Marketing-Communications

Selling “Liquid Gold” Adds Black to Dairy Farms’ Bottom Lines

Thu, 23 May 2024 19:01:08 GMT

When Travis Todd with Zinpro Corporation stopped at Linda Greenwood’s Canton, N.Y. dairy more than 16 years ago, she wasn’t very interested in talking to him.

“I thought, ‘Oh, no, here comes another salesman trying to sell me something I don’t want to buy,” Greenwood says.

But as it turned out, he was actually trying to buy something from her. Todd is in charge of Zinpro’s colostrum procurement program, which purchases colostrum from dairy farms and processes it into animal health and nutrition applications.

A Profitable Routine

“When I figured out what he wanted, I still told him no,” Greenwood says. She couldn’t imagine giving up valuable colostrum, which she needed to feed to the newborns at Greenwood Dairy, a 1,500-cow operation that she and her husband, Jon, started from scratch in 1978. Today, her son, Ted, and his wife, Hibby, also work in the business.

“Then I talked to another dairyman who was working with them. He told me they would take second-milking and heifer colostrum, which I was able to spare,” she explained. “So, I made a quick call to Travis, and he got me started. We laugh about it now; we’ve had a great relationship ever since.”

Today, Greenwood Dairy sells approximately 400 gal. of colostrum per month to Zinpro. It is stored in 4-gal. plastic, lidded pails supplied by the company and frozen in freezers also supplied by Zinpro. The farm’s only outlay is electricity to power the freezers, and labor to harvest and store the colostrum. The freezer storage area needs to be indoors in a climate-controlled space. Zinpro picks the colostrum up weekly, and brings a fresh supply of sterilized storage buckets.

After their initial postcalving milking, which is reserved for the dairy’s calves, the Greenwoods mark fresh cows with a green leg band, alerting the milking crew that the subsequent milking should be harvested for freezer colostrum. The extra effort is definitely worth the revenue procured by selling their excess liquid gold.

Colostrum Demands Soars

Demand for colostrum is exploding. A recent market assessment by Future Market Insights Inc. (FMI) estimated the global value of colostrum sold in 2023 was $1.49 billion. That figure is projected to see a compound annual growth rate of 6.5% for the next decade.

The applications for powdered, dehydrated bovine colostrum have spanned far beyond its original roots in nourishing calves. Colostrum is now being used in the human market for everything from bodybuilding supplements to baked nutrition bars, and protein powders to skin creams. Many health-conscious individuals also take it regularly via capsules, powder and chewable tablets.

FMI says colostrum is loaded with bioactive compounds and nutrients. It is a significant source of protein, and its antibodies are valuable in boosting immune systems and enhancing gastrointestinal health. Marketers also claim colostrum has anti-aging properties because it promotes cell regeneration and thus improves the skin’s suppleness and thickness.

Colostrum also has probiotic properties. A large percentage of consumers have embraced probiotics such as lactobacillus and acidophilus in an effort to prevent ulcerative colitis and colon cancer by supporting a healthy intestinal environment. Both are found abundantly in colostrum. On the animal side, calves aren’t the only creatures on the receiving end of colostrum products. Adam Geiger, manager of the colostrum division for Zinpro, says their colostrum ingredients also reach small ruminants, horses and companion animals.

Enabling Extra Revenue

“We continue to look for suppliers,” Geiger says, noting the company has 79 collection routes spanning 11 regions of the U.S. He says they are flexible in terms of farm size, but proximity along a route is necessary.

Farms that sell colostrum to Zinpro must have a comprehensive herd vaccination program and demonstrate that they adhere to sanitary colostrum harvest protocols. Geiger says they also are counseled to prioritize their own herd’s colostrum needs over sales.

A route driver picks up the frozen pails and delivers them to a Zinpro facility, where a patented process fractionates the fat and casein, increasing the animal’s ability to absorb immunoglobulin G (IgG). The resultant IgG level in Zinpro colostrum powder is a robust 50%, well above industry standards. Processing also includes a bacterial reduction step to ensure clean and consistent product quality.

Like Zinpro, Saskatchewan-based SCCL remains firmly in the animal market. “Collecting colostrum has become more common and competitive since its popularity has grown as an all-natural, bioactive superfood for human consumption and as an ingredient in many pharmaceutical and cosmetic products,” says Jeff Langemeier, USA sales manager. “But SCCL’s focus today is the same as when we were founded 30 years ago: developing innovative colostrum products and applications to optimize calf health and to create stronger herds and more sustainable dairy systems.”

Langemeier acknowledged selling colostrum into human and animal markets “is a growing opportunity for dairy producers to capture a diversified revenue stream, especially during times of low milk prices.”

Compensation plans vary, but conservatively, producers can expect to be paid at least double the commercial milk price for their colostrum.

Linda Greenwood estimated their annual colostrum-sales revenue at approximately $20,000. She uses a portion of those proceeds to keep her calf program ship-shape.

“If I want to order new calf jackets or feeding equipment, I’ve always got colostrum money to do that,” she says.

How Farmers Can Break Through the Noise to Tell Their Stories

Thu, 02 May 2024 13:44:54 GMT

The first time on a dairy farm was an eye-opening experience for Janice Person, founder and CEO of Grounded Communications. She had traveled to a central California farm that had a down cow and as a person who has never been on a dairy, this was hard to wrap her head around. Pearson shared this with a group of dairy producers at a Midwest Dairy event in LeClaire, Iowa, saying “We never know what someone’s knowledge of dairy is before coming to your farm or hearing your dairy story. Did they watch a recent documentary that portrays dairy in a bad way? Did they see something that they can’t quite comprehend?”

Person shares that it seems like there is always noise to contend with when producers are trying to tell their dairy good stories.

“Knowing what message is important can keep the focus where it needs to be,” she says, noting that more and more producers are sharing their stories when they open their barn doors to their local communities, but also at so many other venues – at local festivals, Fun Runs, food pantries and other events.

Joan Maxwell with Cinnamon Ridge Jerseys in Donahue, Iowa, shared that people must hear a message seven times before they comprehend.

“They are getting information from so many places,” she says.

Dairy Producer, Lynn Bolin of New View Dairy in Clarksville, Iowa, told the group she feels it is rewarding to share her farm’s story with others. The Bolin family has a one-of-a-kind bed and breakfast experience where guests can get 24/7 views of cows while staying on their farm.

With farmers being so busy with the daily task of caring for their cattle and land, which is a 24/7, 365-day commitment, why do many carve out time to share their messages with others?

“If only 2% of the population farm, then if we don’t tell our story, who will?” Person asks.

However, engaging with consumers can be easier said than done, as dairy farms are working 24/7. So, we often must compete with the sights and sounds, noise-and-smell and so many other variables.

“Breaking through the challenges that farms bring is essential,” Person says. “That first experience occupies a big space in your head.”

Person shares that storytelling is powerful and can have a huge and lasting impact on people. And farmers have a great story to tell.

The reason why storytelling has such an impact in today’s world is because farmers’ lives are so dramatically different than the other 98% who don’t play a role in producing food.

“Trust has often been broken in the world we now live in. And so for consumers to hear messages that are contrary to what they’ve heard on the internet, no wonder they have to hear a message over and over again before they begin to believe it,” Person says.

The good news is that people love learning and experiencing new things, so they are open to learning more about how farmers care for their cattle and land.

“People love to engage. And when they do, they open up and connect,” she says.

According to Person, storytelling is often easy to understand, as well as retainable, but also easily repeated. She says that sharing stories often creates a sense of wonder and learning.

8 tips that help make a good story

Define characters
Vivid images
Simple morals/theme
Repeatable moments
Emotion/feeling
Challenges/obstacles
Conflict
Action with resolution

“You have a great story to tell,” Person says, but shares that thinking through your farm’s messaging and your storytelling is essential to help combat those hard questions and situations that arise when dealing with the public.

For more information on storytelling tips, visit groundedcomms.com.

4 Tips to Grow as a Leader

Fri, 15 Dec 2023 16:25:09 GMT

Sometimes stepping into leadership hardly feels like a choice, especially when you hear the age-old phrase: Someone should do something. It really hits home when you look around and realize that someone is you.

If your journey into a leadership role is imminent, one of the most important ways to get started is through cultivating influence, but building influence isn’t an egotistical thing. It’s about getting the attention of those who need to hear from you to trust your message.

Two ways to build influence are through using effective communication and building a network.

First, influential communication is about meeting people where they are and communicating with them in a way they understand and accept. For example, let’s say you need to step into leadership in your own farm operation with employees or family members. Does the process of communication currently work in your operation? If not, consider building your own communication norms.

Everyone’s different today. Some like to text, some like to pick up the phone, some like group apps, and some don’t. One of the easiest fixes is to get a norm that everyone’s bought into and agrees to use. Try to practice active listening to better understand the needs and concerns of your team.

Next, surround yourself with a support network of mentors, peers and friends who are able to provide guidance, encouragement and a safe space to share your fears and doubts.

Here’s a recap of some tried and tested ways to grow as a leader that you might want to consider going into the new year:

Join a Board of Directors
Get involved in your local community, whether it’s ag-based or not, by volunteering to serve on a board of directors or get yourself elected to the board of a corn or soybean association, town council or rural electric cooperative. You’ll learn new skills and be involved in high-level decisions that provide new insights into your business.

Build a Peer Advisory Board
If you can’t join one, build one. By assembling an advisory board for your own
business with people who have an outside perspective on your operation (not family or staff), you’ll create deeper relationships with professionals and mentors you trust. It’s a great way to bounce new ideas around with those not too close to the business.

Join a Peer-Group Network
A peer-group network managed by a third-party facilitator is a fantastic way to deepen your relationships with like-minded, growth-oriented producers. Share stories, benchmark your financials, and be ready to get valuable feedback.

Attend Workshops
Get out and go! If you don’t have at least one or two professional conferences or workshops on your calendar each year, you should start researching a few. Content, learning and engaging with others is necessary to keep approaches fresh. Hint: Top Producer Summit is coming up!

