10 years during a telephone conference with members of the Grassroots Pa. Dairy Advisory Committee and 97 Milk, whom he thanked for all of their hard work on dairy issues.
He stressed that the decade of decline in Pennsylvania underscores how important it is to address the loss of milk check value at the farm level.
“Everyone in the dairy supply chain clearly can’t do what has always been done and expect different results,” he said, adding that a change is needed to benefit dairy farmers and that “the rest of the supply chain will have to adjust. We can’t sustain these decade long trends without further disruption. We have seen the impact already.”
Thompson said his dairy pricing initiative is straight forward, to look for “actionable measures that allow hardworking dairy farmers to earn a respectful living. Doing that will stabilize the economic circumstances so the other parts of the supply chain will adapt. If dairy farmers keep going down, we lose our industry, so serious steps must be taken toward economic stability.”
He talked about working as Ag ranking member to have Federal Milk Marketing Order pricing hearings, and he noted that the next Farm Bill offers an opportunity to modernize milk pricing, but it will take industrywide consensus, he said.
To get even a short-term fix for the losses due to negative PPDs before the next Farm Bill will be tough and will require action and agreement by NMPF and IDFA.
“Our best hope in the short term is to get the milk classes back into alignment (in regard to PPD), and work on building consensus for long term resiliency heading into the next Farm Bill,” said Thompson.
As for school milk, Thompson said he planned to restructure his whole milk for healthy kids legislation for reintroduction this session, with some tweaks that make it more workable for schools.
This is an important signature piece of legislation for Thompson because of the triple-impact he believes it will have on the health of children, the economics of dairy farming and the sustenance of rural communities.
Since the Senate ag committee has jurisdiction in school meals, where in the House, the jurisdiction lies with the education and labor committee, Thompson said he has already discussed the measure with the Republican leader in the Senate Ag Committee, Sen. John Boozman of Arkansas.
Thompson also believes there are members of the House Ag Committee who want to elevate this issue, which could include congressional hearings on the Dietary Guidelines. He said that process would start out with briefings to returning and incoming members about the DGAs so they have background on the issue.
With former Ag Secretary Tom Vilsack picked to return to the USDA post in the Biden administration, Thompson said he will be weighing in with Vilsack to encourage maintaining the 1% flavored milk waivers and about further school milk reform. He said he is hopeful about Vilsack’s support for a whole milk measure.
Thompson noted that reforms to milk offerings in schools could also come from the Senate side if Ag Committee Chairwoman Debbie Stabenow opens the door with childhood nutrition reauthorization, but that, “Nothing will move out of the Senate that is not strongly bipartisan, so spending time on the Senate side building bipartisan support will be important,” he said.
While incoming House Ag Committee chairman David Scott (D-Ga.) has priorities and a history of bipartisan action, dairy is not among his biggest focal points, which leaves room for Thompson, as ranking member, to advance dairy as his priority working with the chairman.
Bottom line, the Grassroots Pa. Dairy Advisory Committee will be working to help build consensus for milk pricing reform, and many of the Farm Bureau ideas look promising. The challenge will be getting NMPF and IDFA to come together around shared priorities to benefit dairy farmers in the pricing system, but that effort has begun.
One thing is clear, the House Ag ranking member G.T. Thompson sees the farmer’s position in the current pricing equation as inadequate.
We read about and see the growing number of choices in the dairy aisle that make a simple trip to the store for milk, one that can be quite confusing. There’s the thing about fat (all those different percentages) and the thing about fraud (all those plant, nut, and bean drink products calling themselves ‘milk.’)
First, the different “percentage milks” we know as skim, 1 percent, 2 percent and whole milk. The latter is confusing, is it 100 percent milk? Do some people think it is 100% fat?
Well, all dairy milk is 100 percent milk, no mater what the fat percentage… But, No: Whole milk is not 100 percent fat. It is not even 10 percent fat. It is standardized to 3.25 percent fat, and if you drank it straight from the cow it would be anywhere from 3 to 5 percent fat depending on breed of cow, time of year, and type of roughage fed.
And then there is protein. Did you know dairy milk provides a little over 8 grams of protein per 8 oz. serving? It packs quite a bit more protein-punch than almond ‘milk’ at a little over 1 gram of protein per 8 oz. serving.
Made like coffee, the crushed almonds are filtered with water. In fact, an 8 oz. serving of almond milk may be more like eating an almond and drinking a glass of water with sugar and thickeners added and a handful of other ingredients.
A common almondmilk brand label lists these ingredients the first being almondmilk defined as almond-filtered water: Almondmilk (Filtered Water, Almonds), Cane Sugar, Sea Salt, Natural Flavor, Locust Bean Gum, Sunflower Lecithin, Gellan Gum, Calcium Carbonate, Vitamine E Acetate, Zinc Gloconate, Vitamin A Palmitate, Riboflavin (B2), Vitamin B12, Vitamin D2.
