Bishop family starts new chapter at Bishcroft Farm, large herd dispersal of 1500 head Sept. 1 and 2

Posted on September 1, 2022 by Agmoos

With mixed emotions as they transition away from dairy at Bishcroft Farm are Herman and Marianne Bishop flanked on the left by Tim and Anne and their children (from left) Thomas, Esther, Jim and Elizabeth and on the right by Rich and Nikki and their children (from left) Peter, George, and Bethany (not pictured).

By Sherry Bunting, Farmshine, August 19, 2022

ROARING BRANCH, Pa. — It is likely to be the largest dairy herd dispersal in the Commonwealth of Pennsylvania when the Bishop family has their two-day auction of 1500 head on September 1^st and 2^nd at Bishcroft Farm here in Roaring Branch, Tioga County.

The sale is managed by Fraley Auction Company, Muncy.

The Bishops have been dairying 83 years across three generations. Herman and Marianne are in their 75th year of membership with Land O’Lakes and were recently recognized for that milestone. They operate the farm in partnership with sons Tim and his wife Anne and Rich and his wife Nikki and are transitioning toward a more flexible future, while leaving open the option that another generation may want to milk cows on a smaller scale someday.

The closed commercial herd of sire-identified, AI-bred Holsteins is attracting interest with 580 first and second lactation out of the 750 total milking and dry cows selling Thursday (Sept. 1) and the 750 heifers selling Friday (Sept. 2), ranging 4 months old to springing, with 100 heifers due from sale time through December.

The herd makes an RHA of 26,146M 1021F 797P with somatic cell count averaging 138,000 on the sale cattle.

The sale list will note whether cows are bred to beef or sexed semen Holstein.

They started with Angus beef-on-dairy three to four years ago, primarily on the cows that weren’t settling — resulting in those genetics leaving the herd, Rich explains.

They use Holstein sires on the cows that are daughters from higher net merit bulls, and all bred heifers are due to Holstein sires with 90% to sexed semen, the Bishops confirm. Two-year-olds are also bred first service to sexed semen with a high percentage due to sexed-semen.

The Bishops are keeping all crossbred cattle and all calves under four months of age to raise and sell at breeding age, as they have forage to use up.

“We’re also keeping the bottom end of the cows to continue milking 100 to 150 head for a while,” Rich explains. That is until their valuable production base with Land O’Lakes is sold.

“Our base is listed on the Land O’Lakes website and must transfer through their system, but they don’t set the prices,” he explains. “The buyer and seller negotiate the price and quantity with a 1000-pound daily base minimum transaction.”

Bishcroft currently ships a trailer load of milk every 21 hours. They have worked hard to manage their production to their daily base of 64,352 pounds of milk, which can only be sold to existing Land O’Lakes members.

During a recent Farmshine visit, Rich’s son Peter, 13, was the one to say he’ll really miss the dairy cows.

“He’s never known anything different,” says Nikki. “He fed the calves with me since he was a toddler.”

At the time of the sale, the Bishops are milking 750 cows 3x, having peaked in January milking 820. They have always milked 3x, even experimenting with 4x, seeing 7 to 8 pounds of additional milk per cow, but finding it unsustainable in terms of labor.

The Bishops observe that smaller dairies and more diversified farms have more flexibility to navigate changes in weather patterns, markets, labor and policies.

“I don’t see ever going back to milking a large herd here,” says Rich. “Maybe a small herd. Maybe Peter will want to do something like that with direct-to-consumer sales. But I don’t see going back to what we have today.”

At Ag Progress Days last week, a panel of experts said Pennsylvania is the state with the second largest volume of direct-to-consumer sales of farm products. A relationship with consumers holds some appeal for the Bishops as they transition into cash cropping with some beef on the side and a limited amount of pork as well.

The Bishops have always strived to be near the top of the dairy pack. Progressive and forward-thinking, the brothers participated in industry conferences and geared decisions toward cow comfort, productivity, quality and efficiency.

In fact, that’s something they’ll miss most — the friends they would regularly see at dairy industry meetings.

“Things aren’t what they used to be,” says Tim.

“We see this developing to where larger herds like ours have to be in the top 10 to 20% or we are going backward,” Rich observes. “Dad is almost 77, and he’s doing the majority of the feeding. Tim and I want to spend more time with our families off the farm, and it’s getting harder to attract and keep employees that are willing to work these hours or to make enough money in dairy here to pay the wages and overtime competing with what is happening in New York State.”

The milk price jump of 50% this year was welcome relief after six years of tight margins and uncertainty. That’s when the Bishops really took stock of their position and decided to invest differently.

When asked how it feels to see the herd being sold, Herman, the patriarch, replied: “This is no different than what I did in 1970 when I increased my dad’s herd.

“It’s the way it goes. We made a change in 2004 and 2005 for another generation, not for me. I had a registered herd of 150 cows. We did a lot of research. The boys went and looked at 60 farms. They built this and expanded the herd (from 150 to 350 and from 350 to 650 and from 650 to 800). We changed things for the times, and that’s what’s happening now, a change for another generation,” Herman explains.

Rumors have run rampant, but the simple truth is this: The families are transitioning to options they see as more flexible and less stressful.

They began transitioning their cropping this spring, knowing they wouldn’t need the same mix of crops and forages. They had already been doing trial work for Syngenta. They started looking into utilizing the freestall facilities for beef to some extent, maybe converting to a bedded pack. They’ll still make some hay, but their investments now are in equipment for cash cropping the 1450 acres of land they own and rent.

They planted soybeans for the first time and handled the cover crops differently, harvesting some as small grains, and burning a lot of it down as ‘green manure’ fertilizer to minimize their need for purchased fertilizer.

This will also be their first year combining corn, Tim explains, noting that on-farm grain storage is something they are looking at as they planned to go to Empire Farm Days the day after our visit.

In fact, the brothers note the higher milk price this year allowed them to make some crop equipment investments from cash flow.

As the Bishops raise and feed-out their beef-on-dairy crossbreds, they realize they have a learning curve ahead of them if they move further into beef production.

“We hope to do some direct-to-consumer sales,” says Tim, “feed some of these cattle and bring in a few pigs, even look at doing a truck patch (garden).”

Nikki says the family has always taken time to educate and advocate with the community of consumers around them. Tim’s youngest daughter is a Little Miss U.S. Agriculture, and Nikki fields questions constantly from her colleagues where she works at a local hospital. They want to know where their food comes from.

“People are curious. I have explained cattle rations, comparing it to the ‘ages and stages’ diets we have for kids (at the hospital). The response I would get is ‘that sounds like complicated hard work, why don’t you just buy milk at the store like everyone else?’” Nikki relates.

“These are educated people, and they didn’t quite get it until I explained that if they went to Weis Markets, the milk they were buying might be ours!”

She also tells the story from a few years back when fellow nurses saw the rBST-free pledge on the little milk chugs in the hospital cafeteria and started asking what it was because they thought they were going to win a ‘free rBST.’

While young Peter said several times that he’ll miss the cows, others in the family said they’ll miss the fresh milk.

“We might have to keep a few to milk for ourselves and to have milk to feed to the pigs,” says Tim.

“Excited and nervous” were the two words he used to describe the transition ahead.

“It is nerve-wracking but also feels a little like seeing a bit of light at the end of the tunnel,” Rich adds, noting the stress that comes with price volatility and labor issues will now flip to adjusting to managing cash flow without the regularity of a milk check.

The children are still adjusting to the news, having learned of the decision just a few weeks before our visit.

Some have favorite cows they’ve grown and shown that will have to stay, but Rich also notes none of the kids were “dying to milk cows,” and if they decide they want to do that, some assets are here they can put to use on a smaller scale.

“We have ideas and thoughts about how to utilize what we have differently, but we want to walk before we run,” he says.

Toward that end, the brothers are participating in seminars and looking at beef programs that are coming along. Their main focus will be low input, feeding the current beef-on-dairy crossbreds, raising the 120 heifer calves under 4 months of age they are retaining to breeding age, seeing how the sale goes, maybe looking at buying some feeder cattle… Time will tell as they look and learn and adjust.

“When you realize what a huge world God has created and we’re out here trying to feed the world, you realize how fortunate you are to live here and to be farming,” says Tim.As Herman affirms, this is another chapter in the story:

“The farm and the family are here. As for the future, we never know what it brings.”