Stepping into leadership is a journey that requires courage and self-awareness. While the fear of leadership is natural, don’t let it be a barrier to personal and professional growth.

Remember, leadership is not about being fearless but about finding the strength to lead despite your fears.

2024 Top Producer Summit
Feb. 5 to 7
Kansas City

Bring Back the Milkman: The Power of Nostalgia Marketing

Wed, 13 Sep 2023 13:10:00 GMT

The connection to simpler times resonates with most everyone. This is why Dan & Debbie’s Creamery in Ely, Iowa, is bringing back the milkman.

As director of operations for the creamery, daughter Josie Rozum believes connecting with people on a personal level has been a key driver to the success of their marketing strategy.

Coining the slogan “spilled milk you’d cry over” to accompany their vintage-style logo and black-and-white imagery has solidified their brand by making it authentic and relatable to customers. Their community sees those words on the side of their classic white delivery truck as it drives down the road.

“Life is all hustle, and the simplicity brings people back to their roots,” Rozum says.

Odis E. Bigus began his “The Milkman and his Customer: A Cultivated Relationship” with the words, “America is a service society.” What was the secret behind the milkman’s success? According to Bigus, he had a “cultivated relationship” with his community which could be comparable with courting.

The milkman is back.

While online shopping is growing in popularity, the concept of local delivery is making a comeback. Seventy-seven percent of farms with direct sales sold their products directly to their consumers rather than through a retailer, according to USDA’s 2020 Local Food Marketing Practices Survey .

After Dan & Debbie’s grew the delivery service “people felt a connection to us as a family even more than our products,” Rozum says. “Over the last 3 years, customers have signed up for our weekly milk subscription and that day of the week has become their favorite day. It’s bringing back moments of their childhood. People are at the door waiting and greet us by name.”

How can you bring your farm brand to life with nostalgia?

Listen to your customers.

“I try to become a really good listener when I’m around my customers,” Rozum says. When you take the time to truly listen and lean into what customers are saying about your products and services, you will begin to find nuggets of marketing language that make your brand truly connect with those already talking about your brand.

“Monitoring Google or social media reviews, viewing your Facebook and Instagram comments, or looking at “stitches” to your videos on TikTok provide easy ways to monitor customer reactions to your brand online,” according to Alaina Boyd with University of Tennessee’s Center for Profitable Agriculture. This is also known as “Social listening.”

Tell stories that connect.

When looking for examples of using storytelling to connect, Alaina Boyd refers to the Paul Harvey Superbowl commercial that ran in 2013, “So God Made a Farmer”. “For many of us, that Superbowl commercial stopped us in our tracks. The weight of that story invoked a visceral emotional reaction in its intended audience,” she says.

What do you want your audience to feel when they connect with your farm? Dan & Debbie’s Creamery chooses to not only talk about their values through keywords but exemplify them in their customer experience.

Some of their language includes:

Wholesome. The Creamery does not ding and dash’ when they deliver (like your Amazon driver). They make a point to thank each customer.
The good old days. It doesn’t matter the age, anyone can enjoy dairy products.

“In terms of food and farming, consumers are questioning everything,” Rozum says. “The unique opportunity for farmers is the ability to share their why and potentially build a relationship with consumer.

Showcase your products in an authentic way.

Boyd suggests choosing packaging options that are reminiscent of vintage or antique containers. She adds, “This could also look like using retro typography or imagery on your packaging that plays on your customers’ sense of nostalgia.

Create nostalgic experiences.

Delivery service for Dan & Debbie’s Creamery is not necessarily a large moneymaker, but it is a proven brand builder. Experiences can come in the forms of events, customer touchpoints and even appealing to other senses – think about your own childhood favorites and how they smell and affect your taste buds.

Leverage social media.

To balance social media content, Boyd recommends utilizing the 80/20 rule “Around 80% of your content should strive to entertain, while the other 20% should focus on promoting your business or products.”

“Think about using content that your customers create and post too,” shares Sara Cornelisse, Extension Associate with Penn State University. “If someone takes a photo of a meal they made using your cheese or their group of friends enjoying an ice cream at your store and tags you, ask if you can share their photo or video from your account as well.”

Utilize social media as another way for customers to make “eye contact” with your farm

Entries Accepted for Checkoff’s New Product Competition

Tue, 05 Sep 2023 20:08:21 GMT

The Dairy Management Inc. (DMI) New Product Competition for college students is accepting entries for 2024.

The competition seeks innovative dairy product concepts and is open to undergraduate and graduate students in the U.S.

This year’s contest theme aligns with checkoff-led insights that show consumers are seeking dairy products that deliver health and wellness benefits, including those related to digestion, immunity, joint health/mobility and general health.

A combined $27,000 in cash prizes will be awarded:

$10,000 (first place)
$7,000 (second place)
$4,000 (third place)
$2,000 (awarded to each of three teams that comprise the final six)

The deadline entry is Jan. 15 and winning teams will be recognized at the American Dairy Science Association’s annual meeting in June. More information is available at www.usdairy.com/research-resources/new-product-competition or by contacting Dr. Rohit Kapoor, vice president of product research for DMI, at rohit.kapoor@dairy.org

Glamour Magazine’s Dairy Renaissance

Fri, 14 Jul 2023 15:51:14 GMT

Sporting a vintage “got milk?” t-shirt while vacationing in Italy, celebrity Hailey Bieber sparked controversy, but inevitably got noticed by millions, including Glamour magazine. Bieber, who initially got recognition for her now famous photo, led to the well-known style-beauty-wellness magazine to run an entire article talking about dairy’s Gen-Z reawakening that directed their audience to Dairy Herd Management articles.

Glamour’s article, “Got Milk? Gen Z Does, Apparently” shared, “The Milk Processor Education Program (MilkPEP), the marketing firm for the dairy industry administered by the United States Department of Agriculture, has spent the past couple of years making a concerted push to win over younger generations that have abandoned the drink in favor of its soy, oat, and nut alternatives.”

The stories in their featured dairy resurgence article included two Dairy Herd Management stories:

An October 2022 article, Dairy Checkoff Reconnects with YouTube Star MrBeast article from October 2022. The article talks about Jimmy Donaldson, better known as MrBeast, working with National Dairy Checkoff.

Glamour also linked to the Dairy Herd Management story, Wood Milk—Calling Attention to What People Are Drinking that highlights an ad funded through MilkPEP, who featured the “White Lotus” actress, Aubrey Plaza. This knock-off Got Milk?” campaign called attention to plant-based milk alternatives while making some fun of broader food-brand claims of environmental and animal-friendly products.

Glamour’s article concluded with a quote from MilkPEP CEO, Yin Woon Rani.

“People are saying, ‘Oh, plant-based. That’s what’s destroying you.’ That’s not it. Dairy milk sells as much at retail in a week as oat milk sells in a full year.” She added elsewhere in the piece, “We have to reclaim milk’s mojo.” And where better to start getting one’s groove back than on a dairy farm in Minecraft.”

To read the full “Got Milk? Gen Z Does, Apparently,” article in Glamour, go to Got Milk? Gen Z Does, Apparently | Glamour

Connecting with Consumers Through the Experience of Sharing Great Food

Thu, 25 May 2023 14:00:00 GMT

Often times, life reveals a path greater than anything we could have planned on our own. That’s how it worked out for Cindale Farms when they embarked upon the journey to Southern Craft Creamery.

Cindy and Dale Eade established Cindale Farms in the early 1990’s. Their daughter Meghan Austin, husband Brad and daughter Emma make up the second and third generations. Together, they milk nearly 300 cows and serve up the experience of fantastic ice cream to thousands of local supporters and tourists each year.

The idea to diversify the dairy first came up in 2010. Austin had gone away to school, worked for two years as a veterinarian, and wanted to get back into production ag. “My dad and husband had no desire to get bigger, so we needed to figure out a way to make our scale of farming work for us. We decided diversifying would be a good option for us,” Austin says.

After visiting an established artisan ice cream maker, Eade said it was an idea they couldn’t shake. “Why aren’t we doing this? We have the cows, we can learn how to make ice cream.” Austin adds, “We really felt we needed to be a bridge to bring back a connection to the consumer. And ice cream was a great entry product for us. We could sell it tomorrow or it could sit on the shelf if needed. It allowed us to make that connection we were so desperately missing between farmer and consumer.”

Cindy and Dale’s second daughter Lauren returned to the farm for a time to help get things off the ground. They spent a full year developing their ice cream from scratch, without homogenizing the base for the ice cream mix. “We spent some painstaking hours but came up with a really tremendous product and then started to build our ice cream line,” Austin says.

Southern Craft Creamery was established in 2012, and quickly took off as a wholesale operation. It was time once again to address each family member’s role in the farm and creamery. Austin says, “My parents decided to step in and take over day-to-day management and decision making at the creamery, and then Brad and I handle the farm.”

Eade adds, “Dale and I love being on the farm, but we just knew the kids had things they wanted to try, and we felt like we were getting in the way. Then we could try something new at the same time. I love it.”

The wholesale endeavors quickly built a demand for a retail outlet, so the family adapted. “We bought a building in town, the front is the retail shop, and we make all the ice cream in the back. The town supported us, the Chamber supported us – people came in wanting product almost immediately,” Eade says.

Just eight months later, hurricane Michael hit. “To say that our town was devastated was an understatement,” Austin recalls. “It was the most shocking experience. I don’t think there were really any standing electrical poles in the county.”

After more than a dozen days running on a generator, the creamery was in the first part of town to have power restored. It served as a makeshift hub for those who came to town to help. “We would cook food and serve police officers, the local community and first responders coming to help,” Austin says.

It wasn’t the last curveball to hit the farm and creamery, but the Eades and Austins have come out of each one stronger: building greater demand for their ice cream and creating more connections with their consumers.