A typical dairy milk label lists these ingredients: Milk, Vitamin D3. Pretty simple to see that the calcium and vitamins on the milk label are already in the milk and that zero sugar is added and zero thickeners.
The freshness of REAL dairy milk can’t be beat going from farm to table in 24 to 48 hours. It comes naturally from the cow providing the natural proteins and calcium and small amounts of healthy fat that our bodies readily absorb and utilize.
In fact, the carb-to-protein ratio of chocolate milk is now shown to be one of the best sports-recovery drinks on the market today. Yes, plain ‘ole chocolate milk. Maybe if farmers call it by another name, consumers will take notice to what has been in front of them all along.
Still, for many consumers, the perception persists that whole milk is a high-fat beverage, when in reality it is practically 97 percent fat free!
At the bottling plant, milk is pasteurized and standardized. Cream is skimmed to package whole milk at 3.25 precent fat. The skimmed cream—along with additional cream skimmed to bottle the 1% and 2% and non-fat milks—is then used to make other products like butter, ice cream, yogurt, cream cheese, sour cream and dips.
The “standard of identity” for yogurt states it also contain a minimum of 3.25% fat—just like whole milk.
Even ice cream is not 100 percent fat. The FDA standard of identity is that it contain a minimum of 10 percent fat. Some of the richer, higher-end ice creams contain up to 14 percent fat. But along with that fat, comes some nutritional benefits. These are not empty calories.
Butter is high in fat because it is, after all, a fat. Even it ranges 82 to 84 percent fat. A tablespoon of butter in the pan or on your veggies is a smaller quantity serving than an 8 oz. glass of milk; so even though the fat content is much more concentrated at a higher percentage, no one sits down and eats a cup of butter (2 sticks)!
Furthermore, we have learned that the saturated fat in milk and meat are not bad for us and that when part of a healthy integrated diet may actually provide heart healthy ‘good’ cholesterol.
The fears ingrained over 50 years of low-fat dogma are being abandoned as a nutritional experiment that has failed miserably, even though the federal government continues to hang on to the failed lowfat experiment in the recent 202-25 Dietary Guidelines.
What a growing number of scientists have found is that we need not have blamed whole milk, butter—or beef for that matter—all of these years. In fact, the recent rise in obesity and diabetes is linked more to overconsumption of carbohydrates that have filled the energy-void after we collectively sucked healthy fat out of our diets.
Saturated fats are not the enemy, the “new” science shows. However, the science is really not new. Long-time observers, investigative reporters, and scientists note that the very science supporting the health benefits of saturated fats found in milk and meat has been around for decades, but was ignored — even buried.
Meanwhile, U.S. consumer demand for butter has been expanding, and worldwide demand for U.S.-produced ice cream and yogurt has grown as well. Dairy foods and snacks that offer an energy boost with a healthy protein-to-energy ratio—such as yogurt, whole milk, and even ice cream—will be particularly in demand in nations where busy, on-the-go consumers look for reviving options.
Healthy, natural fat and protein from milk and meat keep food cravings at bay to prevent binge-eating on empty-carb snacks. Enjoyed as part of a healthy integrated diet, dairy products—even ice cream—are satisfying, nutrient-dense, carb-moderating foods that can even be the dieter’s best friend.
Go real, go natural. There’s no reason to fear real milk, dairy and beef products from cattle. Contrary to what the activists say and contrary to government ‘guidelines’ that refused again to consider all the science, nutrient-dense full-fat dairy foods and meat are good for us, and yes, good for the planet.
China, fake meat and dairy, propaganda seeking to eliminate the dairy cow, and much more concern him. But Dr. Kohl encourages farmers to seek opportunities, be flexible, innovative and adaptive, and to follow a process for their business and sharpen their business focus.Be sure to check out the navigation points on Dr. Kohl’s compass at the end of this article.
HARRISBURG, Pa. – The disruptions and challenges of the past year also create opportunities, said Dr. David Kohl, Virginia Tech professor emeritus and co-owner of Homestead Creamery for the past 20 years.
He was the keynote speaker kicking off the 2021 Pennsylvania Dairy Summit held virtually this week through an online convention format that had much of the signature Summit feel.
In his characteristic style, Dr. Kohl stepped the virtual audience through a broad global and domestic view of events and evolution down to the impacts at the dairy farm level with motivational thoughts on how to navigate.
He urged farmers to navigate rocky roads of change by adopting two key management elements. First, be flexible, innovative and adaptable. Second, follow a process for the business with a business focus.