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Why did PMMB go after raw milk farms for Milk Dealer licenses? Small farm bottlers push back, PMMB puts further licensing ‘on hold’

Posted on August 29, 2022 by Agmoos

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, they encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center. The response was overwhelming. They chose to only sell their milk at the farm after being notified by PMMB about needing an intrusive Milk Dealer’s license on top of the PDA permit, inspections and testing they already do. Small processors are pushing back, and PMMB has put licensing of small processors on hold as it evaluates what to do. Facebook photo

By Sherry Bunting, Farmshine, August 19, 2022

HARRISBURG, Pa. — Calls and mailings from the Pennsylvania Milk Marketing Board to small dairy farms processing and selling their very own milk — including those that are permitted by the Pennsylvania Department of Agriculture to sell raw milk — are stirring up a hornet’s nest .

The context of the communications was to get these very small processors to fill out the intrusive applications for Milk Dealer’s licenses, to pay the flat fee, and to do the ongoing monthly milk accountant reporting and calculate and further pay their 6 cents per hundredweight on sales.

To most, this made no sense, given these farms do not purchase milk from other farmers. They do their own pricing based on their expenses — always well above the state-mandated retail minimum — and many are selling raw milk, which is not a general or interstate commerce item.

In the case of raw milk, these producers operate outside of the Federal Milk Marketing Orders, so why is the Pennsylvania Milk Marketing Board (PMMB) coming after them for a Milk Dealer’s license? And why now? Could it have something to do with the bill seeking to collect over-order premium and pool it and pay it to producers directly so that the big players can’t continue to strand some of that premium?

Think about it. The PMMB doesn’t license entities doing cross-border sales of packaged milk whether it was produced in-state or out-of-state to follow the money, but they want small raw milk farms to be licensed Milk Dealers? Something isn’t right.

To their credit, however, the pushback from raw milk producers and citizens has resulted in PMMB putting this licensing effort “on hold”… for now.

Lone Oak Farm, Marion Center, Pennsylvania was one of the small producers to get a voice mail from an attorney identifying himself as a “special investigator for the Milk Marketing Board” wanting to know the name and address to send a packet to fill out.

The packet came. It was the same packet they had received two years earlier — a month before the Covid pandemic — but at that time they were only selling their raw milk and chocolate milk at the farm. They had stated in 2020 that the Milk Dealer’s license did not apply to them and never heard back from the PMMB.

That was the end of it, until August 2022.

This time, the packet included the same letter, along with an intrusive form requiring them to list all of their assets, liabilities — a complete financial statement of personal information — as part of a Milk Dealer’s License application along with monthly forms for calculating their 6 cents/cwt monthly licensing fee and the lesser fee for milk sold through products on which PMMB does not fix a price.

“There was no flow chart to determine if we needed to do this (like is shown below at PMMB website: https://www.mmb.pa.gov/Licensing/Dealer/Documents/License%20Flowchart%202020.pdf). My wife emailed back wanting to know why this pertained to us,” said Aaron Simpson of Lone Oak Farm in an Aug. 17 phone interview with Farmshine. “We were told it pertains to us because we were selling a small amount of milk off site at Back to Nature,” a health store in Indiana, Pennsylvania.

“Someone tipped them off,” he guesses. “We didn’t fill anything out (in the packet), and my wife responded that we would pull our small wholesale account out of Back to Nature rather than jump through these hoops.”

For Lone Oak and other small producers voicing concern, it isn’t even the 6 cents/cwt licensing fee that is the biggest problem, though they believe it is unnecessary. The real problem is the onerous and intrusive forms and the logistics and time it takes to fill out monthly milk accounting to the PMMB. Farms like Lone Oak already applied for and were granted raw milk permits by the Pennsylvania Department of Agriculture (PDA), which inspects them.

Furthermore, as a small producer, with several entities from produce to bakery to milk and more under one umbrella on the farm, the financial statement that the PMMB was requiring was information Lone Oak was not comfortable providing. Why should they? Why is it the PMMB’s business to know their personal business?

“They asked for our entire financial rundown of the farm — as a whole — right down to every asset we own, some of it not even related to the dairy. We are not willing to give that up for a (Milk Dealer’s license),” said Simpson. “This is not how it should be. The only reason we exist is because selling all of our milk conventionally has not been feasible. We are one of three dairy farms left in our township. We are down to the bits and pieces of who makes it and who doesn’t, and that’s been a failure of the dairy industry.”

Most farmers wouldn’t really choose to do customer service as they would rather focus just on farming and taking care of the cows, not running a store. Many have turned to this to preserve their livelihoods, their dairy farms.

“The whole reason we are doing this is because the Milk Marketing Board has failed the farmers, the dairy industry has failed the farmers. How many farms has Pennsylvania lost since 2015?” Simpson pondered aloud. “Within five miles of us, we have lost five or six farms since 2015, so we started selling our own milk with a permit from PDA in 2016.”

Simpson is part of the fourth generation at Lone Oak Farms, milking 40 cows in the same 1960s barn, and diversifying over the years instead of expanding the dairy herd. Now he gets calls from other farmers with all herd sizes wondering how they got started, including large farms wanting to scale back their herd size and get closer to consumers.

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, and encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center, the response was overwhelming.

As the post was shared multiple times, PMMB executive secretary Carol Hardbarger commented that the PMMB staff was looking into what could be done, but that they had to “follow the law.”

The law, according to the flow chart found at the PMMB website (above), stipulates that any dairy farmer selling more than 1500 pounds of milk per month (less than 6 gallons per day) direct to consumers, would have to be a licensed Milk Dealer if they sold any of that milk at a site off the farm or if they sold more than two gallons per day to one customer.

This week, an official response from PMMB executive secretary Hardbarger notes that, “we have officially put licensing of small processors on hold until we decide what to do, sending a letter from me to each not licensed yet, to the ag committees with an explanation, and to PDA.”

But how did this come about and what will happen going forward?

If this requirement is truly part of the law, and if it requires small producers selling their very own milk privately in small amounts must be licensed as Milk Dealers, why have we not heard about it before?

In fact, a Penn State extension educator preparing for a value-added dairy seminar reached out to Farmshine for clarification after reading about the issue in Market Moos last week. She wanted to know why this was never brought to her attention when she asked state agencies for all of the things a small value-added dairy producer needed to know and do to sell milk and dairy products made on the farm. She wanted clarification.

According to Hardbarger, small producers, and those with raw milk permits have received packets and calls in the past, but that a list of raw milk permits was made available to PMMB recently through the online data-sharing that was set up this year between PDA and PMMB now that the weigh-sampler certification work PMMB used to help with has transferred exclusively to PDA. This put the list of raw milk permits directly into the PMMB’s hands.

This PDA list of raw milk permits has always been publicly available and updated online. So why was the action to get small producers to become licensed Milk Dealers started in earnest at this particular time? No clear answer has been given, except that the PMMB is now looking at the situation and putting it ‘on hold.’

Perhaps the biggest players in the industry — that have a stake in preserving the price-regulating and milk-accounting functions of the PMMB — are concerned about the increasing number of Pennsylvania producers going this route outside the system with some or all of their milk. Some dairy farmers are making and selling pasteurized milk and dairy products, others are selling raw milk.

In fact, at Ag Progress Days recently, a panel talked about farm transitions and how important value-added direct-to-consumer sales are for Pennsylvania’s agricultural industry. The Commonwealth has the second largest volume of direct-to-consumer sales of farm products in the U.S., and this is growing as farms are also becoming more diversified, the experts shared.

“As farmers, we don’t need another irritant to yield a pearl for PMMB. This (Milk Dealer’s license) is more administrative paperwork and a check we would need to send every month. It’s one more thing,” Simpson explained, listing all of the things they already do to sell milk through their permit with PDA and in general as dairy farmers.

“Fluid milk is breakeven across the spectrum,” he said. “We have enough irritants in a year’s time, and just that statement about irritants and pearls shows the disconnect between farmers and the PMMB.”

Farmers and dairy professionals around the state are questioning the very low 1500-pounds per month threshold on private sales of milk from farms that pushes these small producers into the category of a Milk Dealer — if any of that milk is sold at a store off the farm.

For example, Lone Oak milks just 40 cows and markets about one-third of that as direct-to-consumer sales of milk, chocolate milk, ice cream and yogurt. The rest goes to United Dairy. They are inspected four times a year for the raw milk permit and twice a year for the conventional bulk sales and federal inspection every 18 months as well. The milk tests are done twice every time they pull milk from the tank – once for the private sales and once for the conventional sales. There will also be new types of inspections coming as well, farmers are told.

Yes, small on-farm processors do not need ‘one more thing.’

“The limit for the number of gallons sold privately off the farm needs to be set drastically higher for this (Milk Dealer license),” said Simpson. “We are not even a blip on the radar, so there needs to be very large exemptions if we are to keep small farms in Pennsylvania.”