Austin says the notion of sharing great food has southern roots going back to elaborate meals her great grandmother used to make. “It’s very much a part of this part of the country, families coming together over a meal. It’s what we want to share in our ice cream – that happiness and fulfillment spending time with those you love over a really good meal. It’s what we want to share in our ice cream.”

Best Advice on Locking in Milk Prices

Wed, 03 May 2023 13:35:45 GMT

In Elroy, Ariz., dairy producer Craig Caballero shares that risk management is a much-needed discussion and a much-needed ingredient to help manage his 5,200-cow dairy. Since 2007, Caballero has utilized risk management and says he could not imagine dairying without it.

“Risk management is a tool that we use every single day,” he says. “It’s part of what we do, and I personally could not imagine in the volatility that we live in, not participating in some kind of a plan.”

Caballero believes protecting both sides of the ledger is needed to help manage his dairy.

“I wouldn’t call it risk management if you’re not handling both sides of the ledger,” Caballero says. “It’s more like speculating.”

Phil Plourd, president of Ever.Ag Insights, says that from a producer perspective, risk management decisions have gotten tougher in the past few months.

“On the one hand, we can look at third quarter Class III milk futures near $18.40 per hundredweight and fourth quarter pricing near $19.20 and say, ‘wow, that’s quite a bit better than the May price of $16.60!’. At the same time, for many and perhaps most producers, those prices are near or below production costs,” he says. “Most people get that second half 2023 prices could go lower – we’ve just seen it happen for Q2. But securing pricing that’s no better than production costs isn’t much fun.”

Penn State Extension offers the following guidelines to be considered in developing a personal marketing strategy for using milk futures:

Don’t lock it all in. Set a minimum and maximum volume of milk to contract each month. If you are new to contracting or have low debt levels, consider less than 50% of monthly production. If you are more experienced and have a higher level of debt, consider a maximum volume of 60-80%.
Don’t concentrate on near-term or far-off contract months. Given lags in the pricing system, worrying too much about contracting next month’s milk production does not make sense. Also, contracts nine months out and beyond are very uncertain. There aren’t many contracts traded for those outer months, so don’t concentrate on those either.
Lock in more contracts as prices rise. You may decide to contract 30% of your future milk production today. If contract prices rise for that month in the days ahead, then contract an additional 20-30%. This method will allow you to average into a strong price. While you are doing that, don’t forget about contracts that are four to eight months out. Those contract months typically do the best in making positive returns when short-term cash markets are rising because strong cash markets today have a positive effect on all contract months.

Another Large DMC Payment Coming to Producer’s Mailboxes

Mon, 01 May 2023 17:17:02 GMT

For the third time this year, a Dairy Margin Coverage (DMC) payment will be issued.

Based on the USDA’s Agricultural Prices report released late Friday afternoon, the DMC income over feed costs for March was $6.19/cwt. That’s the lowest level since August 2021. Producers with coverage of $9.50/cwt. will receive indemnity payments of $2,551.48 for each one million pounds enrolled.

The all-milk price was $21.10/cwt., down $0.50 from February. Overall feed costs decreased $0.39/cwt. from February. Premium hay fell $10/ton to $314. Corn dropped $0.13/bu. to $6.87. Soybean meal slipped $16.13/ton to $484.40.

Phil Plourd, president of Ever.ag Insights, says the margin picture for 2023 continues to look weaker than what we saw in 2022.

“Six months ago, I’m not sure many people expected margins to go quite that low quite this early,” Plourd says. “But here we are. And, with the cheese market under pressure the past couple of weeks, things could be soft for April on into May. It’s just another reminder that in our volatile world and marketplace, everyone has to be vigilant about assessing and managing risk.”

The DMC program was authorized in the 2018 farm bill to offer protection to producers when the difference between the all-milk price and the average feed price falls below the producer-selected margin trigger.

Jim Mulhern, NMPF CEO, says DMC’s catastrophic coverage level is at the top of his team’s farm bill list.

“The catastrophic coverage level within the basic DMC includes up to 5 million pounds of annual protection, which is about a 200 to 220 cow herd. We’re looking at DMC’s tier 2—anything above basic—adjustments because those markets collapsing would be more akin to a truly ‘catastrophic’ event,” Mulhern says.

Producers Share Their Three Wishes for the New Year

Wed, 07 Dec 2022 15:00:00 GMT

Ever dream of having a Fairy God Mother grant you three wishes to help your dairy farm push forward? If you had three wishes for the New Year and could put anything into place on your dairy—whether that be developing a new project or magically resolving a problem, what would those three wishes be?

Recently on a Farm Journal Farm County Update webinar, three dairy producers answered that very same question.

Without skipping a beat, California dairy producer Melvin Medeiros with Medeiros Holsteins says he wishes for water and a reliable labor source.

“We need water out west,” he states. “I made the statement years ago. I remember talking to someone and it was actually over the federal milk marketing order coming to California and how that was going to benefit dairy prices in California. I can navigate my way through low milk prices, but I can’t navigate my business without water.”

Medeiros milks 1,600 cows and farms 500 acres alongside his wife and sons in California’s San Joaquin Valley and shares that they have been struggling for the last five years on reliable labor sources.

“Water is the number one wish out west for us,” he says. “And naturally with water comes more availability of feed by lowering those costs, and just a reliable source of labor.”

In Wisconsin, Jordan Mathews, a partner at Rosy-Lane Holsteins, says he too only has two wishes.

“I’d like our milk price to keep up with feed costs,” he says. “That’s just getting really tough to control. It’d be ideal if we could continue that nice comfortable margin.”

Rosy-Lane milks 1,550 cows at one of two locations—the home farm in Watertown, and a newly purchased second farm in Paoli. Earlier this year, Lloyd and Daphne Holterman began the retirement process, and both Mathews and Tim Strobel continue to purchase the business from them, as well as run the day-to-day operations.

Secondly, Mathews wishes for continued health.

“The last two years with this pandemic we’ve been going through hasn’t been fun for everyone. If we can have a staff that does decide to show up every day, we can keep them out of risk. And just keep them to be able to go home to their families every day and then show up, in the morning or night for us that’d be fantastic, I think for everyone,” he says.

Like Mathews, New York dairy farmer Tyler Reynolds comments about the need for an unwavering milk market.

“Stable prices. This year was fantastic on milk price,” Reynolds states. “Do we need to see as high as we did this year every year? No. But we also don’t need to see feed costs do what they did.”

Reynolds says it could have been really bad for the entire dairy industry if milk prices weren’t high to help offset the skyrocketing feed bill.

Reynolds co-owns and operates Reyncrest Farms, alongside his family and milks 1,400 cows and farms 2,700 acres near Buffalo.

“The other thing I really hope is that politicians and lawmakers continue to remember agriculture and realize some of these policies that are put in place how much it affects us,” he says. “And that big agriculture isn’t a bad thing. That’s how we’re going to feed the world in the future.”

To listen to the entire conversation with these three producers talk more about issues and challenges they faced in 2022 and how they’re planning for the year ahead, click on Farm Country Update - Farm Journal

AgTech Startup Applicants Wanted for the 2023 DFA CoLab Accelerator Program

Tue, 08 Nov 2022 21:41:50 GMT

With the mantra, ‘The best ideas are born out of collaboration,’ DFA offers a community that creates ideas to continue to help propel all avenues of dairy forward.

Applications are now being accepted for the 2023 DFA CoLAB Accelerator program, which will begin in April and run through June. The 2023 program will focus on AgTech and help bring new technologies to DFA’s family farm-owners.

“We know that new technologies and innovations are helping drive growth and efficiency on today’s farms,” Matt Musselman, chief operating officer for DFA Farm Services, says. “Our goal with this program is to help identify and build relationships with those ag-tech companies that can really benefit our farm family-owners in solving problems and improving processes.”

DFA is looking for companies with ag-tech applications or technologies related to any portion of the dairy value chain, including but not limited to animal health, farm data management, herd health and management, supply chain optimization and sustainability. Some areas of particular interest include fintech related to agriculture, new technologies in animal health and innovations to help measure or reduce greenhouse gas emissions from cattle.

Key Features of DFA’s CoLAB Accelerator include:

90-day immersive program, with both in-person and virtual elements from April to June 2023.
Access to top executives at DFA, with each startup having a team of DFA mentors relevant to their business area.
Educational sessions on a variety of topics important for startup growth, including finance, business development, distribution and supply chain, product development, brand building, sales, marketing and pricing to name a few.
Additional workshops that focus on areas such as leadership development and team building.

Since debuting six years ago, the DFA CoLAB Accelerator has worked with 32 companies and continues to work with most of these companies in some capacity. To date, 94% of the alumni companies are still in business today.

The deadline for the DFA CoLAB Accelerator program is Jan. 13, 2023. For more information and the application, visit colab.dfamilk.com.

Midwest Dairy Awarded Vendor of the Year by Cub

Fri, 04 Nov 2022 14:00:00 GMT

Connecting dairy’s story and products with consumers is a key ingredient when partnering with retail stores. Earlier this fall, Midwest Dairy was recognized for its great efforts in this area by a leading Midwest retailer.

Cub, a grocery store chain with more than 100 locations in Minnesota and Illinois, awarded Midwest Dairy with a 2022 Vendor of the Year award on Sept. 7 during Cub’s annual vendor summit.

Led by its National Dairy Month activities, which featured Minnesota Dairy Ambassadors and Princess Kay of the Milky Way engaging with consumers about dairy farming and the goodness of milk, is a driving force behind why Midwest Dairy received this award.

In early June, Princess Kay and Minnesota Dairy Ambassadors hosted an ice cream social at a recently rebuilt Cub in Minneapolis after it had been damaged due to civil unrest. Midwest Dairy and Cub used this event to thank residents for their support, boost community morale and give people the opportunity to sample great-tasting dairy products.

On social media, live Facebook and Instagram events led by Midwest Dairy and two Minnesota Dairy Ambassadors, Luke Borst and Brenna Connelly, also illustrated consumer engagement. Examples of engagements included the “A Day in the Life of a Dairy Farmer,” which showcased a typical day of chores on a local dairy farm, along with the “Ask me Anything” segment that allowed consumers to ask the dairy ambassadors questions about dairy farming and dairy products.

