Tag Archives: milk cooperatives

Fluid milk’s precarious future can’t be ignored

Posted on by
Reply

Class I is at a tipping point, will future FMMO strategies strengthen or exploit it?

“Probably some of you have never recently met an independently owned fluid milk bottler. We are the only prisoners in the Federal Order system. Everybody else can opt in or opt out. Even now… our cooperative competitors don’t have to pay their member producers a minimum price — but we do. I just ask that you take into consideration not just what we can get from Class I … We are on a 13-year losing streak that fluid milk consumption has declined on a total basis. We are at a tipping point,” said Farm Bureau member Chuck Turner, Turner Dairy Farms, a third generation independent milk bottler near Pittsburgh, Pa.

By Sherry Bunting, Farmshine, October 28, 2022

KANSAS CITY, Mo. — The precarious future of Class I fluid milk was an underlying concern expressed in different ways at the AFBF Federal Milk Pricing Forum in Kansas City recently. Some have written off the future of fresh fluid milk and have turned sights elsewhere. Others recognize federal orders don’t fulfill their purpose when fresh fluid milk doesn’t get to where the people are. And then there’s the wedge product — aseptic milk — in the mix as some changes have already been made to promote investment in it.

Since the federal orders are based on regulation of Class I fluid milk, its future is most definitely at the core of the Federal Milk Marketing Order (FMMO) discussion. 

A critical point made by panelists is that more money is needed to get fresh milk to consumers in high population areas. Also mentioned was the restoration of higher over-order premiums to farmers in milk-deficit areas to keep these areas from becoming even more deficit.

But at the same time, Class I sales are declining relative to a growing dairy pie of other class products, and the flurry of fluid milk plant closures near population areas has caused further disruption. 

On day three of the forum in Kansas City, Phil Plourd of Ever.Ag attributed most of the fluid milk sales decline to the fact that “milk lost its best friend – cereal.” When asked, he did acknowledge that about one-third of the problem facing fluid milk is rooted in the low-fat school milk requirement. He also pointed out how the entire food industry is changing, and he warned about the lab-created dairy proteins made in fermentation tanks that can be ‘turned on and off.’

Bottom line is the growth markets are in other products, he said. The declining fluid milk sector can no longer shoulder all of the responsibility for the federal order system. 

He showed a bar-graph depicting the decline in the share of total U.S. production participating in federal or state revenue sharing pools. Using estimates of California’s pre-federal order mandatory state order, the percentage of U.S. milk production that was pooled exceeded 80% in 2018. In November of 2018, California became a federal order. Pooled volume vs. total production fell to just over 70% in 2019, the first year the new Class I mover formula was implemented. In 2020, during the pandemic, pooled volume fell to just over 60% and ticked a few points lower to 60% in 2021.

Several panelists, including Calvin Covington, confirmed that cooperatives, especially DFA, own the majority of the fluid milk plants in the U.S. today. This evolution has only increased with plant closures over the past 18 months, and cooperatives have payment and pooling flexibilities not enjoyed by proprietary plants.

As the Class I sector consolidates to roughly 80% owned by cooperatives and the balance owned by grocery chains and independents, there is another problem with federal orders that is easily overlooked. Who is it regulating? It does not regulate what cooperatives pay their members, therefore, it is regulating a declining number of participants in a growing global industry.

A milk bottler from Pennsylvania used the open-microphone between panels to address this 800-pound gorilla in the room full of consensus-builders doing their level-best to ignore it.

“I am sort of an ‘odd duck’ here. Probably some of you have never recently met an independently owned fluid milk bottler. We are the only prisoners in the Federal Order system,” said Chuck Turner, a long-time Farm Bureau member and third-generation milk bottler from Pittsburgh.

“Everybody else can opt in or opt out. Even now, with recent developments, our cooperative competitors don’t have to pay their member producers a minimum price — but we do,” he confirmed.

Turner asked the room of consensus-builders to “take into consideration not just what we can get from Class I — but let’s think more about what we need to do to sell it. We are on a 13-year losing streak with Class I — 13 years that fluid milk consumption has declined on a total basis. We are at a tipping point,” said Turner.

While half of the forum’s table groupings agreed Class I differentials need to be increased, others wondered how much more money can be extracted from Class I without killing it?

Joe Wright, former president of Southeast Milk Inc., laid out the problem as a “downward spiral” — making it more difficult to attract milk to populated areas in the Southeast. He said it started with the Dean and Borden bankruptcies and continues with more plant closings announced every few months.

In the Southeast, said Wright, it’s to the point where school kids won’t get fresh milk in some areas because no one will bring it.

He noted that the over-order premiums in Florida have decreased by $1.50 per hundredweight. Some 30 years ago, it was $3.00. “We don’t have that now,” said Wright, noting this makes it difficult for farms to continue producing milk for the Class I market in the face of encroaching subdivisions and other pressures to sell.

“There are 9 million people just from Miami to Orlando,” said Wright. “But if we don’t do something soon, we’ll have no dairy farms left in Florida. Do we want the answer to be a push to aseptic milk? Total milk consumption was stable until 2010. That’s when the government gave us low-fat, low-taste milk in schools. Now, we’re going to start them with low-fat, low-taste, aseptic milk? That is going to kill fluid milk.”

He also noted that fluid milk sales are not helped when dairy shelves are empty, showing slide after slide of empty Walmart dairy cases in the same town in Florida in December – three years straight (pre-Covid, during Covid, and post-Covid). When he asked attendees if they have seen this in their own areas, many hands were raised.

He pointed out that when the fresh milk is completely missing on store shelves, it is the aseptic or ESL milk – and plant-based alternatives – that are available. This has a cumulative effect on fresh fluid milk sales.

Again, the topic of aseptic, shelf stable, warehoused milk was brought up with feelings of ambivalence as milk producers are both drawn to it as a hedging mechanism to even-out the supply and demand swings in areas like the Southeast, but on the other hand offended by the prospect that this product can be considered by bottling retailers like Kroger as an innovative “value added” growth category, while the original fresh fluid milk is treated like the Cinderella sister – a low-margin commodity non-growth category.

As more aseptic packaging comes on line, and as schools go without milk and stores short customers on the availability of fresh milk, a transition is being signaled toward packaged milk that is capable of moving farther without refrigeration cost — from anywhere to anywhere – right along with Coke or Pepsi for that matter.

“How do we fix the empty case syndrome that has gotten worse over the years? It’s all about being accountable,” said Wright, giving some history on how this was handled in the past and voicing his hope that having the Dean plants under DFA and Prairie Farms ownership could help.