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PA State Rep. John Lawrence champions three dairy bills

Posted on March 21, 2022 by Agmoos

“We have to get real. I want to drink fresh Pennsylvania milk. It’s long past time to stand up for our Pennsylvania dairy farmers who are producing it,” said Pennsylvania State Representative John Lawrence. He told the 300 dairy farmers attending Sensenig’s Feed Mill’s dairy conference about his package of three bills, including HB 2397, the Whole Milk for Pennsylvania Schools Act.

‘It’s time to take a stand for our dairy farmers’

By Sherry Bunting, Farmshine, March 11, 2022

EAST EARL, Pa. – Pennsylvania State Representative John Lawrence (R-13th) has been working on behalf of dairy farmers in what has

seemed like the wilderness in the past decade — representing Chester County and part of Lancaster County. He’s glad to see, in recent years, more of his colleagues are recognizing the situation.

“Pennsylvania dairy farmers are struggling, and we have a decision to make if we want to drink milk produced on Pennsylvania farms,” he said, speaking to farmers attending the customer appreciation dairy conference and luncheon of Sensenig’s Feed Mill. The event drew around 300 to Shady Maple in eastern Lancaster County in early March.

Lawrence has a slate of three bills in the State House — HB 223 would provide tax incentives for dairy processing in the Commonwealth; HB 224 would provide authority to the Pa. Milk Marketing Board (PMMB) to make changes to account for where all of the state-mandated over-order premium goes, which is paid by Pennsylvania consumers on every gallon of milk they buy; and HB 2397 is the new bill he is introducing to be intentional about allowing whole milk in Pennsylvania schools.

The latter is numbered 2397 for a reason, he said. The last two digits of the bill number, 97, coincide with the popular and progressive grassroots 97 Milk education effort, sharing the benefits and facts about whole milk and dairy, virtually 97% fat free.

“Whole milk was outlawed 10 years ago by the federal government. This is towards the top of what I would call the ‘ludicrous list,’” Lawrence said.

Tired of waiting for the federal government to act to correct this situation for schoolchildren and for farmers, Lawrence says the idea for how to approach it at the state level came to him two months ago. It just occurred to him as he thought about the dilemma.

In fact, he thanks God for that inspiration — the inspiration to approach the bill from the state’s rights aspect of the U.S. Constitution.

“We have jurisdiction on this,” Lawrence explained.

When milk produced on Pennsylvania farms and processed in a Pennsylvania plant is purchased by a Pennsylvania school with Pennsylvania or local funds, then the federal government has no jurisdiction over what can be offered to students.

That’s the gist of it.

The federal government lays claim to interstate commerce, but if a school’s milk is supplied strictly through intrastate commerce (within-state commerce), then the milk offered to students comes under state jurisdiction, and the state can allow whole milk, according to Lawrence.

He said the bill is enjoying broad bipartisan support in the House and will be introduced officially very soon.

“We have a robust dairy industry in our Commonwealth. Pennsylvania milk delivered to Pennsylvania plants and offered for sale to Pennsylvania students paid for by state or local funds is intrastate commerce. Who regulates that? We do. The state does. So, the federal government has no say,” Lawrence related.

Under those conditions, “if a school wants to buy Pennsylvania whole milk, then they would have every right to do that and offer it to students,” Lawrence said. “If the federal government would try to withhold other funding from those schools because of it, then we go after them.”

Lawrence is counting on broad support in the State Assembly for the measure. By the amount of feedback he is getting from colleagues, organizations, schools and others, he believes it will pass.

“It’s time to take a stand for our dairy farmers,” he said. “We have lost a generation of milk drinkers getting skim milk and throwing it in the trash.” This bill — HB 2397 — would give Pennsylvania schools the opportunity to offer whole milk and it would support Pennsylvania’s dairy farms and processors at the same time.

As for HB 224 dealing with the PMMB over-order premium, Lawrence said it addresses transparency and accountability.

“Right now, every gallon of milk sold in Pennsylvania is assessed the over-order premium,” he said. “Pennsylvania consumers are paying this in the price of their milk. That money should all be coming back to you, the Pennsylvania farmers. This bill would account for that.”

He noted that this bill is also finding broad bipartisan support.

HB 223 is the third bill, and straightforward. Lawrence patterned it off the Keystone Opportunity Zones, using the tax credit idea for attracting new businesses and jobs to the Commonwealth.

“In this case it’s focused on dairy,” he said.

This bill would make those tax credits available to new processing on a large or small scale, including expansion of existing facilities and even on-farm processing.

The stipulation is the entity receiving the tax credits must source 75% of their milk supply to Pennsylvania farms.

“This way we create markets for dairy farms in the Commonwealth. We have to keep our farmers alive because we also have to eat,” Lawrence stated matter-of-factly. “We have to stop taking it for granted.

“We have a choice to make about where we will lay our priorities. We have to get real. I want to drink fresh Pennsylvania milk,” he said. “It’s long past time to stand up for our Pennsylvania dairy farmers who are producing it.” -30-

*Advocating strongly for the Whole Milk for Pennsylvania Schools Act are (l-r) Bernie Morrissey, Ken Sensenig, Representative John Lawrence, Mike Sensenig, Devin Shirk and Kyle Sensenig.*

Vale Wood Farms stays steady, but nimble, delivering ‘moo to you’ since 1933

Posted on May 17, 2021 by Agmoos

Carissa Itle Westrick enjoys working every day with her father, Bill Itle. They see whole milk, local connections and home delivery as big trends for dairy — even before the pandemic — that are key parts of their farm and processing for decades. They also share concerns about consumer confusion with the onslaught of imitation beverages in the dairy case.

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.’

Is it?

“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.

Call to action: Grassroots dairy group seeks PA Senate leadership action to move House-passed bills forward

Posted on April 21, 2020 by Agmoos

By Sherry Bunting

HARRISBURG, Pa. — The Pennsylvania House of Representatives passed two dairy bills virtually unanimously last December, but the Senate Ag Committee has failed to act.

On April 7, the Grassroots PA Dairy Advisory Committee sent a LETTER to Senate President Pro Tempore Joseph Scarnati asking to bring new leadership to the Senate Ag Committee to move these bills forward.

The Grassroots group is now asking fellow dairy farmers and citizens to help by contacting Senate President Pro Tem Scarnati’s office at jscarnati@pasen.gov and/or 717.787.7084. Simply email or leave a message asking for new leadership in the Senate Ag Committee to move H.B. 1223 and 1224 forward for Senate consideration.

“Now, there is an opportunity of a lifetime for you to save our dairy industry from complete failure. With the COVID-19 pandemic, displacement and dumping of local Pennsylvania milk and a 35% milk income loss across our farms in one month and expected to continue for the next three, at least, you have an opportunity to get these bills out of committee and onto the floor,” the letter to Scarnati explained.

“The Pennsylvania dairy industry is at risk to losing it all — given our small and numerous herd size — the heart of rural PA. Rural Pennsylvanians are counting on this industry to survive COVID-19,” the letter continues. “Now is your time to act.”

“These two bills were overwhelmingly passed by the House, so why is the Senate Ag Committee stalling? For five months they have ignored these bills,” said Nelson Troutman, a Berks County farmer. “Pennsylvania dairy farmers put their income right back into their communities, but they get no help from the Senate on these issues that are critical for our farms to stay in business.”

“How does this happen? How can the House pass two dairy bills 196-0 and 194-2 while the Senate keeps them in a drawer? It doesn’t make sense. We can’t continue down this road,” said Potter County dairy farmer Dale Hoffman.

His daughter Tricia Adams and her brothers are all partners in the farm with a third generation now involved also. Like other dairies, Hoffman Farms is economically important in their community while providing wholesome nutritious milk and hosting farm tours for nearby schools.

“People in our community ask me all the time, what can I do to help? They want to know the milk they are buying is as local as possible, and they want to know they are supporting the farms in their community who provide it,” said Adams. “There is a point when we have to stand behind something and take action. Is it too much to ask that the premiums be returned to farmers as intended? Is it too much to ask for the Senate to consider these bills that the House passed in a bipartisan way?”

The two bills — H.B. 1223 and 1224 — were introduced early last year by Rep. John Lawrence (R-13^th).

H.B. 1223 passed by a vote of 194-2. According to Rep. Lawrence, this legislation would establish Keystone Opportunity Dairy Zones (KODZ) to incentivize expanded dairy processing facilities in Pennsylvania to expand markets for milk from Pennsylvania farms. It is modeled after the long-standing Keystone Opportunity Zone (KOZ) program. To qualify, applicants would have to use private capital, create new jobs, and use primarily milk from Pennsylvania farms.

H.B. 1224 passed by a House vote of 196-0. According to Rep. Lawrence, the legislation would give the Pennsylvania Milk Marketing Board (PMMB) the ability to coordinate the collection and distribution of state-mandated milk premiums with the Department of Revenue, ensuring the premiums reach struggling dairy farmers.