Charles Krause, a Minnesota dairy farmer, who also serves as a Midwest Dairy corporate board member, says it is gratifying to see how the dedicated staff at Midwest Dairy effectively work with retailers, like Cub, to move more sustainable dairy products to consumers.

“The insights staff provides to retailers help them make better decisions on marketing dairy to the consumers,” Krause says. “It’s a win-win for the grocery store and dairy farmer.”

Scott Gilray, Midwest Dairy director of demand, stated they were honored to be recognized at this level by Cub.

“We know creating these relationships with retailers puts dairy farmers’ dollars to good use by building consumer trust and driving dairy demand,” Gilray said.

He, along with Martha Kemper, vice president of demand, accepted this award on behalf of Midwest Dairy.

“These opportunities – whether in person or virtual – allow consumers to get a more personalized view of dairy farming and how products in the grocery store are made,” Gilray said. “We are so thankful to be able to partner with retailers like Cub who appreciate farmers’ work and the nutritious products they make.”

Midwest Dairy represents 4,800 dairy farm families throughout their 10-state region, including Minnesota, North Dakota, South Dakota, Nebraska, Iowa, Illinois, Missouri, Kansas, Arkansas and eastern Oklahoma.

Time For Change? The Beef Checkoff Needs Your Input

Wed, 05 Oct 2022 18:44:12 GMT

The beef checkoff, now 20 years, is considering increasing fees to $2 per
head.

As a dairy producer, Lucinda Williams understands the frustration of paying the beef checkoff program $1/head for a bull calf that’s worth only $5.

But she wants dairy producers, who fund 14% of the checkoff program, to do more than grumble.

Williams is also vice chairman of the Cattlemen’s Beef Board (CBB), which administers the checkoff program. She is urging dairy producers to speak out this summer on the bull calf issue – and more – as part of a process to improve the 20-year-old checkoff program.

“It’s the role of producers to convey what’s important to them and how to make the program better for all in the industry,” Williams says.

Prompted by USDA, CBB is soliciting comments from beef and dairy producers and industry organizations for possible improvements to the beef checkoff program. CBB will sift through its findings and make internal recommendations by Nov. 30, 2008. Any recommended changes are expected to reach the USDA Secretary by February 2009. Significant changes, such as an assessment increase, would require a referendum vote by producers.

The information-gathering process comes amid hard times for livestock producers distressed by rising costs for everything from feed to advertising. This has led to impassioned producer debates about budget cutbacks in the checkoff program, whose primary goal is to increase demand for beef.

The next few months of soul-searching are an opportunity for the checkoff program to better serve producers, says Dave Bateman, CBB chairman and a farmer-feeder from Oregon, Ill.

“Any changes should reflect the atmosphere of today’s environment, compared to 20 years ago, to make the program more realistic, effective and responsive,” he says.

While beef board members like Bateman and Williams can’t lobby for any particular changes, they can suggest improvements and report what they’re hearing from producers.

One key discussion area, they report, is a possible increase in the assessment. Since the checkoff program began in 1988, it’s required a $1/head assessment for each animal sold in the U.S. and from imported cattle, beef and beef products. But that amount isn’t enough to adequately fund advertising and other program efforts, some say, and doubling the assessment to $2/head may be necessary.

“Dairy producers are producing more milk with fewer animals,” says Williams, who milks 100 cows at her dairy in Hatfield, Mass. “It’s the same in beef: more meat from fewer animals. That’s reduced the number of dollars coming into the program.”

The assessment has built a $41 million checkoff budget for 2008; next year’s revenue is expected to drop sharply.

“Over the years, as the checkoff budget has decreased and all media advertising costs have risen dramatically, it has become increasingly difficult to invest in a “Beef. It’s What’s for Dinner” advertising program that has enough reach and frequency with consumers to be effective,” CBB Communications Manager Diane Henderson blogged on the CBB Web site in May.

“That quandary has reached a degree where [CBB members] have to make painful cuts in other checkoff programs that are integral parts of the overall checkoff strategy toward building demand for beef -– or cut advertising back to a degree that it might no longer be viable,” she noted.

Other areas of checkoff discussion include:

Concern about the roles of the various beef segments. “Some fed-beef producers are concerned that the dairy segment isn’t putting enough emphasis on the beef side of its business,” Williams reports. “Beef makes up only about 4% of a dairy’s operation, so we tend not to pay much attention to it. If we did, we could receive higher value for our beef, and we might not be as unhappy paying that $1 on a bull calf.”
Looking for ways to alter how many times the assessment is collected over the animal’s life cycle;
Collecting the assessment based on weight rather than per head;
The option of combining neighboring states that don’t have their own beef councils into a regional one;
Changing the order’s wording to allow new contractors to do business with CBB. The original order stipulated that only industry-governed organizations existing when the checkoff program was established in the 1980s could work with the beef board;
Better defining the qualified nominating organizations that propose candidates for the beef board.

Formally known as the Beef Promotion and Research Act and Order, the beef checkoff program was formed as part of the 1985 farm bill. Key CBB budget areas are promotion, research, consumer information, industry formation, foreign marketing and producer communications. USDA oversees the program.

Producers who want to weigh in on the beef checkoff program can send comments to:

beefboard@beefboard.org or Cattlemen’s Beef Board 9000 E. Nichols Ave., Suite 215 Centennial, Colo. 80112

Bonus content:

Learn more at: www.beefboard.org .
Listen to two audio reports from the Livestock Marketing Association at: www.lmaweb.com/memberinfo.html . Under “LMA on the Air,” click on “Beef Check-off Survey” and “Beef Checkoff Enhancements.”
Read the views of R-Calf United Stockgrowers of America at: www.r-calfusa.com/News%20Releases/2008/080515-members.htm and www.r-calfusa.com/Checkoff/checkoff.htm .
Additional Web links:
- http://beefboardmeeting.com/ .
- http://www.beefusa.org/

Train for the Worst Crisis scenario seems all too real

Wed, 05 Oct 2022 18:44:12 GMT

The crisis management team of thefictional Classic Co-op works through the details of a food-borne illness affecting its dairy products.

I had to keep reminding myself: “This is only a drill.” Yet the scenario of a national, dairy foodborne illness sickening hundreds and even killing several individuals seemed all too real in the make-believe crisis management drill I was participating in.

The frantic pace, with updates coming in every few minutes—amid questions from reporters, farmers, plant managers, even union reps—made the drill an adrenaline-pumping, what-do-I-do-next blur of information and demands for both answers and action.

The drill was sponsored by Dairy Management Inc. (DMI) and funded by dairy producer checkoff dollars to train not only media specialists but also dairy company executives and plant managers on how to handle a crisis. The drill, one of several conducted around the country, was held in Minneapolis this past fall.

I was playing the role of an embedded reporter assigned to the fictional Classic Co-op (CC)—a small, Midwestern co-op serving 1,500 dairy farm families. Products range from fluid milk and cheese to infant and adult nutrition products and long-shelf-life dairy products. A number of CC products were implicated in the illness outbreak. I was reporting on the actions taken by the Classic management team of 15 individuals.

The scenario for the drill was that more than 1,200 people across the country had become severely ill with nausea, vomiting and diarrhea. Five had succumbed and one baby was hospitalized with liver failure.

The Food and Drug Administration had issued a Class I recall for baby formulas containing dairy ingredients. It was also advising the public to stop eating all American-style natural and processed cheeses and any prepared foods containing these types of cheeses.

As soon as the CC team entered its crisis-management center, the pace of the exercise exploded:

The editor of a farm blog got past CC security and burst into the room, taping everyone with a Flip Video camera. He demanded that company officials explain how CC was involved in the outbreak and what it was doing to stop it.
A text message was received saying that a chain of convenience stores that CC supplies was pulling all dairy products from its shelves.
The union steward from the CC manufacturing plant came in, wanting to know what the symptoms of the illness were, if workers were in danger and whether CC’s insurance policy would cover health costs.
CC’s receptionist called in next to say the company’s phone system was being overwhelmed with panicked consumer calls. Reporters were also calling, asking for comments on the financial impact of the crisis. And a board member called to demand an immediate conference call with top management to get information out to farmer owners.
CC’s chief executive officer came in to say she was scheduling a conference call with her farmer board in 15 minutes and needed all pertinent details from the crisis team.
She no sooner left than CC’s dairy transportation and logistics manager got word that all of the company’s tankers of milk were being returned to their shippers of origin and that CC should prepare to reaccept the milk back into its storage silos.
An Associated Press reporter rushed into the room, saying he was on a 15-minute deadline for his syndicate of several thousand newspapers and needed an immediate interview with the highest-ranking executive available.
Another message said that federal health agencies had issued an order requiring schools, hospitals and nursing homes to recall and stop feeding all dairy products.
Within minutes of that notification, CC’s international sales manager received word that Mexico and China were halting all U.S. dairy product imports and that other exporters were demanding confirmation of product safety. And all of this was happening within the first 90 minutes of the exercise.

Remember, this was only a drill. Yet the way the crisis unfolded was very real. “There is no room for complacency. There is no room for believing something like this couldn’t happen to the dairy industry,” says Eric Pehle, executive vice president of Weber Shandwick, the public relations agency that worked with DMI to develop the crisis management training. “As an industry, we have to be ready and we have to be prepared to respond to such a crisis.”

The drill taught Jerry Messer how fast and how serious a crisis can get out of control. Messer is a North Dakota dairy producer and Midwest Dairy Association chairman. “They were hitting us from every single angle, and it made you feel really uncomfortable about dealing with the scope of the situation,” he says.

“We [as an industry] are very much at risk because we have a very perishable product,” Messer adds. “It’s important that we protect the health and safety of the consuming public, and it’s important that we get such a crisis behind us as fast as possible.”

