As producers struggle, cooperatives fumble: How is ‘excess milk’ determined to be a problem in deficit areas?

By Sherry Bunting, updated from Farmshine, June 1, 2018

KENTUCKY — As the calendar turns to June, the saga of lost markets has meant a transition for some, exits for others, and in Kentucky, 14 producers who still faced May 31, 2018 contract terminations with Dean Foods were given a 30-day reprieve.

“It’s down to the wire and we’re working on a hail-Mary,” says Maury Cox, executive director of the Kentucky Dairy Development Council (KDDC). “We started with 19 affected producers, and we’re down to 14. Some have exited the business and we may lose a couple more.”

According to Cox, the KDDC and other state officials are still working, leaving no stone unturned, for these 14 producers, confirming on May 28 that Dean Foods did extend their contracts to July 1.

Five of the original 19 affected producers in Kentucky have sold their cows and a few others, like Curtis and Carilynn Coombs, are in the process of incrementally downsizing their herds as the termination approaches.

In southern Indiana where seven producers were unable to find a market, Doug Leman, executive director of Indiana Dairy Producers, indicates that some are drying off cows, others are selling, and one is getting into on-farm milk processing. There are a select few that have been offered 30-day Dean contract extensions, mainly because their contract renewal dates were different, and Dean could utilize the milk.

In Kentucky, there is the added and unusual situation of an 800-cow dairy not being able to move into their new 8-robot dairy barn because the processor receiving their milk classified the second location, two miles from the main barn, as a start up instead of an existing patron’s modernization project that in total represented a modest expansion.

As the new robot barn sits empty, and many contacts made with no takers, Kentucky dairy leaders scratch their heads at the gate-keeping that is going on — wondering how is it possible that these things are happening? That in a milk deficit region, just two loads of milk from 14 former Dean Dairy Direct farms — that now have until July 1 — can’t find a home? That in a milk-deficit region, this separate situation happens to  a progressive dairy having to let their new completed barn sit empty and keep milking exclusively in the old facility, in order to keep their existing milk contract with another bottler?

All of this happening in a state that is part of the Southeast region that University of Wisconsin dairy economist Mark Stephenson says has a 41-billion-pound milk deficit in terms of production and consumers. And all of this happening in a state spanning two Federal Milk Marketing Orders (5 and 7) that regularly utilize transportation credits and diversions to move milk — bringing milk in from up to 500 miles away to meet the actual processing needs.

It doesn’t make sense. The movie playing-out in Kentucky could come to other theaters in the eastern U.S., and the previews are already being shown.

Repeated emails to Dean Foods went unanswered over the past two weeks as the company’s corporate communications director indicated by automatic reply that she is on “paid time off” until June 4.

Phone calls and emails to the communications department for the Kroger Company have also not been returned as Kroger bottles 100% of its store-brand milk at its own plants, including the Kroger Winchester Farms Dairy plant in Winchester, Kentucky, which is supplied by Select Milk Producers, Inc. and Dairy Farmers of America (DFA).

IMG-0010x(Incidentally, a billboard popped up recently on I-65 North outside of Louisville, Kentucky –picturing Holstein dairy cows grazing and proclaiming Kroger as “proud to support Kentucky farmers”. What could this mean? As noted in this report, requests to Kroger’s communications department — to understand what these billboards mean and what percentage of milk in Kentucky Kroger stores actually comes from Kentucky farms — have gone unanswered.)

Prairie Farms recently announced it is closing a plant in Fulton, Kentucky and will operate a distribution point there. Prairie Farms and DFA own or supply other milk processing assets in the state and region.

Numerous sources outside the directly affected region indicate that Prairie Farms is working with Walmart to source milk and bottling for Walmart while the Fort Wayne plant start up is delayed . Prairie Farms, Great Lakes Milk Producers and Foremost Farms are the three cooperatives, along with Walmart’s independent milk contracts, meeting the single-source loads requirement for Walmart’s new plant in Fort Wayne, Indiana.

