Over the past weekend, patrons of Foremost Farms received a letter stating that changes will be made starting with the September milk payments to compensate for market adjustments. The cooperative said that the decision to implement market adjustments is based on several inflationary costs factors that impact them, including:
- Record high labor costs at manufacturing facilities due to labor shortages.
- Higher costs of raw materials to covert milk into finished products (energy, packaging, equipment and quality services) and,
- A significant difference between Class III milk costs and the revenue generated from cheese and whey product sales.
Altogether, the market adjustment equals a deduction of $0.90/cwt. that will be subtracted from member milk payments for the remainder of the year.
“Extreme inflationary pressure makes it necessary for Foremost Farms to adjust milk pricing through a market adjustment to ensure the continued viability of the business” Greg Schlafer, President & CEO, Foremost Farms, stated in the letter. “Federal Order milk pricing formulas, which include make allowances, have not been adjusted since 2009. The make allowance is a cost factor built into the milk price to account for all the costs required to convert milk to the final product. These costs have increased significantly over the past year.”
Foremost says that the inverse market pricing of barrels over blocks has made the cooperative unable to generate revenue. All of this adds to their market adjustment deduction decision.
“Decisions to adjust pay price are difficult and only implemented to ensure the long-term viability of the cooperative,” Schlafer stated.
Two Plant Closers
In other cooperative news, it’s been reported that Foremost Farms will discontinue operations in their Milan and Plover, Wis. plants at the end of the year. This impacts more than 100 employees.
A statement from the company, on behalf of the Foremost Farms Board of Directors and leadership, says that this decision is not a reflection on the performance of employees and leaders in these locations.
“We recognize their dedication to the cooperative and their communities. However, the Foremost Farms Board of Directors and leadership agreed it is in the best interest of the performance of the cooperative as a whole to discontinue operations in these locations,” the statement says.
The production limitations in both of these aging facilities and labor challenges have created financial inefficiencies, and it would take significant investments to bring the plants up to date and to add the kind of technology necessary. Therefore, the decision was made to divert milk and move operations to other plants that are newer or already have the necessary technology in place.
The statement shares that the cooperative will support the impacted employees through this transition and will not eliminate any positions before the closings.
In 1995, Wisconsin Dairies Cooperative and Golden Guernsey Dairy Cooperative consolidated to create Foremost Farms USA Cooperative. There are an estimated 5,300 farmer-members in Minnesota, Iowa, Illinois and Wisconsin, and 25 locations, 1,300 employees, 3.6 billion pounds of milk sold annually and $775 million in sales.