If processing plants are paralyzed by a foodborne outbreak, producers won’t have anywhere to go with their milk. Food safety is always the first imperative, and recovering from a crisis as quickly as possible is the next priority, Messer says.

For Joan Behr, director of communications for Foremost Farms USA in Baraboo, Wis., the crisis drill taught three lessons. First, even though Foremost has crisis management plans in place, the co-op has not regularly practiced to implement those plans.

“We will develop a drill schedule so our employees understand their roles and can react quickly and appropriately during a crisis,” she says.

Behr also appreciated that DMI’s crisis management team has contacts in the Centers for Disease Control (CDC) and the Federal Bureau of Investigation (FBI). Both agencies sent representatives to the drill. “We have contacts with USDA and state ag departments, but we don’t have established connections with federal agencies such as CDC or the FBI,” she says. “Both might be needed in such a crisis.”

The third lesson was the power of social media in spreading news about the crisis, she says. Blogs, tweets, Facebook, e-mail and cell phones provide instantaneous communication to everyone in the country, but whether the information is accurate is a whole other story.

And that probably is the biggest lesson of the drill, says Weber Shandwick’s Pehle. Having a crisis management plan in place is the first step.

But knowing who you can call for additional resources and help is key. Since many dairy companies market nationally, even internationally, they can be quickly overwhelmed if such a crisis ever hits.

Dairy checkoff organizations are planning three more regional crisis drills in 2010, the first taking place at the end of March in Seattle.

Bonus content:

Who you gonna call?

How will you respond?

What will you say?

Software to assess farm vulnerability to terrorism

Market Watch Diary The height of possibility

Wed, 05 Oct 2022 18:44:12 GMT

Alan Levitt

Milk prices will be better in 2010, but how high will we go, and will it be enough? These are the questions dairy producers are asking themselves at the onset of the new year.

In a January report, USDA is projecting a 2010 average All-Milk price of $16.60, on par with futures prices for the year. In the same report, it projects that corn prices will average $3.70 this marketing year. Put those two together and you’ve got a respectable year, with slightly greater profitability than the 10-year average of income over feed costs.

But there are so many variables that could impact prices and profitability. Milk production will certainly be lower in 2010—we start the year with approximately 250,000 fewer cows than we had a year earlier—but will supply reductions lead to $20 milk, $16 milk or something less?

Equity has been burned and credit remains tight, so farmers’ ability to quickly expand in response to higher prices is questionable.

Overall commodity prices are rising, looking eerily like the rallies that started three years ago. By mid-January, spot prices for Brent crude oil had topped $80/barrel, a 15-month high. Prices have been increasing steadily for nearly a year, accelerating since last fall. Recent price gains for fuel are attributed to large speculators bidding prices higher after the extremely cold start to the winter nationwide.

Meanwhile, the Food and Agriculture Organization’s Food Price Index for 2009 neatly parallels the trendline for 2007 (see chart). By December, the index had climbed to 172, up 17% since July, led by runups in sugar and dairy.

For their part, large global dairy players are downplaying the possibility of another 2008-type dairy boom. Monthly prices on Fonterra’s closely watched whole milk powder auction slipped 7% in January after almost doubling in the last five months of 2009. The company calls the market more balanced now, crediting the rally to pipeline rebuilding that has been completed.

Apparently, U.S. dairy producers aren’t the only ones asking these questions and considering the possibilities. The investment research firm Variant Perception points out that Google searches for “food inflation” have more than doubled in the last three months. Most of the queries are coming from developing countries—Pakistan, South Africa, Singapore and India—where food makes up a large part of consumer spending.

The prospect for runaway inflation is there again, but at this point buyers (and sellers) are more cautious about feeding the fire.

Bonus content:

FAO food price index

Market Watch Diary Aligning the stars

Wed, 05 Oct 2022 18:44:12 GMT

One morning in late April, a longtime dairy trader told me he was “perplexed.” Whereas the dairy markets usually are either long or short, on this particular day he couldn’t quite pin things down with any certainty.

Prices had been trending up and there was a clear bullish sentiment in the market, yet he wasn’t quite sure that all the stars were aligning.

In truth, the whole constellation is interconnected. Each part is tethered to another, and when one gets out of line, something has to give. Here are a few examples:

In the world of dairy ingredients, all things come back to protein. Therefore, the whey complex and nonfat dry milk/skim milk powder tend to travel together. This spring, the global milk powder market was firming but whey was facing some price resistance, particularly from the feed sector. If dry whey can’t push past 40¢/lb., it’ll be difficult for nonfat dry milk to move above $1.30.

Likewise, Class III and Class IV prices tend to move in sync. In the last seven years, there were only a few months—in the summer and fall of 2007—when the Class IV price got more than 50¢ above the Class III price. We’re about to test this relationship again because the April prices, to be released after press time, will have Class IV about 75¢ higher than Class III. The May spread could be larger still.

When the relative values shift, more milk is channeled into butter/powder production and supplies increase. Then a little less goes into the cheese vat, and supplies decrease. It may take a few months, but eventually the balance is restored.

The relationship between U.S. prices and world prices also bears watching. In a global market, all prices strive for equilibrium. If world levels get too high relative to U.S. levels, overseas buyers start to buy from the U.S. and U.S. prices realign. If U.S. levels get too high, America’s exports decline, its imports increase and prices come back down to earth.

As I write this in late April, the international prices for butter and milk powder are rallying on fears of supply shortages for the balance of the summer months.

Traders are trying to determine if these runups are strong enough to pull the entire U.S. dairy complex higher or if the relative softness of the U.S. cheese and whey markets will be an anchor on the entire thing.

Bonus content:

Federal Orders price announcements

400,000 by Default

Wed, 05 Oct 2022 18:44:12 GMT

While the directive requiring that dairy exports to the European Union (EU) not be made with milk exceeding 400,000 SCC takes effect Oct. 1, the effective date is actually July 1.

That’s because milk processors must certify that the milk they use does not exceed 400,000 cells/ml on a rolling, three-month geometric mean (and a maximum standard plate count of 100,000 bacteria per milliliter based on a two-month average). Being out of compliance in July will mean producers still have August and September to get their average down below 400,000 by Oct. 1.

But each succeeding month above 400,000 makes it that much more difficult to meet the standard. For example, if one month’s SCC is 500,000, the other two months’ SCC could not exceed 350,000.

Because of the math involved, a geometric mean is slightly lower than an arithmetic average, which actually is a slight advantage (see table). But the directive hits in the hot months of July and August, the most difficult months for high-cell-count herds to keep mastitis rates from climbing even higher. In fact, some Midwestern co-ops will issue warning letters in July to producers whose cell count for the month exceeds 400,000.

It all began quietly enough in January when USDA issued a “Notice to the Industry” informing producers of the coming changes. It wasn’t until spring, when the implications of the change became clear, that processors became worried. One large co-op told Dairy Today that 5% of its Midwestern farms exceeded 400,000 SCC in all 12 of the preceding months.

But the history of the action dates back much earlier. In 1997, the EU lowered its regulatory cell count limit to 400,000 based on a geometric mean. Then, in 2004, it changed the regulation to say that the sampling of milk must be made at individual farms, and not from milk commingled in silos or at dairy plants.

USDA was given a copy of this change, but it went unnoticed by agency bureaucrats until last year, when EU auditors came to the U.S. and scrutinized dairy plant records.

In order to be in compliance, dairy plants will have to take a random sample of 10% of their farms’ milk each month. While the chance of the same farm being selected in three consecutive months is low, plants will not risk having a farm out of compliance because it jeopardizes eligibility for export of the entire month’s milk supply.

And while a plant might not even export products to Europe, byproducts such as whey, whey protein concentrates and cream could end up in products that eventually are exported. That’s why fluid handlers, even though they sell all of their milk domestically, likely won’t be exempt from the coming changes.

Segregation of high-cell-count milk to nonexporting processors is not an option. The reason: Virtually all of these plants now produce byproducts of some kind that are used as ingredients in an untold number of products that can potentially be exported. Buyers will now insist the ingredients they purchase are in compliance.

Even if a processor could be found who would accept the milk, the cost of segregation and transport to that facility would be prohibitive. Plus, high-cell-count milk would be considered “distressed,” making it subject to huge price discounts.

Bonus content:

EU Directive on Export Certification

Market Watch Diary The new global benchmark

Wed, 05 Oct 2022 18:44:12 GMT

Alan Levitt

Scarred from the volatility that has trampled the world dairy markets in the last three-and-a-half years, traders have grabbed onto Fonterra’s monthly commodity auction as a new global benchmark.

The auction trades on the first Tuesday of every month. After a couple hours of online bidding and counterbidding, a weighted-average price is published. It started as somewhat of a curiosity in July 2008 with whole milk powder (WMP) and has since added anhydrous milk fat (AMF). But with the absence of transparency in world dairy pricing, the Fonterra auction is evolving into a de facto reference point for all dairy commodity selling prices.

The U.S. doesn’t produce much WMP or AMF, but the auction has an indirect impact on U.S. commodity prices. In the last 19 months, world skim milk powder (SMP) prices have closely paralleled the movements of the WMP auction price (see chart), so each announcement provides a valuable indicator on where the markets are going.

For instance, in the February round, the price of the front-month lot dropped just 2.5% from the January auction. This told traders that milk powder markets were nearly balanced. In addition, prices for deferred-month lots were slightly higher than the front month, suggesting potentially stable prices in the months ahead.

The monthly auction will become more significant going forward. Beginning in March, SMP will be added to the lineup. Expect that price to quickly become a benchmark for global SMP and nonfat dry milk trade.

As further testament to the credibility the trading platform has garnered, NZX, the New Zealand stock exchange, plans to debut a WMP futures contract by June. Futures will be cash-settled to the front-month auction price.

NZX officials hope farmers and others will regard the WMP futures price as a daily pricing indicator.

“The data would be helpful to farmers. It would give them an idea where demand levels are,” explains NZX derivatives manager Katherine Jaggard. “We are looking at [other] dairy derivatives; it won’t just be whole milk powder. New Zealand is the logical hub for derivative trades in dairy futures.”