Kohl also encouraged producers to manage around the things they can’t control like election results, pandemics and the strategies of China’s Xi Jinping.
“A good marketing and risk management plan is critical. In this environment, we have to separate the controllables and uncontrollables… and look for the opportunities,” he said.
As he has in past seminars since the pandemic, Kohl highlighted the ‘buy local’ movement is picking up steam post-Covid. “Many of you are in that footprint. One-third of the U.S. population is in your area, so this movement might be sustainable,” he said.
That’s good news. The bad news is the acceleration of economic divide, said Kohl. He sees this affecting agriculture, other businesses and households, which will add to the economic volatility and extremes in the big three: milk prices, feed costs and interest rates.
“We are in another supercycle that is really impacting the grain sector,” said Kohl. He cited the stimulus checks as “dangerous one-off income” leading to printing more money, which devalues the dollar. This fuels more exports, especially when coupled with the ‘China-effect’ as they rebuild their protein sector and livestock industry.
This, along with weather concerns in South America and investor speculation have “shot those grain prices higher, especially on corn, beans, and we see it in cotton, all up.”
He sees this grain market supercycle abating through 2021 and 2022. The grain price rally is not sustainable, in his view, unless weather problems in South America persist and unless weather affects North American crops this coming season.
Kohl noted that globalization started six decades ago, and he marked 1995 through 2015 as the period of “hyper-globalization, but in recent years, we’ve moved away from this. Dairy is right in the crosshairs of this shift because exports have become a much bigger share of milk production,” he said. “If de-globalization continues, this will impact agriculture in the U.S.”
He warned that the dairy industry would be well advised to not shape itself with China’s market in mind.
“Don’t bet your dairy expansion on trade with China,” said Kohl. He gave the example that 300 million people in China were without power a month ago because China would not allow Australian coal in to fuel plants.
Kohl observes that while the U.S. and Europe are bickering about everything, China has been pursuing world power. China has invested a trillion dollars in 68 countries – the agriculture ‘hot-spots’ around the world.
“Their initiatives will impact our competitiveness,” said Kohl, noting that China is also moving ahead on building a world supply chain for vaccines made at sites they have cultivated in developing countries.
“China could be the leading power by 2040, even 2027. They are going to move forward very fast if we don’t get our act together,” he said, explaining the recent “regional” trade pact China made that makes China the central focus in Asia.
The flipside of globalization is the domestic U.S. food supply and marketing chain.
“That’s our Achilles heel,” said Kohl. “We have too much concentration with too few firms, and I’m being very blunt about this. We saw what happened when plants shut down. Now we see more nations saying they want to become more self-reliant. This is something to watch closely over the next five years.”
Kohl said the industries that are linked to dairy are in 50 to 75% recovery while at the same time Amazon, Walmart, Target are operating at 125%.
“They are getting too much power here in the U.S. and around the world,” he said, noting that on one hand the buy-local movement is accelerating, but on the other hand, the pandemic environment has moved even more market power to these large global entities.
Expressing agricultural ‘serfdom’ concerns, Kohl responded to a question about China purchasing agricultural land and assets in the U.S. This also hit upon the recent news in business journals that Microsoft founder Bill Gates has been buying up farmland and is now the single largest owner of U.S. farmland (not total land but good arable farmland).
“I am worried about this one,” said Kohl. “Some of this big investment money creates serfdom. We need to do some due diligence, and we don’t have enough political forces looking at this. Canada put the kabash on China buying their land.” He noted that his research shows the land purchased by Gates through Cascade Investments is fertile land next to rivers and near international ports, as well as land with mineral rights.
’They want to eliminate the dairy cow’
Kohl’s Summit keynote discussion came the morning after the Super Bowl. And yes, he noticed the Oatly (oat beverage) ad that ran before halftime.
“Did you see the guy last night singing in the field talking about eliminating the dairy cow?” he asked, quoting other CEOs of brands like Beyond Meat also stating their goals to replace cows entirely.
On fake dairy and meat alternatives, Kohl was emphatic about how closely this needs to be watched.
“They’ve got the money. They’ve got the power. And they think they are saving the environment,” he said, explaining that these products are going to become more competitive with real dairy and meat as large investors and large companies in the traditional dairy and meat supply chain ecosystem get involved to drive the alternative product prices down and change the packaging. He gave the example that Beyond Meat is already closing that gap at $6.79 to $6.99 per pound compared with ground beef at $5.49 per pound.
“They are coming after traditional agriculture. That much is loud and clear,” said Kohl. “Big Ag has to look themselves in the face — that they allowed this to happen — with too much market power. This is me speaking, and I’m being blunt.”
During the chat session that followed, Kohl noted that even their Homestead Creamery based in Blacksburg, Virginia is seeing competition from non-dairy alternatives where they sell their fresh local dairy products.