(Author’s note: While Walmart touts the milk for its new bottling plant, once fully operational, will come from within 180 miles of the Fort Wayne plant, the plant’s reach in Great Value bottled milk distribution will be much farther — up to 300 miles away where milk that is more ‘local’ to those Walmart stores in Kentucky and southern Indiana is displaced. So far, none of the cooperatives working with Walmart have taken on this southern milk.)

With Prairie Farms, Dairy Farmers of America (DFA), and Select Milk Producers all supplying milk processing operations in Kentucky, not one has agreed to take on the Dean-dropped dairy producers as members.

New members are a problem for Prairie Farms when their own members are on a quota system, and yet, the cooperative is working with other cooperatives and Walmart to source milk to supply a consumer need that was previously sourced from the dropped herds via the Dean plants.

As for other plants, even Bluegrass Dairy and Food, a dairy powders and ingredients company — with plants in Glasgow and Springfield, Kentucky balancing milk supplies in the region — is not exclusively owned by the local Williams family who founded it in 1995. The majority of the company was purchased in 2010 by a private investment firm. Sources indicate Bluegrass cannot accept the displaced milk from independent producers because they are completely co-op supplied and balance co-op milk at the two Kentucky plants as well as a third plant in Dawson, Minnesota.

When asked if DFA is taking new members, John Wilson, senior vice president and chief fluid marketing officer wrote in an email: “Our Area Councils monitor local milk marketing and manage membership decisions as well as other local issues. Membership decisions by this group of local dairy farmers are evaluated based on a number of factors, including an available market for milk, which continues to be out-of-balance in some areas of the country.”

On the Kentucky situation, specifically, Wilson said that, “We are concerned for family farms. We recognize the dairy farmers in Kentucky and southern Indiana who have been displaced face a tough situation. While there is excess milk in the area and finding a home for this milk will be a challenge, we are working with others to determine if we can provide any assistance.”

DFA-FMMO.jpgFollow up questions about how “excess milk” is determined to be a problem in a milk-deficit area, have not been answered. (Since publication, DFA’s John Wilson replied in an email that the excess milk situation is really the region, not specifically Kentucky.” One can see why when comparing the DFA Area Council Map, above right, to the USDA Federal Order Area Map, above left…  Note how in the above DFA Area Council Map, the lines are drawn with the navy blue of DFA’s Mideast Area Council dipping straight into the maroon of the deficit Southeast Area Council right through central Kentucky, for example, and it becomes apparent that the decisions can be weighted toward surplus transport between Orders within Area Councils and between them.)

After all, milk moves in mysterious (and not so mysterious) ways.

MilkTruck#1Meanwhile, of the over 100 dairy farms in eight states affected by the Dean contract terminations, it has been the willingness of smaller regional bottlers and smaller regional cooperatives to mobilize compassion, leadership and local marketing efforts to pick up the slack.

In Pennsylvania, it was localized (PA Preferred / Choose PA Dairy) bottlers like Schneider’s Dairy and Harrisburg Dairies that picked up many of the eastern and western Pennsylvania farms, with much of the balance being picked up by New York-based Progressive Dairymen’s Cooperative, marketing with United, a bargaining co-op covering both New York and Pennsylvania. Six Pennsylvania farms sold their cows.

In addition, one New York producer shipping to the Erie, Pennsylvania plant slated for closure, made his last shipment of milk on May 31 and sold his 150-cow herd and equipment, although he is hoping to rent the freestall barn he built a year ago.

In Tennessee, at least one farm exited, and all but one remaining were picked up by the new Appalachian Dairy Farmers Cooperative that is marketing to a bottler featuring local milk.

In northern Indiana, the farms with lost markets were picked up by two regional cooperatives Michigan Milk Producers and the Ohio-based Great Lakes Milk Producers.

In addition, with the new Class I Walmart plant in Fort Wayne, and the destabilization of fluid milk sales as U.S. population growth is not making up for declining per-capita fluid milk consumption, Dean plant closings are on the horizon. Sources indicate that Dean plans to close as many as seven plants by September but that no new producer-termination letters are expected in the near-term.