Price volatility has been identified as the biggest challenge facing the global dairy industry in the new decade. Platforms like the Fonterra monthly auction and New Zealand’s new milk powder futures seem to be the tools the industry is choosing to add transparency to the dairy price discovery process.

Bonus content:

Fonterra monthly auction

Dairy Talk: Competition is good

Wed, 05 Oct 2022 18:44:12 GMT

“Is competition healthy enough to protect farmers, and if not, what do we do about it?”

Sen. Herb Kohl’s question at the USDA–Department of Justice hearing on dairy industry consolidation sums up a never-ending debate. There is serious concern among producers that competition among processors is lacking.

Foremost Farms recently sold two fluid bottling plants to Dean Foods. In Green Bay, Wis., the Herfindahl-Hirschman Index (HHI), which measures market concentration, went from an already high 3,049 to 4,777.

At the Chicago Mercantile Exchange, the two largest buyers of block Cheddar made 74% of all purchases between Jan. 1, 1999, and Feb. 2, 2007.

Guaranteed make allowances are anticompetitive, some argue, because they guarantee cheese and powder manufacturers a minimum margin—regardless of what milk, cheese and powder prices are.

Now, flip to the producer side. Supply management advocates say there’s too much farm-to-farm competition and production must be capped. They want to set floor prices or income-over-feed-cost triggers to control supply.

But, as with make allowances, setting the level becomes a game. Set it too low and high-cost producers will continue to complain. Set it too high, and you’ll have to cut supply so much that it raises the cost of production.

Why? Producers will have fewer hundredweights over which to spread their fixed costs. That exacerbates the problem, causing cost of production to spiral ever upward.

Unfettered competition is bad when there is disproportionate market power. That’s why Federal Orders were created in the 1930s. But ever since, the industry has been arguing about what level of regulation is necessary. If it opts for supply management, we’ll be arguing the same kinds of supply-side questions for the next 75 years.

Competition is good—for everybody.

Bonus Content:

CME, Deans Focus of USDA/Department of Justice Hearings

Experts Disagree on Co-ops Role in Milk Price Debacle

Dairy Consolidation and Monopoly Money

Export Bound: U.S. Processors Respond to Growing Global Market

Wed, 05 Oct 2022 18:44:12 GMT

Michigan may be 6,500 miles from Japan, but that isn’t stopping Michigan Milk Producers Association (MMPA) from selling butter to the Asian nation.

Neither are the world’s oceans keeping Hilmar Cheese Company from exporting its lactose and whey protein to China and Russia from its California and Texas plants.

MMPA and Hilmar Cheese are among a growing number of U.S. dairy processors who are expanding their exporting efforts to capture emerging opportunities abroad.

Undeterred by the 2009 crash of global dairy markets, these processors are looking ahead to take advantage of the world’s burgeoning population, higher living standards and increasing demand for protein.

“The U.S. dairy industry is in the perfect position to be a major supplier to the world,” says John Jeter, president and CEO of Hilmar Cheese, which already exports to 50 countries.

While the U.S. dairy industry is no stranger to exporting, new players and products are changing the dynamics.

“It’s not a game only for those on the left or right coast,” says Tom Suber, president of the U.S. Dairy Export Council (USDEC). “And products like whey protein and lactose are going up the value chain.”

Whether it’s China, the Middle East, Mexico or Southeast Asia, the market for U.S. dairy products is massive. “There are so many opportunities, we can just pick them,” Jeter says. “But we have to pick well.”

Big business with overseas markets is resuming after the global financial crisis and dwindling dairy prices forced 2009 export sales to plummet by nearly 40%. That drop followed the peak year of 2008, when U.S. dairy exports totaled $3.8 billion. Last year’s export decline also ended six straight years of expansion.

So far in 2010, U.S. exports are back in full sail. In March, exports of milk powder, whey protein concentrate, cheese, butterfat and lactose all posted significant gains. Total dairy exports for the month reached nearly $291 million, 71% higher than in March 2009.

“Our 2010 export business is already strong, and we may see a year like 2007, which was our best export year ever,” says Clayton Galarneau, MMPA’s general manager.

In 2007, MMPA exported almost 20% of its butter and nonfat dry milk (NFDM). By May of this year, it was again approaching those levels. MMPA’s export sales for the first four months of 2010 reached $3 million on 2.3 million pounds of butter and 800,000 lb. of NFDM. The products are heading from MMPA’s two plants to Canada, Mexico, the Middle East, Japan and Russia.

“It’s a great opportunity for us,” Galarneau says. “We’re always looking to increase profit margins and find the customers who want our products. Everything we can sell outside of the U.S. means that much less price pressure domestically. Our board and membership encourage us to export. It helps add to members’ pay price.”

Like many U.S. dairy exporters, MMPA works with a handful of brokers to help target foreign customers and meet their needs. “We’ve adapted new product specifications and changed packaging requirements,” Galarneau says.

For example, butter destined for domestic markets is usually produced with a butterfat level of 80%. Most export markets want a butterfat content closer to 83%. MMPA has also developed thicker, colored packaging to better survive the increased handling that comes with export shipping.

The export pace at another large Midwest dairy processor, Foremost Farms USA, has also picked up. The Wisconsin-based co-op has developed a strong export business in pharmaceutical lactose and the protein powder used in infant formula. Foremost Farms has made pharmaceutical lactose, a high-grade powder used in pills and capsules, since 1984.

In 2007, however, the co-op changed how it sold those products by partnering with two global marketing and distribution companies. Those partnerships opened doors for Foremost Farms, resulting in increased foreign sales, particularly to Asia and Mexico.

“Five years ago, we were close to nothing in export sales of infant formula ingredients,” says Keith Gretenhart, Foremost Farms’ director of sales and marketing. “In 2009, which was a slow year, we exported 8 million pounds. In 2010, we’ll be just under 11 million pounds.”

Dairy Farmers of America (DFA), with 20 manufacturing plants and numerous joint ventures, now exports about 10% of its commercial business products, which include cheese, butter and powder. DFA hopes to grow that export number to 20% in the next five to 10 years, says Lavonne Dietrich, vice
president of sales and marketing for global ingredients.

“We’ve lived through the ups and downs of the export market, and we’ve learned to adjust and manage internally,” Dietrich says.

DFA’s biggest foreign market is Mexico, which buys significant amounts of a butterlike product called anhydrous milk fat as well as skim milk powder. China is DFA’s second largest foreign buyer, buying primarily whey products. Like other U.S. exporters, DFA has learned to make what its foreign customers want, whether that’s white cheddar cheese or unsalted butter.

“We’ll always be a domestic-based company, but we want to be a player in the export market as well,” Dietrich says. “We’re dedicated to optimizing that business as much as possible.”

Meeting the demands of foreign customers involves more than pricing, these processors say. Contracts must also ensure product security, traceability and quality.

“What I see in the export market, especially among dairy food manufacturers in Asia, is that their facilities are every bit as advanced and modern as the U.S.,” Foremost Farms’ Gretenhart says. “We need to make sure that the quality of our plants and packaging is up to world standards so we can compete.”

Moreover, the U.S. has to refashion its export image.

“The U.S. dairy industry has traditionally used exporting as an inventory safety valve,” Gretenhart adds. “We’ve got the reputation that we’re not always there as a supplier. We’ve got an enormous dairy industry, and there’s no reason we shouldn’t be a consistent world player.”

Bonus content:

“U.S. Cheddar Gets a Boost from CWT”

Bain Report dairy globalization study

Michigan Milk Producers Association

Hilmar Cheese Company

Foremost Farms

Dairy Farmers of America

U.S. Dairy Export Council

Market Watch Diary: Imports are drying up

Wed, 05 Oct 2022 18:44:12 GMT

Once upon a time, all the world’s dairy suppliers wanted to sell to the U.S.

Since peaking in 2005, however, U.S. imports have trended lower. U.S. import volumes in 2009 were down about 20% compared with four years earlier. This year, imports are down about 20% more, to their lowest level since the late 1990s.

By value, cheese, casein and milk protein concentrate (MPC) make up two-thirds of our dairy
imports. All have tumbled since the mid-’00s, particularly cheese; in the first five months of 2010, U.S. cheese imports were barely half what they were in 2004.

Whereas world Cheddar prices (fob Oceania, reported by USDA’s Dairy Market News) averaged 44¢ less than U.S. National Agricultural Statistics Service cheese prices from 2001 to 2004, the tables have turned and U.S. prices have averaged 16¢ less in the 2007 to 2010 period.

And so New Zealand cheese exports to the U.S. have fallen nearly 60% during the last decade, even as its overall cheese exports have held steady. Instead, it’s selling more in Australia, Japan, Korea, the Middle East, China and Southeast Asia.

Likewise, the European Union, by far the largest cheese supplier to the U.S., has cut shipments by 27% since 2003. Import volumes from Australia and Argentina have both fallen by more than a third since the middle of the decade as well.

Probably the biggest factor here is the weakening of the U.S. dollar. In 2009–10, the value of the U.S. dollar was down about 50% versus the euro and the New Zealand dollar compared with 2001–02. That makes imports from these countries more expensive to U.S. buyers.

Declines in U.S. cheese imports coincided with the roll-down of EU export refunds too. And of course, U.S. manufacturers have done a better job of producing specialty cheeses at home that used to be purchased from abroad.

Meanwhile, U.S. production of MPC has displaced some of the imports from offshore. Last year,
domestic manufacturers produced 92.9 million pounds of MPC.

Imports fell from 139 million pounds in 2008 to 114.5 million pounds in 2009, the lowest figure since 2004.

This has been positive for the U.S. dairy trade balance. In April and May, net cheese exports averaged 2.8 million pounds per week. For comparison, during the previous six years, net weekly cheese imports averaged 4.5 million pounds.

Little of the overall trade data yet reflects the Cooperatives Working Together (CWT) Export Assistance program, which was reactivated in March. Through the end of 2010, some 38 million pounds of CWT cheese is slated for export.