“Pennsylvania’s family dairy farmers are struggling due to historically low prices and foreign competition. Taken together, these bills will positively impact every dairy farmer in Pennsylvania,” Rep. Lawrence observes. “I appreciate the bipartisan support these bills received in committee and on the House floor.”

According to Rep. Lawrence’s press release, both bills also received support from family dairy farmers across the state, the Pennsylvania Farm Bureau, the Pennsylvania Association of Milk Dealers, the Pennsylvania Association of Dairy Cooperatives, and the Pennsylvania Milk Marketing Board.

“We are at a crossroads in Pennsylvania, where agriculture is our number one driver of our state’s economy, and dairy is the linchpin. We are losing farms every day, hundreds of them every year, and with them, we stand to lose other businesses, jobs and the economic vitality of our rural communities,” said Karl Sensenig of Sensenig’s Feed Mill, New Holland.

“Our farm families are being pressured from all sides by five years of economic stress and market losses as rapid consolidation accelerates production in other regions. Now the coronavirus pandemic is revealing how the system is starting to collapse and how easily these state-mandated premiums disappear in the system between the consumer and the farm,” said Mike Eby, a Lancaster County farmer and chairman of National Dairy Producers Organization. “These bills are following the same pattern we saw in three previous sessions where other transparency bills were passed by the House only to die in the Senate without consideration. What is Senate Ag Committee Chairman Elder Vogel afraid of?”

“The current pandemic shows how important it is for our state to have strong farms and vital processing for our citizens to be food secure. We see our farms being forced to dump milk, losing access to markets, and at the same time scarce supplies of milk and dairy products at stores and limits on purchasing,” notes Krista Byler, a farmer in Crawford County. “These bills help connect some of those dots between farms and consumers.”

For Katie Sattazahn, a dairy producer in Womelsdorf, these bills “offer hope as the dairy situation in Pennsylvania is deteriorating. We have the land, climate and young producers who have grown up on the farm, pursued degrees, and come back with knowledge, passion and talents to move family farms forward, but wonder if they’ll have the opportunity,” said Sattazahn.

Over the past decade, Rep. John Lawrence has introduced other bills aimed at improving PMMB over-order premium transparency. Previous bills also passed the House but were ignored by the Senate Ag Committee.

Now, this pattern continues as H.B. 1223 and 1224 languish without consideration by the Senate Ag Committee under the leadership of Chairman Elder Vogel Jr., representing Pennsylvania’s 47th district.

“This has gone on for too long,” said retired agribusinessman Bernie Morrissey of Robesonia. “Our farmers have been patient. They have been involved in working on these issues for more than 10 years. Our consumers pay a higher price for milk that includes these premiums that the law requires be paid to farmers. It’s time for the Senate to act on this legislation that helps make sure these funds get to our Pennsylvania farms.

“It’s time for Senate President Joe Scarnati to bring a leadership change to the Pennsylvania Senate Ag Committee,” Morrissey added.

The Grassroots PA Dairy Advisory Committee is chaired by Morrissey and is comprised of dairy producers and related agribusiness representatives from diverse regions of the state.

Their letter was also sent to Senate Ag Committee Chairman Elder Vogel and all members of the Senate Agriculture and Rural Affairs Committee on Tuesday, April 7, 2020.

To support action and leadership on these bills, farmers and citizens of Pennsylvania are asked to contact PA Senate President Scarnati at jscarnati@pasen.gov and 717.787.7084. Simply email or leave a message asking for new leadership in the Senate Ag Committee to move H.B. 1223 and 1224 forward in the Senate.

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Eastern dairy industry has value-add soul-searching to do

Posted on January 1, 2019 by Agmoos

Talking candidly about dairy markets and trade were market experts (l-r) Tom Wegner, Land O’Lakes economist; Tom Roosevelt, founder and owner of West Chester-based Roosevelt Dairy Trade, Inc; and Matt Gould, owner of Philadelphia-based Dairy & Foods Market Analyst, LLC. Photos by Sherry Bunting

By Sherry Bunting, published previously in Farmshine, November 30, 2018

BAINBRIDGE, Pa. – “There is a long list of demands coming from consumers with unprecedented opportunities for milk,” said Matt Gould, owner of Dairy & Food Market Analyst LLC, based in Philadelphia. “Consumer demands are the key, and they are willing to pay for them.”

That was the good news. Gould said that Pennsylvania has an image to capitalize on, and part of that image is family farms working close to the land and animals — the iconic Lancaster County Amish-made image — for example.

But by the end of the forum, it was clear that how the state of Pennsylvania — and the eastern states in general — can tap into value-added dairy opportunities will require both individual and collective soul-searching.

The not-so-good news was the main substance of three hours with three dairy market experts at the annual Professional Dairy Managers of Pennsylvania (PDMP) Fall Issues Forum on November 14 at the Bainbridge Fire Hall in Lancaster County.

Each expert, in their own way, painted a changing and sobering portrait of the dairy market landscape. Producers in Pennsylvania, and the eastern U.S. in general, are not located where commodity processing growth is occurring to serve rapid growth for export and foodservice markets, but instead, exist in a market where declining fluid milk consumption is dictating the terms and leaving mainly the option of slow growth consumer niche markets that take time to develop and must be “continually fed.”

The experts noted that even though the Northeast is down to 30% Class I utilization, 87% of fluid milk sales is water that is expensive to ship, so, in a sense, the albatross around the neck of eastern dairy farmers is the fluid milk market needing farms nearby consumers, but at the same time declines in fluid milk sales are pressuring those farms.

In fact, the experts characterized the East as mainly a fluid and specialty market for dairy. Not the news many wanted to hear since a recent Pennsylvania Dairy Study suggested the Keystone State is a good location for a new cheese plant, and the Port of Philadelphia was tagged in the study as a vehicle to potentially capitalize on export growth markets.

Tom Roosevelt, founder of Roosevelt Dairy Trade, Inc., West Chester, said that commodity processing expansion is mainly associated with export growth and that is all being centered on the West and Midwest.

“A new cheese plant is not my first thought for Pennsylvania,” he said bluntly.

In fact, all three panelists agreed that the Keystone State’s hope is in building niche markets, and they offered these strategies: 1) branding the state’s image, 2) improving milk components, 3) marketing to consumers who have an emotional connection to where their food comes from and how it is produced, and 4) altering production practices — such as Organic, non-GMO and animal welfare labeling — to meet those niche demands.

They also preached the need for greater efficiency and market discipline, that producers here will increasingly see base/excess programs and will need to be using risk management tools and futures markets to get a ‘flat’ price because a ‘flat’ price is where the industry is headed in the midst of volatile global trade factors.

All three experts indicated that the deepening national and global dairy crisis won’t get better any time soon, and that Pennsylvania has some additional long-term challenges if it wants to retain and grow dairy.

Billed as a session to take dairy markets and trade ‘beyond the spin,’ the forum discussion was brutally honest. While disheartening, the information about what is happening here in the context of what is happening elsewhere is important for constructive ongoing discussions in Pennsylvania and other eastern states about the future of their dairy farms that are key to agriculture infrastructure and state and local economies.

When asked about the potential to change how milk is priced, Roosevelt said that there is no question the CME is thinly traded, but that electronic trading has brought in more activity. He said the USDA National Dairy Product Sales Report that provides the product prices for milk pricing formulas, is outdated.

He and Gould agreed that substantial changes to Federal Order milk pricing are not likely to happen because the investments of large companies (think Walmart, Leprino, etc.) rely on a “stable regulatory environment to protect their investments.”

Adding value

Gould challenged Pennsylvania’s dairy industry to instead focus on “value-added” processing and marketing instead of focusing on making more milk.

Tom Wegner, economist with Land O’Lakes said that, “Three years of tough markets would seem to be due for a price peak, but I don’t want to give any notion that it will get better soon. That is the impact of long milk. We are long on milk, and that will probably continue for a while.

Tom Wegner, economist with Land O’Lakes, shows global milk production patterns during the PDMP forum on dairy markets.

“Your production of components here is more important to enhance milk checks than anything else,” Wegner said.

Roosevelt was particularly candid: “It’s tough to look at this part of the country and think you’ll have dairy exports. The real benefit you have here is in value-added.”

He gave the example of conventional nonfat dry milk selling for 85 cents a pound when organic powder is over $4.00/lb. (The flip-side of this proposition is the very high feed costs and other costs for organic production in which consolidation is also happening, so those producers also are having tough times.)

“It is hard for you to compete on a commodity level,” said Roosevelt from his experience trading dairy commodities at a ratio of 60% domestic use, including animal and pet feed makers, and 40% exports, noting the export trade really began in the past eight years.