This level of Dean consolidation was mentioned in quarterly earning reports. However, Dean Foods has not publicly announced specific plant closings and repeated emails and calls to the Dallas-based company were not answered.

Three plant closings later this year have been confirmed by town authorities quoted in press reports.

One is the Garelick plant in Lynn, Mass.

Another is Dean’s Meadow Brook plant in Erie, Pennsylvania. The Erie Regional Chamber reported to Erie News Now that Dean intends to sell the Erie plant and transfer its bottling to the plant in Sharpsville, Pennsylvania while purchasing a smaller property in Erie for a distribution center.

The third reported Dean plant closure of an estimated seven to be announced is the Louisville, Kentucky plant where many of the Kentucky and Indiana farms that received contract-termination letters ship their milk.

Meanwhile, as Walmart’s new milk sourcing with the “Midwest supply-chain” gets underway ahead of its new Fort Wayne plant becoming fully operational, the 90 to 100 million gallons of milk per year (roughly 800 mil. lbs) are already being moved away from regional bottling and distribution channels to consolidated sourcing and distribution — with the biggest effects at the farthest edges of the new Fort Wayne plant service area, like Kentucky, where dropped producers are unable to find milk buyers.

There just does not appear to be any market access at other plants in the region without being members of cooperatives like DFA or Select or Prairie Farms, and despite multiple attempts by state dairy leaders, none of these three cooperatives have stepped up to accept the displaced producers as members.

As noted in a May 15 Farmshine report,  the KDDC, Kentucky Department of Agriculture and the Governor’s Office of Ag Policy have all been involved in helping these farms find a solution.

It is not an issue of no processors for the milk. The issue is the gates to these processors are closed to these displaced independent producers because they are not already members of the cooperatives manning the gates.

In the most recent March/April edition of KDDC’s Milk Matters newsletter, president Richard Sparrow talked about the situation for these Kentucky dairy farms as “operating in a very limited, if not closed market, with few or maybe no options.”

In his Milk Matters president’s corner, Sparrow offers this commentary:

“It is a really sad commentary on the state of our dairy industry that all the major fluid milk processors in Kentucky have a large percentage of their day-to-day milk supply coming from farms hundreds of miles outside our state’s boundaries. Yet, at the same time, Kentucky dairy farm families can’t find a home for their milk,” writes Sparrow. “This situation did not happen overnight. It is not an oversupply problem or a quality problem. It is a marketing problem.”

KDDC executive director Maury Cox said in a phone interview that he did not want to be negative. However, when he looks at the whole picture of the market, the increased hauling and marketing fees, the quota programs and base-excess programs in this milk-deficit region, the amount of milk being sold $1.00 or more below mailbox price, and the effect of potentially losing these producers upon the infrastructure for remaining producers, he admits that it is difficult to see light at the end of the tunnel.

“They are putting us out,” he says. “I think we are looking at the complete demise of Kentucky’s dairy industry. I think that is what we are seeing.”

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Innovative milk. Innovative dairy.

By Sherry Bunting 

NASHVILLE, Ill — It came hopping in a month before Easter, and was more popular than Prairie Farms could have imagined. The first run sold out immediately and away they went. Sold only in quart cartons and made with 2% fat milk, the Peeps-flavored milk even has its own hashtag on Twitter: #peepsmilk! Peeps-Milk3597

The chance for tasting came on March 21 while touring Finke Farm’s totally automated dairy — with its Galaxy Astrea 20.20 milking robot and its Trioliet automatic feeder. Craig Finke (right) ships his milk to Prairie Farms. He is pictured with Carbondale area Prairie Farms’ field rep Jim Donahue (left).

wfinke3650I gave all three flavors a thumbs up — my favorite being the actual Peeps flavored milk that tasted a bit like a sweet, but creamy, marshmallow. Chocolate marshmallow was like the ice cream by the same name, with just the right amount of sweetness for a milk. The Easter eggnog was pretty much just another chance to enjoy that super-rich beverage.

wfinke3655 Local FFA students poured samples for hundreds of open house attendees, many of whom said the flavors were more enjoyable than they had imagined.