Bonus Content:

U.S. trade database

Dairy Talk: Not Good Enough

Wed, 05 Oct 2022 18:44:12 GMT

Jim Dickrell

Two major dairy trade events this past spring remind me of the old bumper sticker, “Think global, act local.”

The first is the European Union (EU) requirement that all U.S. dairy products crossing the pond be made from milk with less than 400,000 somatic cells. This stipulation, in trade documents since 2004, becomes reality on Oct. 1.

The second is China’s insistence that the U.S. certify it has been free of Johne’s, bovine tuberculosis (TB), brucellosis and anthrax for the past 12 months. At this writing, USDA is using a 30-day extension to work the details out.

Both trade issues point to what is now obvious: The U.S. dairy and cattle industries must think far beyond our own borders when it comes to herd health issues.

In the case of the EU requirement, U.S. dairy leaders have known for the past decade that the world standard is 400,000 cells/ml. But, insisting it is not a health issue, they said 750,000 is good enough for the U.S. market.

On the disease front, a vocal minority of cattle producers have opposed premise registration and a national electronic ID program. By itself, such a program will not eradicate TB, Johne’s or anthrax. But it certainly would make tracing infected animals easier, faster and cheaper.

On this issue, at least, dairy industry leaders recognized the importance of a national program. But they failed to convince cattle producers that our current hodgepodge of ID regulations isn’t good enough.

Some have argued that these are just the first in a long line of issues that foreign competitors will use to impede trade. They want to close our borders and produce only for the folks here at home.

But global trade impacts us whether we participate or not. As other nations innovate, their exports will clamor for entry into U.S. markets. Consumers will demand them.

Without growth and innovation, the U.S. industry will stagnate. Dairy farms will continue to go out of business.

Even worse, how do we tell U.S. consumers our safety measures and product traceability are not up to world standards? They will not accept “good enough.”

Bonus content:

EU trade dispute

Chinese trade dispute

Dairy Cattle Beef up Beef Industry

Fri, 20 Nov 2020 05:47:55 GMT

While dairy producers are seeing profitability from milk checks there is also a tremendous opportunity to market cattle into the beef supply thanks to record high beef prices.

According to Lance Zimmerman, an analyst with CattleFax, dairy cattle account for 1 in 5 pounds of beef production in the U.S., so they are vital part of the beef supply chain. Zimmerman gave a presentation on the topic of marketing cull cows and dairy calves at Dairy Today’s Elite Producer Business Conference in Las Vegas.

The cattle industry has seen a drop in total numbers from a peak in 1982 at 50 million cows to this year’s low of approximately 38 million cows. Some of those losses can be attributed to drought experienced. In 2012, drought affected 80% of the beef cow herd and 85% of corn production. Dry periods from 2008 to 2014 caused 3 million cows to leave beef operations.

While drought is still affecting dairy producing regions like California it is not as widespread. Currently only 12% of beef cow herd and 5% of corn production is being affected by drought.

As we’ve transitioned from the dry period of 2012 to a wetter 2014 we’re seeing beef cow slaughter drop off Zimmerman says.

Many beef producers are holding back more cows to capitalize on record high calf prices. In the past 4 years 550 lb. feeder calf prices have increased 83%.

Other animal protein sectors have also seen record high prices thanks to demand and a drop off in production.

Pork producers had to deal with PEDV and broilers had fertility issues. However, both of those industries can rebound much quicker because it takes weeks to hatch more chickens and months to farrow more piglets. Beef and dairy producers need 3 years to develop a heifer into a cow.

“We’re going to have larger protein supplies next year by just a couple of pounds, but it is all going to be due to the other proteins, not beef,” Zimmerman adds.

Zimmerman believes it is likely that fed cattle and cull cow prices will still be in the same area next year for the highs, with maybe a $5/cwt increase. It will still be nothing like the $20 to $30/cwt increase from this year.

“Where we’re going to get the depreciation is the lows. I think $1/lb. is going to be pretty normal for the low in the cull cow market,” Zimmer says. “The high on those cull cows is going to be right in that $1.20-$1.30/lb. range.”

Looking forward the beef industry will be in a supply driven environment.

“Anytime we’re in a supply driven environment, it doesn’t matter if it is beef, chicken or Mercedes Benz, the leverage situation changes where the guys down the food chain hand leverage to the guys up the food chain,” Zimmerman says.

Retailers can’t stand open shelf space so they will bid more on a product to keep their stores full. In the case of the beef industry that price gets handed down to the packer.

Zimmerman relates packers will have to bid more for cattle to help cover the fixed cost of keeping plants open and hopefully make a profit.

“The guys holding the supply, whether it’s day-old Holstein calves, cull cows or a cow-calf producer in central Kansas, you guys hold the chips for a little while longer,” Zimmerman says.

These tight supplies should last for another year to 2 years before it will transition towards the retailer and packer.

Dairy cows account for 6% of beef production, while fed dairy calves account for 14%. Even though the beef cow herd has declined in the past few years, the dairy herd has remained relatively stable.

The drought forced the majority of beef cows out of the traditional feedlot region south of Interstate 70 in the High Plains of Texas, Kansas, Colorado and Oklahoma. To help fill those pens and keep packers near capacity feedyards had to buy an increasing number of dairy calves, driving up prices. Additionally, more grower yards and heifer development facilities have been taken on at feedlots in the region.

The biggest driver in all of this will be consumer demand.

International markets will help drive the boat more and more as countries like China continue to eat increasing amounts of protein. Domestic demand will be the primary market, particularly for grinding meat.

“I think you could easily say 55-60% of U.S. consumption this year is ground beef,” Zimmerman says. “For years the beef industry cried ‘we need our own chicken nugget or chicken breast.’ My message to everyone in the beef industry that will listen is you have it. It’s called a hamburger.”

Trim accounts for approximately 65% of a cow carcass, and it accounts for a lot of value. At one point in 2014 trim was worth 75% of the total value of a cow carcass.

“Dairy-influenced beef will continue to be a bigger part of the beef story. Dairy cull cows are increasingly important to beef production,” Zimmerman adds. ”Feedlot overcapacity has made dairy-influenced calves attractive and veal isn’t the only market.”

Large Holstein Steer Discounts Seen as Packers Reduce Slaughter

Fri, 20 Nov 2020 05:47:48 GMT

Cattle prices are still considerably lower than the highs of two years ago. However, Holstein cattle appear to be facing their own price pressure as buyers push discounts and some packers shut the door.

Step into the Lake Odessa Livestock Auction in Lake Odessa, Mich. where Holsteins are up for bid.

“The expansion is underway and it will not stop,” said Tom Rademacher, a producer in Eagle, Mich.

Rademacher is talking about the state’s dairy boom. The USDA’s latest milk production report says Michigan is continuing to see growth in milk cows and production, growing more than 5 percent over the same month a year ago.

“The herds were 250, and are now 1,000 or 3,000 head,” said Rademacher.

While the state’s dairy herd expands, the prices at auctions shrink. Producers say Holsteins seem to see larger discounts than normal.

“The Holstein steer market has just gone all to pieces,” said Verne Lettinga, owner of the Lake Odessa Livestock Auction. “The fellas feeding colored cattle and black cattle are not too bad yet. They’re holding up at $1.10 and $1.20 in that range, but these Holstein steers are 80 to 90 cents.”

“Typically, you have your Holstein prices $10 or $15 below the standard animals, and there’s talk of $20 or $25 below because they need to go further to find a home to be slaughtered,” said Bryan Doherty, senior market advisor with Stewart-Peterson .

Some major packers are cutting back or not accepting dairy cattle for slaughter, and producers say it’s not helping.

“There is a bigger discount with Holsteins today because some of the packers are not killing Holsteins,” said Lettinga. “They just quit and all they’re killing is colored cattle.”

Some truck drivers at the auction say they’ve already reduced their trips to Tyson in Joslin, Ill.

“All of the cattle now are pretty much going to different packing houses besides Tyson,” said Tom Wiskow of Wiskow Trucking and Livestock . “They don’t want Holsteins. They want all colors down there.”

Sale barn owners and producers have told AgDay the squeeze is mainly felt at Tyson plants in the Midwest.

Tyson says the company cannot comment on its buying practices, they consider it proprietary.

Doherty says the impact of packers scaling back is hard to determine at this point.

“The packer industry continues to look for high efficiency and profit margins,” said Doherty. “It looks like the dairy steer, the Holstein steer is on the short end of the stick again. The industry is going to have an issue with supply.”

The changes are out of the producer’s control and soggy markets have the dairy industry nervous about the prospects for finding profits beyond the milk parlor.

Some packers are scaling back while others are maintaining the numbers. Cargill told AgDay the company “has not changed its cattle procurement practices.”

JBS also says, “The JBS Regional Beef business remains dedicated to the calf-fed Holstein steer market. As part of our business model, our plants in Green Bay, WI, Tolleson, AZ, and Plainwell, MI, will continue to actively participate in Holstein steer slaughter. We purchase cash cattle every day to support our strategic investments in JBS Holstein-based beef brands.”

Despite dairy growth, Lettinga believes the dairy industry is seeing some consolidation with smaller dairies in Michigan. He also says there’s a need for more packing houses in Michigan because of the Holstein steer market.

In The Cattle Markets: Impacts of the Dairy Industry on Beef Markets

Fri, 20 Nov 2020 05:47:09 GMT

By: Brenda Boetel, University of Wisconsin-River Falls

The Holstein beef market is an integral part of the beef supply chain. Derrell Peel pointed out in his Cow/Calf newsletter dated June 20, 2016 how although the dairy cow represents on average only 22 percent of all cows, they have represented an average of 47 percent of total cow slaughter over the last 20 years and 57 percent of total cow slaughter in 2015. In 2015, dairy cow slaughter accounted for approximately 1.9 billion pounds of beef.