“We do a lot of business with Land O’Lakes and Maryland-Virginia,” he said, “but we don’t move hardly anything into export markets out of the Northeast. The fluid market dictates things here in the East compared with the West and Midwest, where cheese is king.”

Roosevelt said the Midwest, Southwest and West are where dairy plants are doing line extensions, and new plants are being planned and breaking ground.

Global volatility

“These companies and cooperatives are going after the commodity big-volume markets to China and Mexico,” said Roosevelt. “If tariffs take those markets out, then it will affect you here because that milk moves down the line. When those markets move product out of the U.S., that means less competition for you here.”

The export markets are deemed the growth markets, said the experts, because domestic demand is declining in some sectors and offers only slow-growth opportunities in other sectors.

With the growth-focused U.S. dairy industry fueled mainly by exports, the volatility of the global market has forced more of the industry to use the CME futures markets to get the ‘flat price’ they want in their quarterly contracts, according to Roosevelt.

“As traders, we trade off the market price and use the futures to convert that to a flat price,” he said. “I would urge you to look at the futures to get a flat price. It’s a tool that will be increasingly important to all of you because, whether we like it or not, we are in a global market and futures are a way to reduce that volatility.”

Roosevelt’s bottom line was for producers to be as efficient as they can and look for the market that “gives you the value, whether it’s artisan or organic.”

Wegner echoed the advice on being efficient. He said the largest farms have the advantage of stretching their economies of scale and taking a longer view in this long period of long milk.

He gave a history of Land O’Lakes with its butter production dating back to 1921 and the eventual merger with Midatlantic here in the East.

“We aggregate demand also,” he said, a nod to Land O’Lakes’ Purina. “We want more of our members to buy more of our products, not just sell us milk.”

Explaining Land O’Lakes’ market-back philosophy, Wegner said the cooperative has put tools together that include traceability and are trying to put production discipline tools into that mix.

“We come to our customers with a farm-to-fork approach and send that back through milk production for an end-to-end view,” said Wegner. “Being farmer-owned is a great part of our background as we continue to grow markets.”

While Pennsylvania’s average herd size is 90 cows, most of the producers attending the forum represented farms with 300 to 1200 cows. Some of the questions lingering in their minds were: How many niches does a dairy market have? And what will it take to develop those in-roads to cover more milk and spread those opportunities beyond the small farm-store label at the end of the drive?

While niche-marketing connects producers and their location and practices with consumers who develop that emotional tie, Roosevelt said the dairy commodity supply-chain has been developing its own sets of practices and programs.

Supply-chain realities

“Traceability is a huge part of our business, and it is as important on the feed side as the food side working with customers like Cargill and ADM,” he explained, noting the huge increase in paperwork following every product delivery. Not only are there certified analyses, date processed, how processed and lot numbers, but in the case of whey, the buyer wants to know what type of cheese process produced the whey because each one has its own profile. He gave the example of whey from Swiss cheese being whiter and higher in protein.

He noted they are getting questions about organic and non-GMO whey, which will produce even more paperwork, and that the traceability aspect is moving back the supply chain to the farm level.

Wegner also talked about traceability. While he didn’t mention it specifically, both Land O’Lakes and DFA are trialing block-chain technology to follow product digitally through the supply chain. Walmart is driving full traceability and moving toward block-chain technology.

“Walmart is one of our biggest customers for butter,” said Wegner. “Just think of the traceability challenges of mixed loads with hundreds of producers.”

The National Milk Producers Federation FARM program was described as a way of consolidating groups of producers into blocks that are being evaluated to use approved practices.

“Members want to know ‘what’s in it for me?’’ said Wegner, “but the reality is that the FARM program contains a lot of the things we have to do to be part of the market.”

Not only are domestic commodity dairy sales being driven by large fast food chains that want to be sure a farm-level animal welfare issue, for example, doesn’t damage their name, the export markets have this concern as well where brands are involved.

Wegner noted that Pizza Hut is launching a new restaurant every 18 hours, globally, and the Yum brand, which includes Pizza Hut and Taco Bell, are opening new restaurants every 8 hours across the globe. He said that 80% of the menu items at these restaurants include dairy. They secure cheese from the U.S. and are concerned about capacity and traceability over the next three years.

For example, Leprino has 80% of the market share for U.S.-produced mozzarella, said Wegner, and their growth is more concentrated in states like Michigan, Colorado, New Mexico and California.

Trickle-down effect

With the commodity production for export and large chain foodservice sectors growing — and served mainly by the Midwest and West — Roosevelt maintained that this export growth is still very important to the East because “the benefit trickles down from the West.”

He said that, “The value of growing exports, for you, is that you will have less competition coming from the Midwest and West.”

What can alter that picture — overnight — is the impact of trade tariffs and trade wars with the top three countries for off-shore dairy trade, in order: Mexico, Canada and China.

He said the tariffs have had an incredible effect on lactose trade. Those customers can go to Europe. “There’s plenty of lactose in Europe and they are quick to fill the gap with a lower price,” said Roosevelt.

Another big trade item is permeate, which is 70 to 80% lactose with some protein left in. There are fewer global competitors in this market, but when the tariffs hit, product was “in the water” and fourth quarter contracts were being negotiated, resulting in buyers and sellers splitting the extra costs and new contract offers coming in on lower bids.

The bottom line on these two commodities, according to Roosevelt, is less market for U.S. lactose and a lower price on U.S. permeate.

As for nonfat dry milk powder, it goes all over, but primarily to Mexico, Canada and China, in that order. The “new NAFTA” and the trade war with China, combined, can have an impact on all three export destinations for nonfat dry milk.

Mainly, Roosevelt’s point was that trade uncertainty can create changes “overnight” that affect dairy, and that tariffs are bad for agriculture, in general, because they “create inefficiencies that stop the normal market dynamics from taking effect.”

Like every other economist at every other meeting, Wegner talked about how Europe “really put on milk” when the quotas were removed. He admitted that he was among those who didn’t believe it would happen. But it did. And this extra milk, said Wegner, resulted in stockpiled powder that drove prices down globally.

With some intervention and drought conditions affecting Europe, the EU’s growth this year was only 1.4% instead of 2.5%. But a 1.4% growth in Europe represents far more milk than the same percentage of increase in the U.S.

Growth challenges

Wegner explained that the U.S. is growing milk production at roughly 1% per year now, but that equates to 2 billion additional pounds of milk annually. At the same time 600 million fewer pounds are going into bottles for Class I sales.

“That is what is challenging our system,” he said. “We are seeing the cows come out of the system, but better cows are going back in. For things to get better, a lot more cows need to come out.”

With Land O’Lakes having a national footprint, Wegner observed the challenges of more milk coming on in some of the largest herds in the nation. While California is not growing year-on-year, Texas and the Southwest states are growing rapidly.

He noted that even though Michigan’s growth slowed this year, “Michigan is the poster-child for the hazard of growing ahead of the market,” said Wegner. “They doubled their production from 5 billion pounds in 2000 to over 10 billion pounds by 2018, and this drove their price $2 below everyone else because their milk has to move around.”

Wegner touched on the recent Pennsylvania Dairy Study and its finding that a new cheese plant or other new processing capacity could reduce hauling costs for producers and add value to farm level milk pricing.

“New processing is easy to do, but what do you do with the additional product?” he suggested. “We take a market-back approach at Land O’Lakes because if we don’t sell it or eat it, the product gets stored.”

Wegner called cold storage cheese stocks “very high” and he said that butter stocks were “a little higher than they need to be.” (Note that the USDA cold storage report the following week showed a record-high draw-down in butter stocks that may have improved the butter storage situation.)

Wegner also said that Mexico’s retaliatory tariffs, if they remain in place until a new trade agreement is signed, are already stagnating U.S. cheese production into storage – cheese that had been going to Mexico. (Cheese exports were down 9% compared with a year ago in September.)

The bright spots, he said, are the dairy ingredient markets. “But the Class III market, right now, is a dog.”

The Class IV market is improving as Europe works through its mountain of powder, bit by bit. That powder is getting close to two years old, and Wegner observed that the U.S. is selling fresh powder at a price advantage to buyers who want fresh.

Looking at some of the specific market impacts of the trade tariffs, Wegner stressed the “woefully underestimated” tariff-mitigation payments by USDA to dairy farmers, and all three experts agreed that these tariffs, and more that will potentially kick-in January 1^st, are having very negative impacts on the U.S. dairy supply chain.

When asked how these impacts could be blamed for the lack of a price recovery when U.S. dairy exports have been record-high for January through September (most recent figures), the response was that producers should not expect higher export levels to improve farm-level prices because these export markets are largely “market-clearing” commodity markets.