“Can they push back on Walmart on stocking? I don’t know. There has to be margin in that relationship, but these are correctable problems that affect milk sales,” he said.

For its part, Kroger also closed a plant last year that was running half-full, according to Mike Brown, senior VP of Kroger’s dairy supply chain. 

Milk bottling is consolidating rapidly to run the remaining plants at or above capacity to capitalize on throughput and improve margin.

“The reality,” says Wright, “is we are seeing a downward spiral, and milk is not always available where the people are. The question is, what are we going to do about it?”

Brown noted that the Class I mover formula change, which was an agreement by IDFA and NMPF in the 2018 farm bill, was intended to make fluid milk pricing “more predictable.” This was deemed necessary to attract investment to make fluid milk “more durable and transportable.”

In short, the Class I change was done to attract investment in expensive aseptic packaging to make shelf-stable milk and milk-based high protein beverages. 

Going forward, said Brown: “Risk management is important and especially for specialty products such as extended shelf-life and aseptic milk, which are growing more than the plant-based beverages for Kroger. We have to be sure we nurture these new products because they are value-added growth markets for fluid milk.”

On the other hand, farmers in Kansas City voiced their concern for what happens to fresh fluid milk, that it matters for consumers and it matters for their dairy farms, and it also matters for the continuation of the federal orders. 

Aseptic milk is experiencing growth, but why? Is necessity the mother of invention or is the investment driving the necessity. 

After all, it is the regional and perishable nature of fresh fluid milk that led to the development of the federal orders in the 1930s. Aseptically-packaged and warehoused milk is not fresh enough — and may not be local enough — to be the product that helps extend the viability of the federal orders. 

Empowering dairy farmers: knowledge, tools, ideas shared

Posted on by
1

By Sherry Bunting, Farmshine, April 2021

GORDONVILLE, Pa. — Empowerment. One word with power in it.

“I got to thinking about introducing this session and thought everyone knows what empowerment means, right? Give power. But then I looked up the opposite of empowerment,” said Kristine Ranger, a consultant in Michigan working with farms and writing and evaluates grants. She traveled to Gordonville, Pennsylvania  with National Dairy Producers Organization board member Joe Arens to the farm of Mike Eby, NDPO chairman, for the ‘Empowering dairy farmers’ barn meeting Friday, April 23, 2021.

What is the opposite of empowerment?

“Here are the words in the dictionary,” said Ranger. “Disallow, forbid, hinder, inhibit, preclude, prevent and prohibit. Have any of you been experiencing any of that as you try to build a livelihood with your dairy farms?”

Good question.

From there, the daylong barn meeting moved headlong into weighty topics, but stayed focus on the positive concept of encouraging producer involvement in seeking accountability and transparency in the systems that govern dairy.

Although the sunshine and spring planting kept in-person attendance low, the event was livestreamed on visual and audio with producers listening in from all over.

Traveling from Michigan to the Lancaster County, Pennsylvania farm of Mike Eby (center) for an ’empowering’ farmers meeting were Joe Arens (left), NDPO board member and Kristine Ranger, a knowledge consultant working with farms. Ranger worked with Eby to secure a grant for the in-person meeting and multi-media production. In addition to serving as NDPO (National Dairy Producers Organization) chairman, Eby is executive director of Organization for Competitive Markets (OCM), represents the south district on the PA Farmers Union board and is a member of the Grassroots PA Dairy Advisory Committee collaborating with 97 Milk education efforts.

A thought that kept surfacing in this reporter’s mind listening to the panel of speakers was this: The longer something goes uninterrupted, the more vulnerable it is to become corrupted.

In fact, it tied in directly with Arens’ personal account following Gary Genske on the program. Arens urged producers to look at annual reports and ask questions. “That’s what NDPO is all about, to support your efforts to get to the cooperative boards of directors about what they should be doing at the co-op level,” said Arens, a member of the NDPO board for two years.

“Members own the milk. Members have the power, but the whole thing has been tipped upside down,” said Arens.

“We need to do something to change this,” said Arens. “Get in front of your board members… They are talking about expanding plants, not talking about producer price. Their one and only responsibility is that price on the milk check settlement statement.”

“If producers do not hold their co-ops accountable, then silence is your consent,” said Genske, a certified public accountant since 1974 based in California with a dairy in New Mexico.

He kicked things off at the barn meeting, presenting details about the roles and responsibilities of cooperatives, boards and members. He shared his insights into improving dairy farm milk prices.

Genske is a longtime member of the NDPO board. He highlighted the marketing concepts of 100% USA seal for milk and dairy products, returning to the true standards for fat and components in beverage milk that are still used today in California, and moving toward aligning milk production with profitable demand.

Gary Genske was the kickoff panelist, presenting virtually from his office in California.

The Genske Mulder firm does the financial statements for 2500 dairy farms each year and 10,000 farm tax returns annually. He sees the numbers and knows the deal.

Walking attendees through the various aspects of USDA regulation and the Capper Volstead Act, Genske gave producers the tools and encouragement to accept their responsibilities as cooperative members.

In October, he had a successful lawsuit in Kansas City. After requesting documents from the cooperative in which he is a member, and being denied or provided documents that were mostly redacted, he took the issue to court.

After a two-day hearing, the judge ruled in Genske’s favor on his request for documents, as a cooperative member, with a stated purpose.  

In short, Genske said, “We have to put people in the position of taking care of the members… We want to cull cows not dairy farmers.”

Bernie Morrissey, chairman of the Grassroots PA Dairy Advisory Committee talked after lunch about the 97 Milk effort when farmers empowered themselves to market whole milk, since no one else was; and all kinds of prohibiting, hindering, forbidding, preventing and precluding had been going on regarding whole milk availability and promotion.

“This is it,” said Bernie Morrissey. “The dairy farmers made me successful, so this is me giving back.” He talked about the whole milk education effort and the push to legalize whole milk choice in schools. If ever there was an example of the opposite of ’empower’, it would be the treatment of whole milk by industry and government, especially since 2008. The steep decline in fluid milk sales from 2010-2018 is starting to stabilize as consumers and policymakers are getting the message. Each step is hard work.

“It started with Nelson Troutman who painted the first round bale, just like that sign: Drink Whole Milk 97% Fat Free,” said Morrissey pointing to the large banners and holding up the Drink Whole Milk School Lunch Choice Citizens for Immune Boosting Nutrition yard signs.

With a joint effort underway now for a little over two years – working to educate lawmakers and consumers about whole milk, and pushing efforts to legalize whole milk choice in schools — Morrissey said “It’s working. Things are happening.”