Kudos to Farmer-owned Prairie Farms — a cooperative that covers portions of the Midwest and Midsouth — for thinking outside the box and drawing consumers to milk via flavor curiosity. The Peeps Milk is available seasonally through spring and only in the Midwest markets.

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Now… about the automation at Finke Farm… FINKE FARM has been in the family at least 5 generations, with Craig and Tricia’s two children Natalie and Hayden being the sixth generation to live here. wfinke3663

Today, the dairy business complements the 1300-acre crop business as Craig is able to operate both on a skeleton crew with the automation of the milking and feeding routines. Robotic milking and feeding also free Craig from the rigid milking schedule.

wFinke9514wfinke9628   Integrated sensor technologies throughout the facility — and as part of the milking and feeding systems — provide the needed information to manage the herd. The herd expanded from 80 cows in the parlor to now 117 cows currently milked by the robot — and capacity for up to 130. Cows milk an average 2.7 times per day giving an average 85 lbs/cow/day.

The Finke herd moved into the new robot barn Nov. 18, 2013. First, Craig introduced the cows to the new barn and started up the feeding system. He walked the cows through the automatic milking system, without milking them, to get them used to the environment. A couple days later, the automatic milking system was started and has milked the herd ever since.

Before Thanksgiving 2013, a neighbor lost facilities in a devastating tornado. Craig offered his empty barn and parlor while they rebuilt. This delayed calf modernization. Calves here will eventually be group-housed with Urban CalfMom automated calf-feeders.   wfinke3606

The total project stemmed from needing to install a new manure handling system. Craig opted for a flush system, which launched the idea for a new freestall barn and feeding system. His family has worked with Unverfehrt Farm Supply for over 35 years.They introduced him to the Trioliet Triomatic Automatic Feeding System. After looking at all robotic milking systems, Craig found he liked best the Galaxy Astrea 20.20 Automatic Milking System (AMS).

wfinke9645   “Galaxy Astrea’s 1/arm, 2-box milking system made the most sense,” he said, seeing in Holland how well the Milking and Feeding Robots complement each other. “The adapting of the cows has been seamless. Surprisingly, they were not the least bit scared of the Triomatic feeder on that first night. They took right to it,” says Craig, describing the Triomatic T30 as “an extremely accurate and consistent, flexible, fully programmable twin screw mixer on a track that feeds the milk cows 7x/day, dry cows and bred heifers 4x/day and the calving pen once a day.”

The T30 mixes and delivers TMR after gathering from 4 bunkers containing corn silage, straw, alfalfa hay, corn gluten and either of 2 stainless steel mineral bins (one for milk cows and one for dry cows/bred heifers) and a bulk bin outside for the base grain ration and a programmable water station to adjust TMR dry matters.

When it comes to the milking, Craig says the Astrea 20.20 is cow- and user-friendly. wfinke9675 He notes its reliability and lower maintenance costs: “We maintain 1 robot arm, 1 camera, 1 laser, and we are spreading the lower cost milking twice as many cows with 2 boxes.”

Focused on comfort, Craig likes the air quality and openness of the Clear Span building and the comfort of the sand-bedded GreenStalls. “It’s amazing how relaxed the cows are,” he says. “They are so much calmer with the flush system because it doesn’t interrupt them doing their thing.”

As for the robots, Craig says he “absolutely loves both systems: The most important difference today is the ability to be more proactive rather than reactive. There is a plethora of information to be gleaned from Galaxy’s Saturnus software. It can tell me a potential problem exists with a cow before I am able to see it,” he says.

“With Galaxy Astrea 20.20 AMS, consistency of the milking routine is much improved. Triomatic T30 Automatic Feeding has enhanced my ability to deliver a consistent ration to the cows day after day. And the PLC-based system that operates the rest of the building’s functions (lights, fans, curtains, flush, garage doors, etc.) and the camera system allows me to respond to changing weather, low feed levels in bunkers and other situations with a click of the mouse or smartphone without having to be present on the farm,” Craig explains. “This has allowed me to be more flexible with my time.”