PDMP executive director Alan Novak opens the discussion to questions from the 60 dairy producers and industry representatives gathering at the Bainbridge Fire Hall on November 14 for the Professional Dairy Managers of Pennsylvania’s (PDMP) Fall Issues Forum focused on dairy markets and trade.

Also driving milk production and processing west are the incentives western states provide for new plants, new dairy operations, and growth of existing businesses. For example, the I-29 corridor of the Dakotas is an area that has lots of capacity, is building more, and has dairies, like Riverview, adding cows in a big way.

Indiana and Michigan are other examples of states becoming big dairy suppliers via Select Milk Producers and Fair Oaks. Colorado’s growth is fueled by Leprino, and Texas has multiple growth influencers, including line extensions by Hilmar.

Taken together, the U.S. has grown milk production by 17 to 18 billion pounds of annual production over the past five years, according to Wegner. That’s like adding another Pennsylvania and Minnesota to the nation’s milk load. Wegner said that boils down to 50 million more pounds of milk per day moving in the U.S. compared with five years ago.

Wegner also talked briefly about Land O’Lakes’ base/excess plans. “This is our way of putting some discipline into the discussion, which goes to our market-back approach,” he said. “We moved a lot of milk from our milkshed this year, and that long milk has a cost. At the same time, he noted that Land O’Lakes has been stripping and dumping milk here, that its producers are assessed to pay for that.

“We worked with DFA (Dairy Farmers of America) and DMS (Dairy Marketing Services) on this step to do cream salvage,” he added.

Land O’Lakes’ view of investing in processing is that the products have to be able to move along the value chain in order to produce more of them.

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‘It’s getting real, and we’re not alone’

Posted on November 24, 2018 by Agmoos

Unsure of future, Nissley family’s faith, community fill gap as dairy chapter closes with sale of 400 cows

By Sherry Bunting, Farmshine, November 16, 2018

MOUNT JOY, Pa. — Another rainy day. Another family selling their dairy herd. Sale day unfolded November 9, 2018 for the Nissley family here in Lancaster County — not unlike hundreds of other families this year, a trend not expected to end any time soon.

After 25 years of building from nothing to 850 dairy animals — and with the next generation involved in the dairy — the Nissleys wrestled with and made their tough decisions, saying there’s no looking back, although the timetable was not as they planned because the milk price fell again, and some options for transitioning into poultry came off the table.

The Cattle Exchange put up the tent, and the community came out in-force to support the Nissley family and their sale Friday. Throughout the weekend, they heard from people who bought their cows, telling them they’ll take good care of them. While many went to new dairy homes, a third of the cows at dispersals like this one have been going straight to beef, despite culling a good 10% of the herd in the weeks before the sale.

They began culling hard the past few weeks and on Friday, Nov. 9 offered 330 remaining milk cows and over 80 springing heifers. The Cattle Exchange put up the tent, and the community came out at 10 a.m. to support the family and — as Mike Nissley put it — “watch a life’s work sell for peanuts.”

Breeding age heifers are being offered for sale privately and the young calves, for now, are still being raised on another farm as they would sell for very little in these trying times.

As we talk outside the sale tent in the cold November rain, the cell phones in the pockets of Mike, Nancy (left) and Audrey are sounding off with outpourings of support. Know that the smiles through brushed back tears are because of the loving care of others, the family’s faith in a loving God, and the knowledge that they took great care of their cows.

Mike and his wife Nancy aren’t sure what the future looks like, but they are surely feeling the prayers, calls and texts of their friends, family, and community getting them through it.

Both Mike and his daughter Audrey Breneman have loved working with the cows, saying the sale felt like a funeral — “the death of a dream” — standing in the light rain outside the sale tent while the auctioneer chanted prices dipping into the $500s and $600s, even struggling shy of $1000 on a cow making 90 pounds of milk with a 54,000 SCC.

Later, a smile crossed his face, hearing the auctioneer stretch for $1700. “That one’s good to hear,” he says, as they headed back into the tent to watch springing and bred heifers sell.

While Daniel Brandt announced their number-one heifers, bids of $1600 and $1700 could be heard on some.

“It was a privilege to make the announcements on those 425 head, and I was impressed with the turnout of buyers, friends and neighbors as the tent was packed,” said Brandt after the sale. “The cows were in great condition and you could tell management was excellent.”

Mike gave Audrey the credit.

Before the rattle of cattle gates and the pitch of the auctioneer began, Audrey addressed the crowd with words that make the current dairy situation real for all who were there to hear them:

“We would like to welcome you to the Riverview Farms herd dispersal and thank you each for coming. Today feels a bit like attending my own funeral where we bury a piece of me, a piece of my family, and a piece of history, where we say goodbye to a lifestyle, to a way of life, to a lot of good times and many hardships as well. But I stand before you today proud to present to you a herd of cows that will do well no matter where they go.

“This isn’t the end for these ladies, nor is it the end for us. I’ve had the privilege of managing the herd for the last 15 years and though we may not have done everything perfectly, we’ve done a pretty darn good job of developing and managing a set of cows that can be an asset to your herd. Everything being sold here today is up to date on vaccines. Any cows called pregnant has been rechecked in the last 10 days, Feet have been regularly maintained and udder health was always top priority. We culled hard over the last few weeks and have only the cream puffs left as the auctioneer Dave Rama says.

“Though it feels like the end, it’s only the beginning of the next chapter, and we’re excited to see where God leads us next. Our milk inspector said once: it’s not a right to milk cows, it’s a privilege, and that’s exactly what this herd of cows was, a privilege.”

Her sister Ashlie’s husband Ryan Cobb offered a poignant prayer. The youngest grandchildren not in school, watched until lunchtime as the selling went through the afternoon, and the cattle were loaded onto trucks in the deepening rain at dusk.

As the sale progressed, a solemn reflection could be seen in the eyes of neighbors and peers. To see a local family sell a sizeable herd leaves everyone wondering ‘who’s next’ if prices don’t soon recover.

“It’s getting real,” says Mike. “Everyone is focused on survival, but we can see others are shook, not just for us, but because they are living it too.”

He has spent the last two years fighting to protect everything, including his family, “but now I surrender,” he says. “It feels like failure.”

There’s where he’s wrong. There are no failures here, except that the system is failing our farmers — and has been for quite some time — leaving good farmers, good dairymen and women, to believe it is they who have failed, when, in fact, they have almost without exception succeeded in every aspect of what they do.

Nancy is quick to point out that without Mike’s efforts and the family’s faith, “we wouldn’t have gotten this far, but now it’s time to see where God leads us next.”

The dairy chapter closed last Friday for the Nissley family in Mount Joy, Pennsylvania, but they are looking forward to where God leads them next. Mike and Nancy Nissley are flanked by daughter and herdswoman Audrey (left) and son-in-law and feed manager Matt Breneman and son Mason and daughter Ashlie (right) and son-in-law Ryan Cobb.

“Never have we felt the love and support like we have now from our community,” Audrey relates.

Nancy tells of a group of 20 who met at the farm for a meal the night before: “They prayed with us and rallied around us and supported us.”

Mike feels especially blessed. “We’ve had people just come over and sit in our kitchen with us,” he says. “People say ‘we’re here for you.’ People I never met are reaching out to tell me ‘you’re not alone, you’ll get through it, and there’s life after cows.’”

His bigger concern is that, “The public doesn’t fathom what the real struggles are out here. They have no idea where their food comes from and what it takes to produce it, the hours of work, of being tied to it 24/7/365. As farmers, we don’t have the resources or the time to correct all the misinformation when everyone believes what they see on social media.

“They go in a store and see milk still sold at $4.75/gal. The ice cream mix we buy for our ice cream machine costs the same as it did in 2014, when farm milk prices were much higher. DFA and Land O’Lakes report big annual profits. Where does the money go? Where did our basis go? It used to be $3.00 and now it’s barely 50 cents. There’s not one area to fix if the system is broken,” Mike says further.

“When you really look at this,” he says, “it’s amazing how little farms get for the service they provide, but if the public doesn’t know or understand that service, then they won’t expect the farmers to receive more and will actually make it harder for the farms to do with less.”

The Riverview herd had good production and exceptional milk quality. Making around 25,000 pounds with SCC averaging below 80,000, Mike is “so proud of the great job Audrey has done. Without that quality, and what was left of the bonus, we would have had no basis at all,” he says, explaining that Audrey’s strict protocols and commitment to cow care, frequent bedding, and other cow comfort management — as well as a great team of employees — paid off in performance.

But at the same time, with all the extra hauling costs and marketing fees being deducted from the milk check, the quality bonus would add, but the subtractions would erode it.

He notes further that a milk surplus doesn’t seem to make sense when the bottom third — or more — of every herd that sells out is going straight to beef.