With the FMMO map on the screen behind him, Dick Bylsma of NFO talked about the history, purpose and hot FMMO topics of the day. He said the most empowering tool a dairy producer can have is the right to vote on milk order changes, instead of being bloc-voted by the cooperative.

Dick Bylsma of National Farmers Organization (NFO) traveled from Indiana to brief producers on joint efforts between NFO, Farmers Union and Farm Bureau to empower dairy farmers by getting their individual votes back in Federal Order hearings. He traced the history of Federal Milk Marketing Orders, and the genesis of bloc voting at a time in history when there were hundreds of thousands of farmers and communication was slow.

“It’s time to end bloc voting,” said Bylsma, and he laid out some of the efforts underway around that proposition, also highlighting the purpose of the Federal Orders.

These are just some fast highlights from a day of deep learning. More from these speakers and additional speakers on co-op involvement, systems accountability, checkoff reforms and referendums, and other empowering topics — including more from Genske about ending the silence and exercising rights and responsibilities with communication tools that work for cooperative members — will be published in a future edition.

Similar in-person meetings recently encouraged producers in Michigan and northern Indiana, said Ranger.

For dairy producers who are interested in knowing more, want to get involved, but aren’t sure how, NDPO chairman Mike Eby suggests joining in on the NDPO weekly national Tuesday night call at 8:00 p.m. eastern time at 712-775-7035 Pin 330090#. Every dairy producer in America has a standing invitation.

To hear past calls and learn more, click here

To view a video or listen to a recording of the empowerment meeting, click here

Look for more in a future edition of Farmshine.

-30-

Regional milk and dairy food security in jeopardy

Posted on by
2

Widespread milk dumping continues, small regional co-ops face extinction

MilkTruck

Enter a caption

By Sherry Bunting, Farmshine, April 10, 2020

BROWNSTOWN, Pa. — As the dairy supply chain disruptions worsened this third week of COVID-19 pandemic stay-home orders in most states, large milk cooperatives continued rotating their milk dumping between members. For example, Dairy Farmers of America (DFA) — the nation’s largest cooperative — reports 12 to 15% less milk is needed under current conditions and wants to see the supply of milk they handle drop by 10% in the next several months to match the reduced demand for milk as processing and distribution capabilities have made seismic shifts amid the COVID-19 pandemic.

In this situation, small milk cooperatives and independent producers are finding themselves particularly vulnerable as a flurry of contract terminations fill voicemail and email, not to mention social media timelines.

This, from a family in Corry, Pennsylvania on their facebook page Monday (April 6): “Today we got it. The thing you know is possible but you just do not think it will be you. Not your farm. After all you have survived things for generations, it just cannot be you. But today it was.Today we got our letter, Rothenbühler Cheese Chalet canceled our contract. Today it all crashed down. Hope disappeared, and all our dreams vanished. We will be dumping our milk until we can figure it out how for 200-plus cows in the middle of a pandemic. No auctions, no sale barns, no options. It is heartbreaking to watch generations of work and dedication become meaningless. Wasted.”

The next day came the update that their 27-member cooperative in Northwest Pennsylvania has a few weeks to solve an abrupt concern, after previously being given three hours on a Friday afternoon — paperwork details that aren’t technically part of their milk contract that became effective March 1 with the Middlefield, Ohio cheese plant.

Farmers Union Milk Producers Association, based in Stoneboro, Pennsylvania, learned Tuesday (April 7) they have a few more weeks to address this paperwork request that had resulted in a contract termination email Friday (April 3) at 5:00 p.m. The cooperative has had a decades-long relationship with the Middlefield, Ohio cheese plant, but learned Friday at 2:00 p.m. that certain paperwork not detailed in their contract was required by 5 p.m.  that day to avoid termination.

“That’s three hours and not possible,” notes Lisa Royek. Her husband Walter is the current president of the cooperative.

Over the weekend, the co-op board went to work, received some legal advice, and asked the company for an opportunity to discuss the situation. Eventually, the company agreed to give Farmers Union until April 17 to meet this new request.

Even though it’s not in their current contract — signed last December and effective March 1 — Royek notes that, “We value this relationship and want to act in good faith in the hopes that the cheese plant will do the same.”

Despite this two week reprieve, some of the co-op’s members expressed concern Wednesday about milk sampling irregularities — leaving a few in jeopardy of their milk being excluded from pickup this week — and there were other questions about whether milk would be received from some of the member farms once it got to the plant.

But Farmers Union co-op is moving forward, doing what needs to be done, hoping to save their milk market with the plant they’ve done business with for as long as Royek can remember.

For producers in other small co-ops of northwest Pennsylvania and southwest and central New York, similar hurdles are being met.

Members of one small cooperative reported Wednesday that the cheese plant in Friendship, New York will no longer need their milk, indicating that Walmart had canceled orders.

While New York shippers for the Dean Foods bottling plant in Sharpsville, Pennsylvania often have their milk sent to the Friendship, N.Y. cheese plant, it is unclear whether a similar distribution status exists for the Middlefield, Ohio cheese plant in the Farmers Union cooperative situation.

The Dean Foods Sharpsville, Pa. bottling plant is one of 44 plants — nationwide — being purchased by DFA. Dean Foods receives a large share of its milk from DFA and this market accounts for a large share of the milk DFA ships. The 44-plant sale was approved by the court on Friday (April 3), pending final details before transition of assets after another hearing set for April 27.

Members of small co-ops shipping to the Middlefield, Ohio or Friendship, New York cheese plants were contacted for this report and did not know if their milk had ever been used to supply the Dean plant in Sharpsville or if these cheese plants ever supplied Class I markets in the Mideast Milk Marketing Order. Just the same, we called the plants and the Mideast Market Administrator to find out the pool status of these plants, and any recourse these producers might have. Our calls were not returned by either the plants or the Mideast Market Administrator.

Producers who are part of the small co-op cut off by the Saputo-owned Friendship, N.Y. plant, said the reason they were given was cancellation of orders by Walmart, Dollar General and others. Their members began dumping milk Wednesday (April 8) because there was no where for the milk to go.

IMG-3717

Just one of many photos submitted April 8-11 showing a continued shortage of real butter at Walmart stores in Pennsylvania, New York and Ohio, except for small quantities of unsalted or “lite”, and plenty of imitations and margarine.

On the very same day, no less than 20 texts, emails, and messages came in from people throughout Pennsylvania, New York and Ohio reporting that their Walmart stores were low on milk and had zero butter, sour cream or shredded cheese. Walmart and Sam’s Club shoppers also reported being limited to one or two gallons of milk with limits on other dairy products as well. (These reports persisted with documentation of empty Walmart butter shelves and limited or absent sour cream and shredded cheese, along with either no milk or very little milk, especially whole milk at Walmarts in Pennsylvania, New York and Ohio as recently as April 8-11.)