“It is interesting that we are getting more questions on the non-meat and non-dairy products out there. Our customers are asking our sales team,” said Kohl. “We try to go into it with more education, and we are going A2A2 as a differentiator for our milk and ice cream.”
Minimum wage impact
Current legislation being considered in Congress includes a four-year phase-in to raise the minimum wage to $15 per hour. That’s more than double the current federal minimum wage.
“This will be bad for small business. The big guys can handle it,” Kohl observes. “This creates more business consolidation. We’re seeing a little push back on this now, but there needs to be a lot of push back. America was built on small business and entrepreneurs. We don’t want to create a serfdom where we just work for big business.”
Stimulus, taxes, regulation
With $2 billion a day in stimulus checks being written by governments worldwide, Kohl said this ‘black swan (pandemic event) can turn into an angry bird.
When government writes check, what comes next is encroachment, said Kohl. He sees federal, state and local taxes increasing and “regulators are going to have more swagger. This makes it imperative, to surround the farm business with your best advisors and have a good tax accountant who understands agriculture.”
Regulations in the environmental, labor, banking and financial service sectors are likely to increase, said Kohl. “Regulators have a lot of pent up energy from the past four to five years, and they’ll likely be coming out with a full-court press.”
Noting that the U.S. had its longest economic expansion until February of last year (pandemic), Kohl said a key reason is that the U.S. became the number-one energy-supplier in the world.
The effort to become energy independent began after the tragic attack of 9-11 in 2001. Today, the U.S. is number one energy producer, Canada is number four and Mexico is number eight. This means three of the top 10 energy producers are in North America.
“Now we are seeing a rollback of this playing right into the hands of Opec,” said Kohl, noting that the advertising and policy points about moving to electric vehicles can all sound good. “But we’re not thinking of the unintended consequences, where 74% of the components (for EV vehicles) are produced in China.”
How energy plays out policy-wise is important for agriculture, according to Kohl, because “$8 out of every $10 we spend is linked to energy.”
Kohl sees a “fine balance” to be had on sustainability and climate action.
“Some things we are doing for water, air and soil health are important, but there are contributors other than fossil fuels. I see a need to think about unintended consequences. If components for new sources come all out of China, and we get locked down, that creates a problem. Also, a lot of people seem to forget: when gas goes to $5 to $7 per gallon, it shuts a consumer and a farm down very quickly.”
Navigation points on Dr. Kohl’s compass:
— Surround yourself with good advisors and a good tax accountant.
— Be careful with one-off income from government support. Are you using that money to build efficiencies or pay down debt? Don’t make long-term expansion decisions based on this one-off income.
— Watch the value of the U.S. dollar relative to other currencies, but land value should hold.
— Expect to see acceleration of ‘carbon payments’ replacing direct farm program payments.
— Keep the non-dairy and meat alternatives on the radar screen, especially if you are involved in dairy leadership.
— Healthy soil, water and air quality are important focuses as agriculture deals with weather extremes.
— See the positives that have come out of the pandemic: farms labeled essential, local food movement acceleration, time with family, time to re-evaluate priorities.
— Be flexible, innovative and adaptive.
— Have a risk management plan and realize you are going to leave money on the table when you follow a plan that works for you 8 out of 10 years.
— Keep working capital available as your shock absorber and so you will be ready for emergent circumstances and unexpected opportunities. The recommended ‘war chest’ is to have greater than 25% of the farm’s expenses (not including interest and depreciation) as working capital reserve.
— Have a written farm budget and compare periodically (monthly) to actual expenses.
— Have a separate family living budget and compare periodically to actual expenses.
— Use advisory teams. They are the fastest growing trend, and they work.
— Be proactive on a plan to transition the business and to merge older and younger views of the future.
— Evaluate your business management IQ with 15 questions to ask yourself about your business and have each member of the family in management fill it out separately. This is a great way to measure business management progress, “and it gets you to think,” said Kohl. (See chart.)
— Do your baseline cash flow projections for the farm business, but also do financial sensitivity analysis. Work through the numbers in a best-case scenario to the aspiring goals of the business, but also run worst case scenarios. Look at the analysis if interest rates go up 1 to 2% — or with changes in the input and output values — to see how those changes affect the bottom line. “This gives you the parameters to keep you out of the ditches as you move forward,” said Kohl. “If those values experience extreme change, you can fall back on that working capital reserve.”
— Monitor those cash flows monthly against projections.
— Work with ag lenders to lock in interest rates where you can.
— Re-examine your vision and your goals and make sure expansion or investments line up with these goals; keep your working capital cushion.
— Look for your “three’s” – 3 things you want to continue, 3 things you want to improve. When isolating goals and actions, limit to three to intensify your focus.