The Nissleys are emerging from the deepening uncertainty that all dairy farm families are living right now in a country where we have Federal Orders for milk marketing, and yet we are seeing an expedited disorderly death of dreams at kitchen tables where difficult decisions are being made.

Trying to stay afloat — and jockeying things around to make them work — “has been horrible,” said Nancy. She does the books for the farm and has a catering business.

Financial and accounting consultants advised holding off the sale for the bit of recovery that was expected by now. But it never materialized, and in fact, prices went backward.

“The question for us became ‘how much longer do we keep losing money hoping that things will get better?” Audrey suggests. “We had to start figuring our timeline.”

She has been the full-time herd manager here for 15 years since graduating from Delaware Valley University with a dairy science degree. Husband Matt has been the full-time feed and equipment maintenance manager.

Cows have been part of Audrey Breneman’s life as long as she can remember. “They are part of who I am,” she says. Graduating from Del Val with a dairy science degree in 2003 and working full-time for 15 years as herdswoman at then 400-cow dairy farm started from scratch by her parents Mike and Nancy Nissley, have given her options as she moves forward after the sale of the family’s dairy herd.

She loved the cows. Their care was her passion, and the herd record and condition reflected this. But even the strongest dairy passion has limits when tested in a four-to-five-year-fire of downcycled prices.

“It’s too much work to be doing this for nothing,” she says.

With two young children of her own, Audrey could not envision doing the physical work, the long hours, with no sign of a future return that would allow her and her husband to invest in facilities, equipment and labor. How many years into the future could they keep up this pace, continually improving the herd and their milk quality, but feeling as though they are backpeddling financially?

These are the tough questions that the next generation is asking even as their parents wonder how to retain something for retirement, especially for those like Mike and Nancy who are still a way off from that.

We hear the experts say that the dairy exits are those who are older and deemed this to be “time,” or that the farms selling cows are doing so because their facilities have not been updated, or because they don’t have a next generation interested.

These oversimplified answers seek to appease. The truth is that in many cases — like this one — there is a next generation with a passion and skills for dairy farming.

The problem is the math. It doesn’t add up.

How are next generation dairy skills and passions to take hold when the market has become a flat-line non-volatile price? There are no peaks to go with the valleys because the valley has now become the price that corresponds directly with the lowest cost of production touted by industry sources and policymakers when talking about the nation’s largest consolidation herds in the west — and how they are dropping the bar on breakevens.

How are the next generation’s dairy passions to take hold when mailbox milk checks fall short of even Class III levels in much of the Northeast where farms sit within an afternoon’s drive of the major population centers

In Audrey’s 15 years as herd manager, there have been other downcycles, but they were cycles that included an upside to replenish bank accounts and hope. The prolonged length of the current downcycle brings serious doubt in the minds of young dairy producers about a sustainable future, but are the industry’s influencers, power centers and policymakers paying attention?

Cows congregate in the two freestall barns and in the meadow by the road as a holding area during the Nissley family’s sale of the dairy herd Friday while the milking team milks for the last time in the nearby parlor.

Like many of her peers transitioning into family dairy businesses, the past four years have been draining. Much depends upon how far into a transition a next generation is, what resources they have through other diversified income streams in order to have the capital to invest in modernizing dairy facilities and equipment.

Without those capital investments, these challenging dairy markets combine with frustrating daily tasks when there is insufficient return to reinvest and finding and securing sufficient good labor also becomes an issue.

As difficult as it is for the Nissley family, they are also concerned for their family of employees. The herd’s production and excellent milk quality are very much a team effort, they say, and the team of milkers pictured with Audrey (l-r) Manuel, Willie and Anselmo were busy Friday with the last milking at Riverview as cows came through the parlor all day ahead of their sale and transport.

The Nissleys are quick to point out that as hard as this has been for their family, it is also hard on their family of employees. They, too, are hurting.

“This is what I wanted to do all my life. It was our dream when we were married. I had a love for it and Nancy had a love for it,” says Mike, whose dairy dream was ignited by visits to his grandfather’s farm. Nancy grew up on a farm too, but the cows were sold in the 1970s.

The couple worked on dairy farms in the early years and saved their money. In 1994 they started dairying on their own farm with 60 cows. In September 2007, they moved to the Mount Joy location and began renovating the facilities for their growing herd.

Cows have been part of Audrey’s life as long as she can remember. “They are part of who I am,” she says, adding that she is glad to have her dairy science degree, along with the dairy work ethic and experience. “Here we are selling the cows, and I have opportunities to consider that I may not otherwise have. That degree is a piece of paper no one can take away from me.”

As the Nissleys closed this chapter Friday, they turn to what’s next. Nancy says she looks forward to being able to do things together they couldn’t do before while being tied to the dairy farm. As to what they will do on the farm, she says “God has not steered us wrong yet. Yes, it’s scary, but we also have faith that He is in this.”

Mike and Nancy Nissley aren’t sure what the future looks like, but they say they are feeling the prayers, calls, texts and support of friends, family and community. That’s what is getting them through these days.

Mike has also gained new perspective. He observes that for any dairy family that has a future generation with a long-term goal, it makes sense to stay in and try to ride this out. “But if you have any question about that long-term goal, have the tough conversations about your options.

“It’s easy to lose perspective. For the last two years, I lost my perspective because I was so focused on survival. That’s what I take away from this, the importance of getting perspective. We are first generation farmers. We started with no cows 25 years ago and have 850 animals today. It’s hard to see it all dismantled and be worth nothing. But we’re not second-guessing our decision.”

Talking and praying with friends and acquaintances, Mike believes that, “We go through things, and we can’t let it drag us down but use it for God’s glory.”

Under the milky white November sky spilling rain like tears, he says that while the sale “feels like the death of a dream, I know I’ve been blessed to have shared this dream with my wife and to work alongside our daughter and to see the great things she was able to do with this herd, for as long as we could. I’m thankful for that.”

The sale started at 10 a.m. Over 400 cattle were loaded in the deepening rain at dusk as the dairy chapter closed at Riverview Farm, Mount Joy, Pennsylvania, and two generations of the Nissley family said there’s no looking back, only forward to where God leads them next.

Seismic shifts in milk supply chain ahead: New Walmart plant triggers Dean’s cut of over 100 dairy farms in 8 states

Posted on March 9, 2018 by Agmoos

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By Sherry Bunting, from Farmshine, March 9, 2018

LEBANON, Pa. — He saw the mailman drive up and linger in the driveway, wondering if they were expecting a package. Moments later, his wife was standing there, holding a letter she had signed for.

The certified letter informed this Lancaster County dairy farm family that after 13 years of sending their milk to the Swiss Premium plant in Lebanon – along with decades of the farm’s milk in generations before them — the agreement with Dean Dairy Direct would end May 31, 2018.

The same story played out Friday among neighboring farms on the same hauling route to the same plant. And it was the same scene in driveways for approximately 120 dairy farms in eight states, including 42 in eastern and western Pennsylvania — around half of the Dean Dairy Direct shippers to three plants in the state.

Reace Smith, director of corporate communications for the Dallas, Texas-based Dean Foods, confirmed in a phone call Monday that against the backdrop of expanding raw milk production, and companies “asserting and expanding their presence in a market where consumers are drinking less milk (namely the Fort Wayne, Indiana Walmart plant where bottling begins this month) over 100 dairy farms in eight states received 90-day termination notices” from Dean Dairy Direct on Friday and Saturday, March 2 and 3 stating that their agreements will end May 31, 2018.

Smith confirmed that the over 100 affected dairy farms are in the states of Indiana, Ohio, Pennsylvania, New York, Kentucky, Tennessee, North Carolina and South Carolina.

“This affects all size herds and is not a large or small farm thing,” said Smith. While she was unable to supply specific information about the farms that were terminated, she said the widespread volume adjustments at multiple plants across four Federal Orders was necessary due to the new Class I plant (Walmart) coming online this month and the loss of a contract through a competitive bidding process (Food Lion).

Both market losses for Dean indicating structural change to the dairy industry as more retailers move into milk bottling in more centralized distribution models.

Sources in the various states confirm the affected farms range in size from less than 100 cows to over 1000 cows.

“This was an incredibly difficult decision. We tried very hard to avoid it and regret this decision had to be made,” said Smith. She indicated that Dean Dairy Direct field representatives are serving as resources to these producers and can provide a list of contacts for potential milk buyers. They are also offering counseling.

While the company will not provide a list of affected plants or a state by state break down in the number of farms or volume of milk affected, they have indicated that the state that may be hardest hit on a volume basis is Indiana.

In fact, the volume of displaced milk in Indiana, alone, has been estimated at over 20 million pounds per month, representing the under 100 to over 1000 cow size range but most of them milking 300 to 1000.