It is unclear what role Walmart’s Midwest supply chain via Prairie Farms, Great Lakes and Foremost — play in the Mideast Milk Marketing Order supply chain disruptions that are leaving small regional co-ops facing complete termination while at the same time the Walmart stores in the region show a stark lack of dairy products and depleted milk supplies for shoppers.

Walmart_PA_April_7

Walmart stores throughout the region, like this one in Kittanning, Pennsylvania on April 7, continue plowing through milk supplies rapidly. Meanwhile farms in the region continue to be forced to dump their milk or face the complete loss of their milk contracts. They are told it is because of a drop in dairy demand due to schools and restaurants closing and exports stalling. They are also told that retailers — like Walmart — are not increasing their orders, and are canceling some orders, despite the surge in consumer demand for real milk and dairy products.

The Dean Foods Sharpsville plant in western Pennsylvania is part of the USDA Mideast Milk Marketing Order that regulates Class I fluid milk in the western half of Pennsylvania, all of Ohio, all of Michigan, three-quarters of Indiana, most of West Virginia, and the northernmost part of Kentucky.

Pennsylvania also has a state-regulated milk marketing system. For the past three years, Walmart has been an approved ‘milk dealer/handler’ — not just a retailer in the Pennsylvania system, where the Milk Marketing Board (PMMB) sets minimum retail and wholesale prices for beverage milk that include an over-order premium intended by law for dairy farmers.

The state’s accounting system through PMMB only follows the over-order premium back to the farm level when the retail milk meets three specific criteria: produced, processed and sold in Pennsylvania. However, consumers pay this premium on all milk they buy in Pennsylvania — no matter what state it was produced in or processed, and no matter which side of the state border the wholesale warehouse transaction occurs.

These are all complicating factors of milk’s classified pricing system and large chunks of consolidating, centralized milk supply chain.

The Northeast Milk Marketing Order is having its share of problems also, and the Walmart stores in the Northeast are equally lacking in dairy products.

Reports surfaced this week from Central New York dairy producers that a small co-op downstate has been abruptly terminated by their milk processor in Menands, N.Y. until further notice.

In addition, Jefferson Bulk, a small upstate New York cooperative, had been able to market every drop of their milk since losing their contract with Kraft Cheese effective  January 1.

Jefferson Bulk’s marketing options in the region are now non-existent or very difficult to achieve amid the COVID-19 pandemic foodservice contract losses and as retailers — especially Walmart — are not providing enough milk, butter and other dairy products in their stores to keep up with surging consumer retail demand to feed their families at home.

As a national footprint cooperative with regional councils, the nation’s largest cooperative — DFA — answered questions last week about their assessment of the situation in the Northeast in comparison to the West in an email response to Farmshine Wednesday: “Like the coronavirus, this situation is not limited to one area of the country and is changing daily. At this time, we have requested that less than 10% of our members dispose of milk, as an absolute last resort. Primarily, disposal is happening in areas where a plant has reduced its schedule or has even shutdown, which forces us to try and quickly find a new home for our members’ milk.”

The explanation went on to say that, “There are times when there is no economical location to deliver milk, so in some regions, where there is no viable market for milk right now, we’ve had to ask some farms to dispose of raw milk, as a last resort.”

DFA also indicates that payments for the milk “will vary by region, as the marketing of milk is a very localized activity, DFA has provisions in place to compensate members for the milk that’s being disposed. Ultimately, an individual does not bear the cost of the disposal themselves, when they’re member of a cooperative, like DFA.”

Meanwhile, the widespread shortage of butter in supermarkets, especially Walmart stores, is going on three weeks now, so we turned to Land O’Lakes customer service for our inquiry due to the sheer number of consumer reports about these shortages of butter and limits on butter purchases.

Land O’Lakes is also a national footprint dairy cooperative with its famous butter brand and a significant butter/powder production plant in Carlisle, Pennsylvania.

Land O’Lakes has a base program that penalizes its farmer-members if they produce more than their base milk production amount. This program is being strictly enforced in the Northeast since early March. Some Land O’Lakes members in the Northeast also reported being forced to dump their milk last week. One farm was able to find another processor to take the milk strictly to make products for food banks.

By contrast, no base penalties have been reported by Land O’Lakes members in Minnesota, and dairy leaders in Minnesota report no milk has been dumped in their state, where Land O’Lakes is headquartered.

In fact, Farmshine could only verify one milk dumping occurrence west of the Mississippi in states where milk production has grown by leaps and bounds in recent years.

We asked Land O’Lakes customer service: Why are we seeing widespread butter shortages even though farmers are being penalized and forced to dump milk and even though USDA’s March 1 Cold Storage report pegged U.S. butter inventories to be 25% above year ago?

The answer we received in writing was this:

“We’re so sorry that you’re having difficulty finding our butter,” a Land O’Lakes customer service representative responded in a message. “Our whole co-op is working hard to make sure that your favorite products continue to be well-stocked, despite the business challenges posed by the COVID-19 outbreak. While our online product locator is helpful in finding stores that have recently sold our products, we know that supplies at the store shelf may vary over the next few weeks/months. We appreciate your patience and support during this trying time and wish the best to you and your family.”

-30-

92823124_1568862956610362_5176863088485335040_n

Dollar stores and pharmacies like this Rite Aid in Crawford County, Pa. April 10. Not only are dairy farms being forced to dump milk, small co-ops in the region face termination as milk suppliers.

Global dairy thoughts Part II: Who’s being creative?

Posted on by
2

Part Two of Five-part “Global Dairy Thoughts” Series in Farmshine

wGDC18-Day1-56By Sherry Bunting, from Farmshine May 4, 2018

BROWNSTOWN, Pa. — Everywhere we turn, we receive the message that fresh fluid milk is a market of the past and exports of less perishable dairy products are the wave of the future. As discussed in Part One of this ‘global dairy thoughts’ series, that seems to be the trend if you look at the markets.

Yet, could a portion of the reason we are in this fluid milk decline, be the effect of USDA-regulated pricing, USDA-imposed restraints on the ability to promote competitively in the beverage space, and the resulting industry neglect of this regulated commodity category — fresh fluid milk?

The government — USDA — and the checkoff and cooperative leadership have no appetite for significant change to any of these factors. USDA gets to pay less than it otherwise might for milk in its nutrition assistance programs, while both the proprietary and cooperative processors get to pay less than they might otherwise for components in a range of products.

Meanwhile, dairy farms see the first product to come from their herds — milk — declining, and their futures along with it.