The affected Indiana farms shipped milk to the Dean plant in Louisville, Kentucky, which also terminated 22 Kentucky dairy producers, ranging from 50 cows to 250, according to Maury Cox, executive director of the Kentucky Dairy Development Council.

In Tennessee, Julie Walker of Agri-Voice near Knoxville has confirmed nine (now 10 confirmed) affected producers ranging 60 cows to 300, and numbers in the Carolinas are unknown at this time.

From the standpoint of the farms affected, Pennsylvania is hardest hit, and while the number of New York farms is unknown at this time, some may have shipped to Dean plants in Pennsylvania.

According to Jayne Sebright, executive director of the Center for Dairy Excellence, 42 Pennsylvania dairy farms shipping to three Dean plants in eastern and western Pennsylvania received notices Friday – representing half of the Dean Dairy Direct shippers in the state. This includes 26 producers in eastern Pennsylvania, including Lebanon and Lancaster Counties, as well as 16 in western Pennsylvania, where the Dean plants in Sharpsville and Erie also ended agreements with Ohio farms. The number of Ohio farms affected is unknown at this time.

“The (Agriculture) Department and the Center have been reaching out to other markets to see what capacity is available, but at this point we do not know of any with available capacity,” said Sebright. “We are working to support the affected farms as best we can. We are very concerned both about the future of the farms and the well-being of the farm families.”

Sebright noted that the Center is making additional resources available and recommending use of their Dairy Decision Consultants Program to evaluate options — both within and outside of the dairy industry. “This is a difficult situation to be in and we are concerned.”

In fact, the farm this reporter visited in Lancaster County Tuesday was already working to call every available market and neighbors who also lost their contracts were looking at everything they could think of. Four or five trucks go through the county picking up milk every day so they wonder if each one can find a market or if they are better off pulling their milk together to find a single-haul market.

The producer was thankful, at least, for being part of a dairy producer discussion group and thankful for folks like Dr. Charlie Gardner with the Center who leads the group.

Not only were the Pennsylvania dairy farms shocked to receive the letters, veterinarians, nutritionists, feed company and equipment maintenance folks are facing this loss with their farm customers as the news spread this week throughout farm communities and the greater dairy community.

In Indiana, where estimates are that over 20 million pounds of milk per month has been displaced, producers had already been on edge as the Walmart plant took shape in their state and they contemplated its milk sourcing.

“We are working with producers and contacting cooperatives and potential markets to try to work together to get through this thing,” said Doug Leman, executive director of the Indiana Dairy Producers. He has been in contact with affected producers, the Indiana Department of Agriculture, and the plants and cooperatives that provide markets for milk in the region.

“I’ve had calls not just from the affected producers, but from many other Indiana dairy producers sharing their concern and asking if there is anything they can do,” said Leman. “I’m encouraged by that, and I am encouraging our producers to keep their chins up through this difficult time in their lives, families and businesses in the hopes that we can work through this together.”

Leman said he does not want to blame Walmart because, wherever the first Walmart plant would have been located, this was coming. Indeed, Walmart has entered a trend among retailers to move toward bottling their own private label store brands (Great Value and Sam’s Club Member’s Mark) rather than contracting with Dean Foods.

“Walmart was coming to Ohio, Michigan or Indiana, and I still believe it is better to have the plant in Indiana because it offers opportunities,” said Leman.

While fluid milk consumption is on the decline for 15 years — although stabilizing with more consumption of whole milk last year — retailers notice that nearly every shopping basket going through their stores includes milk. They seek their own store brand loyalty as loyalty to their store and some of the retail price wars happening in states without loss-leader protection are evidence of this. As is the ability to pull premiums away from states that have loss-leader protection or a minimum retail price as in Pennsylvania, to “fund” price wars in other surrounding states without any loss-leader protection.

The dichotomy points to a need, perhaps, for a federal loss-leader threshold versus random state programs that can fuel the picking of winners and losers in today’s times of seismic structural change to the dairy industry from retail all the way through the supply-chain.

In short, the region would likely have been affected by Walmart’s decision to vertically integrate its Great Value and Member’s Mark milk brand for its stores in the region — no matter which state the plant had been located.

In fact, sources indicate potential sites to the south are being eyed for a second Walmart plant in the future, revealing a corridor strategy to this vertical integration of single-source, full-traceability, each-truck-one-farm model.

The Dean Dairy Direct letters of termination to dairy producers in the region were dated February 26, 2018, which was the same day as Dean’s 2017 earnings call where the company projected its strategy in brand and private label supply and to “right size” its milk volume and consolidate its supply chain to achieve a “flatter, leaner and more agile” company into 2019.

According to Smith, there are no official announcements of any plant closures at this time and none of the plants involved have released all of their shippers. Still, there remains concern that some of the plants that have released a larger portion of their farms are vulnerable.

“We still have a commitment to local milk,” said Smith about the volume adjustments. “There are many factors that impacted this decision. We are seeing surplus raw milk when the public is consuming less fluid milk, and we see companies asserting and expanding their presence in a market where consumers are drinking three gallons less annually, per capita, since 2010 while the U.S. dairy industry is producing 350 million gallons more milk annually than the year before.”

In addition to the overall imbalance Smith said that, “The introduction of new plants when there is an industrywide surplus forced us into the position of further adjusting our milk supply according to demand.”

As vertical integration of milk at the retail level leads to consolidation by the nation’s largest milk bottler – Dean Foods – the company has diversified into soft dairy product brands that are just starting out of the gate and were discussed in the Dean earnings call as well.

Specifically, the letter received by Indiana and Kentucky dairy producers shipping to the Louisville plant stated “two indisputable dynamics led to this difficult decision. First and foremost, a retailer’s new Class I fluid processing plant is coming online in the region, significantly decreasing our production as milk volume is moved away from our facility to this new plant.

“The second reason is bigger than all of us. The steady increase of raw milk production combined with the decrease of Class I fluid dairy consumption…” the letter stated.

Letters received by producers in the southern market as well as eastern Pennsylvania did not specifically reference the new Class I fluid processing plant built by a retailer (Walmart) as had the letter to Kentucky and Indiana producers serving the Louisville plant and western Pennsylvania and Ohio producers serving the Sharpsville plant.

Those letters received by farms further to the east and the south indicated the plants had “lost a portion of customer fluid milk volume to a competitor through a customer-bid process.” Sources indicate this may include both the Food Lion private label store brand and the Walmart Great Value private label in these areas as well.

The letters received by producers said further that Dean was “unable to lock-in enough new customer volume to offset this loss.” This is a function of the overall decline in fluid milk consumption and the new milk via large multi-owner, multi-site farms in surplus regions of the Mideast and Midwest.

One thing is also clear in speaking with producers, veterinarians, organizations and others in the industry, the farms that are facing this difficulty are largely well-managed and producing high quality milk. Many of them are young families representing the next generation. Many are progressive, with updated facilities and technologies as well as utilizing the resources available to them for continued improvement in all that they do to supply their communities with milk.

In these states affected, whole transportation routes were terminated, presenting both challenges and opportunities for a collective effort in dealing with these market losses.

Walmart will not reveal the farms they have secured to supply the plant, but it is widely known that some of the milk will come from the north, some from within Indiana, and that a processor in Wisconsin is handling contracts and in a position to balance the Walmart plant’s fluid needs that may or may not have involvement by cooperatives.

As in Indiana and other states, Cox said of Kentucky: “We, are contacting other potential markets for our producers and would like to meet with Dean Foods to see what more we can do for these producers and to have a better understanding about the future of the Louisville plant” (where both the affected Kentucky and Indiana producers shipped their milk.)

Some state dairy organizations, state departments of agriculture and other industry leaders indicate they want to let the dust settle and allow options to emerge as they adopt a patient mindset to look at potential options for their respective state’s producers.

In the meantime, all are reaching out to producers and urging producers to reach out to them, and to each other. In fact, right now, more than ever, the dairy community needs to be reaching out and talking about its future to higher levels of relationships beyond what has occurred in the past.

“We want to survive,” said the dairyman this reporter visited 15 minutes from my home in Lancaster County, Pennsylvania, just four days after receiving the letter.

Like others this reporter has spoken to, they have done everything the industry suggests to make their farm competitive. While a small farm whose milk shipped for generations to the Lebanon Swiss plant serving local stores and consumers, this young farm family had invested in the latest technology, produces milk with very high components and very low somatic cell counts.

But here they are, facing what 120 of all sizes face throughout eight states as vertical integration from Walmart and other retailers sends a ripple effect and seismic shifts throughout the supply chain.

-30-

Ag Moos

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Seismic shifts in milk supply chain ahead: New Walmart plant triggers Dean’s cut of over 100 dairy farms in 8 states

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