Yes. We all know it. Fresh fluid milk — the most nutritious and natural option — is in the fight of its life. In meeting after meeting, presentation after presentation, we hear the messages from the industry and university economists — both subtly and outright.

Like this: “The fluid milk market is the dead horse we need to stop beating.”

Or this: “Do we want to hitch our wagon to a falling rock?”

And so forth, and so on.

It is difficult to question the industry and its economists on anything to do with the Eastern U.S. or the fluid milk market. Some have gone so far as to say that if the East is relying on fluid milk, they are out of luck.

Meanwhile, dairy farmers in eastern regions suggest that if fluid milk does not stabilize its losses or restore its market share — at least partially — they see their value as producers vanishing.

And in fact, this has an impact on our global advantage — that being the U.S. having a large consumer base at home to anchor the base production while growth is said to be the reason why we need exports.

As mentioned briefly in Part One, the Federal Orders are designed to move the milk from surplus regions to deficit regions, and that is what the proposed USDA change in Orders 5 and 7 will do further, the experts say.

Meanwhile, who is being creative to figure out how the deficit regions of the East can use or regain their primary competitive advantage — having a base of consumers within a day’s drive. This line of thinking is analogous to how the U.S. fits as an exporting nation with quite a large consumer base at home.

What really requires our creativity is the U.S. product mix and how milk resources are priced and sourced.

Here are some numbers. U.S. dairy protein disappearance has had average annual growth of 6.3% over the past five years, though it has been a bumpy ride, with U.S. production of milk protein concentrate (less exports) at its lowest levels over that five-year period in 2014.

Meanwhile, demand for fat is increasing as consumers heed the dietary revelations and switch from lowfat and fat-free milk to whole milk and have their butter without guilt.

Mentioned last week in part one is that global milk production increases are beyond the stable rate of 1.5% per year. According to the U.S. Dairy Export Council (USDEC), the combined growth rate from the EU-28, U.S., New Zealand, Australia and Argentina was double that collective 1.5% threshold. Looking at 2018, however, reports are surfacing to show spring flush is delayed in Europe just as it appears to be in the U.S.

Or is global production reining in? The markets are trying to figure that out with quite a rally going in powder right now.

One thing rarely mentioned in these reports is that Canada’s production has also grown with increased quota to account for the greater demand they see in their domestic market for dairy fat.

In fact, despite its supply management system, government figures show Canada’s milk production had year-over-year growth between 3 and 6% for each of the past three years, and 2018 production is off to a 5% start.

In Canada, as in the U.S., fat fortunes have changed over the past four years, so the belt has been loosened to serve that market, leaving more skim swimming around.

Canada’s new export class (Class 7) mainly pertains to this excess skim, which has reduced the amount of ultrafiltered milk they now buy from U.S. processors.

In addition, as pointed out by Calvin Covington in his presentation at the Georgia Dairy Conference in January, milk can be purchased at lower prices for this Canadian export Class 7 because the excess skim is used in products that are then exported.

This means the resulting products in the Canadian export class can be sold at globally competitive prices. While not in huge volumes, some of this product is going to Mexico.

This brings us to Mexico — currently the largest buyer of U.S.-produced nonfat dry milk, making the outcome of NAFTA negotiations a sticky issue for industry leaders, especially as Mexico recently signed a trade deal with the EU to include dairy.

The two forks come together in regions like the Northeast, where Class IV utilization has become an increasing part of the blend price and a more important balancer of the shrinking Class I.

While March showed a surprising jump in Class III utilization to a 15-year high in the Northeast, the overall trend over the past four years has been a blend price with increasing Class IV utilization and decreases in Classes I, II and III.

Dairy economists indicate the U.S. is making more world-standard skim milk powder for export, but in reality, the U.S. still makes a high percentage of nonfat dry milk (NFDM), which is still the largest domestically-produced milk powder category and it is the only milk powder that is used in the Federal Order pricing formulas.

NFDM is primarily made in conjunction with butter. As butter demand has grown and prompted greater butter production in the U.S. over the past four years, more NFDM has been made and stored (or the skim is dumped) as a result.

The market issue in the U.S. has been compounded by the EU having a mountain of intervention powder stocks in storage, some of it aging.

After the European Commission sold over 24 metric tons two weeks ago, global and domestic powder markets moved higher. It was the largest chunk to come out of that mountain to-date and was offered at reduced prices to attract buyers. But by the time the bidding was done, it sold at or above the GDT price for SMP powder.

It’s really true. Inventory depresses prices. Having a big chunk of a huge inventory gone, is, well, big.

The flip side of the coin is that European processors have shifted from powder production with their excess to making more cheese and butter.

Next in Part Three, we will look specifically at some differences between the products made in the U.S. vs. what is traded globally, and at the differences between the U.S. and global trading platforms.

-30-

PHOTO CAPTION

GDC18-Day1-56

While attending the 2018 Georgia Dairy Conference in January, a large global cargo ship on the Savannah River, passed by the glass windows at lunchtime on its way out to sea. Several dairy producers walked outside for a closer look, we all hoped there was plenty of powder on board. Photo by Sherry Bunting

Dumped. Desperate. Delivered. But is it over?

Posted on by
1

‘It will happen again if we don’t find a way to deal with this.’

By Sherry Bunting, Farmshine, April 17, 2015 Cover-041715

FULTONVILLE, N.Y. — Ray Dykeman does not want to see anyone go through what he and his cooperative of 8 producers did this week. He cites the feeling of not knowing where to turn as the worst part of the “bizarre situation.” But as the group began their phone-tree of calls last week, and the Albany television news cameras rolled at the 950-cow Dykeman Dairy Farm to produce what became the number one ‘shared’ story of the week… things started happening that led to a reprieve.

The co-op of 8 had lost their milk market. They were given notice 4 weeks ago that April 15 was the last day they would haul their milk to New York City’s only bottler — as they had for 13 years. Less milk was needed by Elmhurst Dairy, and another entity had stepped in to supply — and balance — that need.

“When we first lost our market, we spent 14 days thinking we were getting something lined up with another buyer,” said Dykeman. “When that fell through, we were faced with literally 7 to 10 days of hecticness. There’s not a tremendous amount of options. That is the other hard part.”

Dykeman served as the co-op’s point man communicating with other co-ops, processors, government officials and the media.

The 8 farms, totaling near 3000 cows, were down to 7 days to find a new home for their 110 million pounds of annual milk. Staring them in the face was the real possibility of selling their cows and shutting their doors.

“What do you do in 30 days, in that amount of time?” said Dykeman, who has ownership in 3 of the 8 affected farms, including the 500-cow Envision Dairy, Amsterdam, owned by a consortium of 23 people with expertise in different aspects of dairying and forage, along with young dairy startups from Cornell. Envision Dairy was accepted by another co-op 10 days before cutoff. That lightened the load a bit, but the rest of the milk was still a long way from home.

“Even today, our 42 employees are looking at me saying what are we doing Thursday?” said Dykeman in a Farmshine phone interview late Tuesday afternoon. “We are 24 hours away from having no home for our milk, and I still am not sure how to answer them.”

Hope and support…

But he had hope. Fellow dairy producers and community members were calling and emailing. People were reaching out. He had had countless meetings and secured two buyers to each take a little of the milk. On Tuesday afternoon, he was waiting for an answer from a third processor considering taking half.

By late that evening, that contract was signed for a 3-month reprieve in time to make the nightly television news.

“Trucking our milk to 3 different places will be new for us, but we are able to use the same hauler and we are accustomed to high trucking costs — having hauled milk into New York City for 13 years — so we are very happy,” said Dykeman with an audible sigh of relief.

“I hope, going forward, we don’t let this experience go by the wayside because I honestly believe if we do not come up with a plan for this area, it will happen again and be potentially devastating,” he quickly added. “Just look at the investment farmers have. All that we have put at risk.

“I would much rather have someone say to me: ‘We really need you to go out of business. You are not needed in New York anymore, and you have a year to get out,’ than to be told all of a sudden there’s no place to send my milk,” he said.

Dykeman stressed that they have “no animosity toward any of the companies.” This is business to business, they realize. But what amazed them was the amount of public support.

“Everyone worked so hard to find a home for this milk: Our representatives and senators, the Governor’s office, the New York Ag Commissioner, other co-ops and processors. Local people wanted to take the local milk. It was a very difficult situation in which to find a solution, but the people we have dealt with in this were very helpful.”

Dykeman could not say enough about Sen. Chuck Schumer. “He was kind enough without a scheduled meeting to meet with a couple farmers while in Johnstown for another reason,” he explained. “He and the Commissioner both called this morning to express their relief in how things turned out.”

No easy solutions…

The 3-month reprieve gives the co-op of now 7 farms the breathing time to secure an annual contract. And Dykeman feels certain there will be more discussion in the industry on how to handle these things better in the future.

“Farmers generally want to go back to being farmers,” Dykeman shared. “This is not what we do. This is one of the reasons we farm. We grew up on farms and this is what we want to do — not doing the kinds of things I’ve been doing for the past few weeks.”

Dykeman said the silver lining is “seeing your community respond and be very helpful. I can’t even calculate the number of emails and phone calls I’ve had. In fact, I’ve had 5 calls try to buzz through while on the phone with you today,” he said Tuesday. “People want to help. But there are no easy solutions and it will happen again if we don’t find a way to deal with this.”

One of the ideas being tossed around is to pair extra milk with efforts to supply food banks, or to ask the government how to use the “demand buying” in the Farm Bill to alleviate the supply pressure coming to roost on a region despite the fact that the “national average milk margin” is not even close yet to triggering the national government purchases for feeding programs.

Players and perspective…

In contacting the New York Department of Ag and Markets on their role and perspective, emailed questions were requested, and Dave Bullard, assistant public information officer provided this statement in response: “Ag and Markets is working with local elected officials, including Congressman Tonko and Assemblyman Santabarbara, to assist the farmers in finding alternative processors and manufacturers for the cooperative.  There is currently a surplus of milk due to strong production combined with lower sales as a result of reduced exports and a few other factors.  This supply/demand imbalance has created a very challenging situation for all producers and processors.”

Similarly, a request for an interview with DFA was met with a request for emailed questions. In asking what DFA would like to report in terms of taking on one of the farms in the Pennsylvania situation a few weeks ago and the New York situation currently while also gaining additional outlet for member milk in the process, the emailed response from DFA’s spokesperson was, that “Every milk marketing organization handles regional market dynamics differently.  One of the advantages of our cooperative system is that we work diligently to provide a secure market for our members’ milk.  Our goal is to market our members’ milk in the most efficient and cost-effective way as possible.  As we look to the future, the Northeast dairy industry is in an excellent position because of our proximity to major population hubs and our access to natural resources.”

Asked to define some of the biggest reasons for the oversupply of milk in the Northeast given that the Northeast has not grown by as wide a margin as the national average, DFA’s emailed response was: “For most of 2014 and into 2015, the Northeast marketplace has been in a challenging milk supply situation. Overall a generally weak demand and increased milk supply resulted in the need for additional milk movements around and beyond the Northeast. With plant closures (Farmland Dairies) and an overall weakening in demand from Class I and Class II customers, more milk than normal was placed in balancing facilities throughout our system and outside our geography. In the Northeast the loss of capacity in conjunction with the increase in supply resulted in the extra milk movements.”

Welcome to the squeeze chute…

When reviewing the larger decline in Northeast Class I utilizations versus the decline nationally — and seeing the effect as Eastern mailbox milk prices fall further behind their respective all-milk price while national average mailbox milk prices have atypically become higher than the all-milk price — it is obvious that the Northeast market is the new squeeze-chute when milk supplies nationally burgeon.

The yogurt-magnet that strengthened the confidence of Northeast dairy farmers over the past few years has led to small but steady increases in production, and then in 2014, New York increased by more than 2% to re-take from Idaho its former position as the #3 milk-producing state. Meanwhile the Northeast milkshed, as a whole, was up just under 2% in 2014 compared with the national increase of 2.7%, and has backed off in early 2015.

No reason to sour on yogurt…

Yogurt production is one of the primary fall-guys for the current supply/demand situation reversal of fortunes in the Northeast. But further analysis is less clear on that pointed finger. Yogurt production was 741 million pounds in New York State in 2013 and 692 million pounds in 2012. The 2014 figures for the state will not be available until late May. The 2012 and 2013 totals, however, show New York yogurt production used around 12% of New York’s growing milk supply in both years as both the yogurt and the milk production grew simultaneously.

On a national basis, however, the total U.S. yogurt production figures are available at this time, and yogurt production grew from 4.42 billion pounds nationally in 2012 to 4.65 bil. lbs in 2013 to 4.74 bil. lbs. in 2014.

Furthermore, the April 2 Dairy Products report indicated that nationwide plain and flavored fresh (not frozen) yogurt production was up in February by 7.2% over year ago and nearly 12% higher than for January.

Context and common denominators…

The yogurt industry is known to be highly secretive and competitive.

Interestingly, 2009 is the last year in which the USDA reported monthly yogurt production on a state-by-state basis. Since 2010, those monthly yogurt production figures are only available on a national basis. This reporting change coincides with the timing of when yogurt production began to rise in New York State; so now, when it counts, there are no free and public records of production by state until 6 months after a year ends. It’s not that way for other substantial dairy products, and prior to 2010, those figures were available monthly without having to pay hundreds of dollars for an insider yogurt market publication to read insider industry estimates and trends.

In April’s central New York situation, like western Pennsylvania in February, rumors fly about reasons for farms to be cut from the shipping rolls of processors and small co-ops. Some folks wonder about the milk quality of those producers, or they may believe producers were expecting to be paid more money. But that’s the thing with rumors, there is but a shred of quasi-truth.

While some producers may find themselves in this situation through nitpicking on an inspection report or somatic cell counts that are a little too far north of 200,000, others may find themselves in this situation for merely asking a higher pay price when milk is short, but then staying with their processor on a handshake without the requested pay increase during the short-milk times only to find themselves on the other side of that equation — losing their processor when milk becomes long.

The bottom line in talking to various folks who’ve been through this in Pennsylvania and New York, the common denominators are: 1) the lack of warning, 2) the inability to prepare or negotiate or help problem-solve in advance of being flatly cut off, and 3) the loss being driven, at least in part, by the independents and small co-ops’ lack of reliable access to balancing assets — either owned or simply a standby buyer that will take a little milk for cheese or butter or yogurt or powder as producers balance the diminished and diluted Class I demand.

Looking ahead…

“Everyone in the industry was helpful to us, and we want to continue to work with them on solutions for the future,” said Dykeman reflectively.

Running in the background is some loss of confidence as producers deal with permanent and temporary loss of markets. One of the producers who survived the western Pennsylvania cutoff in March said in a phone interview this week, “crazy things are happening and people are being let go. Everyone is afraid to invest. Some of us already invested in our operations and are on our toes about losing our markets, and then we go to a local meeting where the speaker from Elanco tells us we need to increase production with rbST even though we are clearly in a region where more processors are requiring affidavits not to use it and people are losing their markets because of too much milk.”

At the end of the day, from the outside looking in, it seems the good beef price and current status of processors wanting to label products rbST-free are two strong signals folks could pay attention to in stabilizing demand. It’s also important to gauge the market direction in planning phases of growth. That growth is necessary here to sustain the dairy infrastructure and make farms that are not quite as surrounded by other farms attractive as a pickup. However, the two market loss situations in Pennsylvania and New York illustrate vividly that size does not matter.

As long as the Federal Orders put all the marbles of high value, pooling and provisions into Class I while that is the milk class that is dwindling in sales, size won’t matter. When milk is long, the milk guns will continue to point East and all size farms are vulnerable in the business of dealing with the push of supply through the squeeze chute.

Look for more on the Northeast market situation in next week’s Farmshine.

-30-

PENNSYLVANIA – Feb. 2015

Got Milk! But nowhere to go…Cover-022715

By Sherry Bunting, Farmshine, Feb. 27, 2015

WEST NEWTON, Pa. — What happens when no one will come for your milk? That’s a situation increasingly facing dairy producers in southwest Pennsylvania, given what has and is occurring in the proverbial tip of the iceberg: Westmoreland County.

It happened to Mike and Vicky Baker and six of their neighbors last May, and it is happening this week to 6 to 8 more producers in Westmoreland County, with the potential for additional shippers in surrounding counties to be affected as the calendar approaches the spring flush and schools letting out for summer.

For Doug and Janice Greenawalt, West Newton, Pa., the news could not be worse. On Saturday, February 28, the milk from their 40 cows will simply not be picked up.

Two other producers being terminated this week said they are selling or have already sold their cows. Two others said they have until March 31 to find new buyers for their milk. All received termination letters from Lanco-Pennland Quality Milk Producers Cooperative between January 30 and February 5.

“I’ve been on the phone all day, for days. I must have called dozens of dairies in the area since getting the notice on Jan. 30 that we were being terminated due to ‘hauling and marketing conditions.’ Our farm supports 3 families and we have 4 days to find a way to keep going,” said Janice Greenawalt in a phone interview with Farmshine Monday. As of Wednesday, they were still without a buyer for their milk come Saturday, and were looking at options for culling some cows and putting assets and energies to work raising cattle in a way that can yield some income for the farm and its families.

“All we know is that United Dairy has not renewed the contract with Lanco for our milk to be commingled, so Lanco could not sign for our milk after Feb. 28,” she explained. “Everyone we contacted to buy our milk says there’s too much milk around to take us. But some said they would have taken us … if we were larger.”

For Todd Ramaley, the story is similar. His farm is almost into Indiana County and about a 35 minutes’ drive (in a car not a milk truck) from the nearest Lanco shipper still shipping to Lanco. As of Tuesday, he said DFA was still looking at the possibility of taking the milk from his 40 cows “because it is really clean milk with SCC of 150,000.”

If his milk went to DFA, it would actually still go, physically, to the United Dairy, Inc. plant in Uniontown, several sources indicated, because United has a “swapping deal” with DFA, under which some of United’s milk goes to DFA’s plant in New Wilmington and some of DFA’s milk goes to United’s Uniontown plant.

When asked about the letters sent to six of its producers in Pennsylvania’s southwest corner, Lanco’s director of dairy operations Robert Morris explained how originally all the milk hauled by that hauler served Saputo Cheese in Hancock, Maryland.

“That plant closed in July,” he said. “But before that, those shippers ended up in our world when Saputo bought Jefferson Cheese. At that time, we were able to work an arrangement with United in Uniontown and hauler Wayne Harmon to commingle that milk on United’s independent routes. They were in charge of the Uniontown, Pa., Martins Ferry, Ohio and Charleston, West Virginia plants and would commingle some of our milk on the nearest truck.”

Morris noted the total milk of their six terminated farms is “roughly 250 to 275,000 pounds a month.”

According to Morris, United had apprised Lanco about losing a sizeable bottling contract through its system in January, and before cutting its own producers, would first stop receiving milk from outside sources. United set Feb. 28 as the last day they could commingle that milk. Lanco also received word through the St. Louis, Missouri milk broker that ran the commingling that United’s sizeable loss of sales would prohibit further commingling of Lanco milk in that region on their trucks.

Morris noted that Lanco is “still taking on new producers in areas where we have haulers close to our customer base,” and he noted the six producers they’ve let go are “small farms and out of our orbit, especially since Saputo closed the Hancock plant in July.

“Those farms were never charged the real cost of hauling their milk because United had picked up the trucking subsidy,” Morris stated. “With us losing the ability to commingle that milk, there is no way for us to haul it, or any market for us to send it to, where the hauling doesn’t eat up all the income.”

Requests from the affected producers to find a way to haul their milk for Lanco were denied.

Morris further explained that their milk from south of Williamsport, including Cambria County, Indiana County and Somerset County as well as Garrett County, Maryland — that had all flowed to Saputo in Hancock — is now going East to the Land O’Lakes plant in Carlisle. Some of it goes to Dairy Maid in Frederick, Md., and to HP Hood in Winchester, Va.

In areas where Lanco has hauling, they do commingle with the Maryland/Virginia co-op, but these fringe areas — like Westmoreland County — are an issue now without the Saputo cheese plant and considering the cut in volume needed by United at its Uniontown plant. Both Lanco and Maryland/Virginia have milk into Somerset County, plus Maryland/Virginia has milk in the Sugarcreek, Ohio region. The producers affected by the latest termination fall into a void — a pocket of milk between two higher-density dairy areas.

“We simply had too much milk at the Uniontown plant,” said Tom McCombs, milk procurement manager for United. “We had to cut back on the co-op milk, so we gave Lanco the notice.”

When probed further about the loss of Class I milk contracts, McCombs said that what United actually lost was its volume of sales that Save-A-Lot trucks would pick up at its Uniontown plant for their Pennsylvania warehouse “just down the road.”

“They did some redistricting with their stores, and that milk volume is now going to other warehouses,” he noted. This would include the warehouses served by United’s bottling plants in Ohio and West Virginia.

McCombs said the loss of volume going to the Save-A-Lot warehouse served by United’s Uniontown, Pa. plant leaves the company with the difficult task of deciding when and how to cut some of its own independent shippers that serve that plant as well.

“We have to make that decision in the next few days,” he said Monday. “It will be a tough situation to pick a load in an area that is not as flexible to get to our plants or other cheese plants.”

When asked about the milk swapping arrangement still ongoing with DFA, McCombs noted that, “We would not be accepting DFA milk, either, if we did not have the swapping agreement with DFA.”

He added that he expected the lost volume from the Save-A-Lot warehouse served by the Pennsylvania plant to come back in the fall “if things change.”

According to McCombs, United’s current 340 farms produce 36 million pounds of milk per month, and this total had increased by 850,000 pounds from December to January. “Our farms have not added cows, but they are producing a lot more milk per cow. It must be the good feed,” he said.

“Not only do we have more milk, but the Class I consumption is down. We have got to get milk back to consumers. The schools used to serve lowfat. Now they serve no-fat. They take the fat out of the milk, which takes the taste out of the milk, and people don’t want to drink it,” McCombs stressed, adding that the snow and low temperatures this winter are causing school closures. “We had five loads of school milk canceled and the balancing plants were all full. That snowballs on you.”

The Pennsylvania Department of Agriculture has received the quality records of the terminated farms, but not one of the producers has heard anything in terms of options from the state.

For shippers in Federal Orders 1 or 33, there are provisions for the market administrator to direct a cooperative to pick up the milk but be allowed to pass the full cost of marketing on to the producers. However, the shippers regulated under the Pa. Milk Marketing Board do not have those protections if their Class I market collapses.

That is what happened to Mike and Vicky Baker’s dairy and six others in the Westmoreland County region last May.

“We have a lot of independent processors in this western region,” she said in a phone interview Tuesday. She recounted her experience of losing their milk market last spring. In fact, her dairy and the others let go at that time were in the top seven for milk quality at the plant, and they lost their market anyway.

“We were able to get a good load of milk together at that time, so five of us are now with Land O’Lakes. It’s not cheap. We are paying $1.43/cwt in trucking costs,” she said.

The overarching problem, says Morris at Lanco, is that the Northeast and Mid-Atlantic market is “losing raw silo space” for weekends, holidays, and times of the year when Class I utilization is lowest. Add to this the 4% national decline in Class I sales to begin with, along with the reluctance of cheese plants to run at full capacity to build inventory, and the situation becomes one that producers throughout the region should be watching.

While some truckers report wait times at plants of 2 and 4 hours over the holidays, coop dispatchers note that was accomplished by dumping milk or just separating the cream and dumping the skim so that the trucks would not be waiting and so their turnaround times could be maximized on multiple routes.

Estimates of milk dumpage since last summer runs in the hundreds, but is anyone’s guess. DFA’s response to the question is to say it balances its member milk as it sees fit. Only certain types of milk dumping are reported to the Market Administrator, and that’s a story for another day.

For Todd Frescura, another of the six Lanco-terminated producers, the path forward will be different. He has talked with Horizon because there is demand for Organic milk that is reportedly in short supply. He is confident his fields will certify for three years of organic treatment due to the way his farm is operated for rotational grazing. But he will still have to wait one year for the herd to be certified.

“I guess I’ll cull the herd real hard, dry the cows I can, and maybe just milk 10 cows to feed calves for the neighbors and raise my heifers to be ready to produce organic milk in the future,” said Frescura.

But “going organic” is not an easy answer for most of the dairies affected now and in the future.

With the milk dumping last spring and summer and over the holidays, the concern is the independent bottlers will have a balancing problem once the spring flush hits and the schools let out in June.

Part of the problem is the reportedly large shipments of milk into Pennsylvania balancing plants from Michigan. DFA member-milk from Michigan takes precedence over non-coop milk, here, and DFA’s plants are full to the point where the cooperative is charging a 50-cent/cwt marketing fee. Land O’Lake’s fee also increased recently from 15 to 40 cents/cwt.

“My fear is that the producers losing a market this month are just the tip of the iceburg for what could happen in June,” Baker explains. “DFA has their own milk to fill their own plants.”

What will happen to the shippers for plants that are relying on 60 to 80% of their market in Class I? The verbal agreements bottlers have with DFA may not be good enough to carry their shippers through the loss of fluid sales at a time when balancing plants are full, production per cow is high and the schools are closed.

Baker notes that the annual Southwest Regional Dairy Days in Blairsville, Pa. next Thursday, March 5 will include a producer panel on this topic.

“We had already planned this on the agenda to talk about positioning our milk for the future,” said Baker. “But now we’re going to really talk about having good quality milk and how it may or may not matter in long run. Producers in that 40 to 50-cow and 100 to 130-cow range need to be aware of what they might have to do to make themselves more attractive.”

She said it matters beyond the farmgate because of the domino effect. “I am fearful for what this means for our infrastructure. As dairies leave, the service providers will have trouble staying for those that remain,” Baker noted. “Other pockets of milk in this state have more options than we have here because, here, we have an independent market, and DFA is the only balancer for that market, and DFA has more than enough of its own milk (from here and from beyond) to fill their plants.”

-30=