Obviously, the percentage of beef supply coming from dairy cattle is dependent both on the number of beef animals harvested, which have been low in recent years, and the number of dairy animals harvested, which are more consistent over time. The dairy industry typically has a more consistent production of animals than beef; however, the dairy cow herd has increased slightly in recent years and 2015 had the largest number of dairy cows, 9.3 million head, since 2009.

Dairy cow slaughter was up 3.5 percent in 2015 relative to 2014. Additionally, the dressed carcass weight was up 2.7 percent. Given the lower beef production in 2015, but the increase in dairy beef production, the dairy industry had a larger impact on the beef market than in previous years.

Although cull cows have contributed between 7 and 8 percent of the beef supply in the last few years, the largest dairy contributor to the beef sector is the dairy steer supply. The larger the dairy cow herd, the larger the calf crop and the larger the number of dairy steers. In 2015, the dairy steer calf crop accounted for approximately 13 percent of the United States calf crop and approximately 14 percent of total beef production, or approximately 3.2 billion pounds of beef.

By far, the largest dairy breed is Holstein accounting for an average of 86 to 90 percent of all dairy breeds. Beef from Holstein steers has often suffered from perceptions of poor quality to industry outsiders. This perception has changed some with production changes to the calf-fed production model. By placing calves on feed directly after weaning, the finished carcass is lighter and similar in size to the industry norms. Additionally, the predictability associated with finishing Holsteins allows for a larger percentage of Holstein steers, as compared to traditional beef breeds, to be graded as Prime rather than Choice or Select. Depending on the year, between 30 and 35 percent of all Prime beef production in the United States has come from Holstein steers.

Impacts on the beef markets from dairy animals is significant. In the last few years, beef production from the dairy sector, including cull cows, dairy steers and heifers, has accounted for between 19 and 22 percent of total U.S. beef production. Due to this large impact, the dairy market and the dairy beef market has impacts on cattle and beef prices.

The Markets

Last week saw new lows for 2016 cattle futures. The industry has been absorbing reports of higher than expected marketings in the second quarter, and sustained high slaughter rates for the remainder of the year. The USDA increased its beef production forecast to be 5.3 percent higher than 2015, with another 3.4 percent increase in 2017. Beef export expectations were also increased and USDA expectations are for 9 percent increase over 2015 and another 4.5 percent increase in 2017. Unfortunately, hot weather has weakened domestic beef demand slightly.

On Monday, July 18, 2016 live cattle futures closed 57.5 to $1.525 higher with the lead August contract leading gains. The dressed beef market was not supportive though and wholesale trade saw Choice beef drop $1.73 and Select declined 48 cents on decent movement of 68 loads.

Corn prices have seen recent increases. Causes for the increases include last week’s Supply and Demand report showing lower than expected carryover, the higher than expected export inspections, as well as the hot weather and continued forecast for high temperatures.

Commercial Red Meat Production Down Slightly From Last Year

Fri, 20 Nov 2020 05:39:06 GMT

Released March 20, 2014, by the National Agricultural Statistics service (NASS), Agricultural Statistics Board, United States Department of Agriculture (USDA).

Commercial red meat production for the United States totaled 3.65 billion pounds in February, down 1 percent from the 3.67 billion pounds produced in February 2013.

Beef production, at 1.79 billion pounds, was 5 percent below the previous year. Cattle slaughter totaled 2.24 million head, down 5 percent from February 2013. The average live weight was up 10 pounds from the previous year, at 1,330 pounds.

Veal production totaled 8.2 million pounds, 9 percent below February a year ago. Calf slaughter totaled 52,200 head, down 12 percent from February 2013. The average live weight was up 9 pounds from last year, at 267 pounds.

Pork production totaled 1.84 billion pounds, up 4 percent from the previous year. Hog slaughter totaled 8.67 million head, up 1 percent from February 2013. The average live weight was up 6 pounds from the previous year, at 283 pounds.

Lamb and mutton production, at 11.6 million pounds, was up 1 percent from February 2013. Sheep slaughter totaled 168,200 head, 4 percent above last year. The average live weight was 138 pounds, down 4 pounds from February a year ago.

January to February 2014 commercial red meat production was 7.9 billion pounds, down 1 percent from 2013. Accumulated beef production was down 5 percent from last year, veal was down 10 percent, pork was up 2 percent from last year, and lamb and mutton production was up slightly.

February 2013 contained 20 weekdays (including 1 holiday) and 4 Saturdays.
February 2014 contained 20 weekdays (including 1 holiday) and 4 Saturdays.

Click here to read the full report.

Get the latest livestock markets news at Dairy Today’s Dairy Markets Center and Beef Today’s Cattle Markets Center .

Masters of Change

Fri, 20 Nov 2020 05:34:54 GMT

lsmith@farmjournal.com

The Schmidt family doesn’t always find change easy, but they never shrink away from it when it’s the right thing to do. Now in the third generation of farming in the U.S., Schmidt Farms has changed location multiple times, adopted conservation tillage before it had a name, added and dropped livestock and sought value-added enterprises. Brothers Alan and Hans and their wives, Brenda and Jennie, already are planning so they will be ready if their children, now ages 10 to 14, choose to farm.

They were chosen as Top Producer of the Year finalists for their ability to survive and thrive in the Chesapeake Bay area—one of the most environmentally challenged watersheds in the country and one with increasing suburban pressure. By squeezing additional dollars of profit from their existing acres, they are able to support multiple generations.

Oscar Wilhelm Schmidt and his brother, Ernst, left Germany in 1910 and tried farming in Argentina, Brazil, Paraguay, Uruguay and Saskatchewan before migrating to the Eastern Shore of Maryland in the early 1920s. Today, the family farms 1,800 acres near Sudlersville.

In time, Oscar’s son Walter took over the operation with his brother, who died in 1970. Although Walter’s sons Hans and Alan were still in grade school, the death of his brother was a wake-up call for him to begin transitioning the farm while he was still in good health and could serve as an adviser.

“Dad taught us management skills on specific enterprises very early,” Hans says. “He let us make decisions and make mistakes.”

Goodbye to Livestock. When the brothers purchased the farming operation from Walter in 1995, it included a 500-sow farrow-to-finish hog operation that had been part of the farm for 50 years and a cow–calf herd. That soon changed.

“We saw the handwriting on the wall regarding both the local livestock market and environmental issues,” Hans says. “We decided to get out of the livestock enterprises and survive on grain. Two years later, we realized we couldn’t make enough from grain, given our land base.”

Located 70 miles from the major population centers of Washington, D.C.; Annapolis, Md.; Newark, Del.; and Philadelphia, the operation’s acreage growth was limited by suburban encroachment, and the brothers didn’t want to enter rental wars with neighbors. So they needed to get more profit out of the existing 2,100 acres owned by the family (1,800 farmed).

They looked around and saw thriving markets for high-quality hay for horse farms and fresh green beans for the nearby urban markets. They invested in a new co-op that offered a lucrative market for edible soybeans and began growing canning tomatoes on contract. They converted one farm to organic production and switched to seed soybeans and seed barley.

Most recently, they added wine grapes. “We are maxed out on tomatoes and string beans, and we have all the hay acres we can manage. So we looked for value-added enterprises,” Hans explains.

Wine Grapes. New to the vineyard business just seven years ago, the Schmidts began growing grapes on three acres. Their current 20 acres represent the largest commercial vineyard in the state, and Jennie is president of the Maryland Grape Growers Association. The wine grape industry is an emerging market in Maryland, with 558 acres of grapes in the state and 42 licensed wineries, many of which are not yet open.

“We learned through networking and by doing,” Jennie explains. “One of the hardest things was that with grain, the focus is more on quantity; with grapes especially but hay and vegetables as well, it’s all about quality. Once you have figured out how to get the quality, then you can focus on quantity.” Another adjustment is that it takes three years before you harvest a crop and five years to reach full production.

Growing interest in wine grapes and boutique wineries in the state has spawned a new enterprise, which Jennie runs: custom vineyard management. In addition to the family’s 20 acres, they now manage 35 acres of grapes for other vineyard owners.

“Growing wine grape varietals opens the avenue for a winery down the road—perhaps our children will choose to do that,” Jennie adds.

This mix reduces risk through multiple added-value crops, and it keeps two full-time and two part-time employees employed year-round. “By being busy 11 months of the year, the business is able to support our three families and our employees,” Jennie says.

The Schmidts employed a total of 28 people this past summer—seven local teens and 13 migrant workers from Guatemala for the tomatoes and grapes, plus family and year-round employees.

Not every venture has been a success. Raising birds for hunters and ostriches for meat came and went.

“We now look at markets that exist—not ones that you have to create a market for,” Hans says. Every enterprise is reviewed regularly on its own merit and will stay only as long as it is the best fit for the operation’s resources and profitability.

“Alan and Hans have a unique ability to assess risk and make well-calculated business decisions, often into areas that are new and different and as yet unproven to them and their neighbors,” says Kenneth Bounds, vice president of MidAtlantic Farm Credit.

“A key component of success for farms is the ability to objectively review your financial condition and make strategic financial and operational decisions based on the analysis,” he adds. “Alan and Hans perform enterprise analysis, track and analyze costs by unit and trend income and expenses by enterprise. They use this information to make appropriate operational changes.”

Analysis is Key. Ag lender William Walmsley with the Centreville National Bank of Maryland, also agrees: "[The Schmidts] are in the top tier of those who look at the math first. Cash-flow analysis is completed for every enterprise from field corn to grapes and all in between. All tools are used in production and marketing to recover as much profit as possible.”

Opening the door to new opportunities remains a key to the Schmidts’ future. Alan and Hans will try new enterprises that many farmers would never consider. Given the transition their father, Walter, set in motion, the brothers have set a course to ensure the farm remains profitable—and ultimately will support their children, should they choose to farm. It may not appear to be the same farm it was in generations past, but change is necessary to stay profitable and productive.

Quick Facts
> Location: Sudlersville, Md.
> Owners and partners: Hans and Jennie; children Zachary, age 12, and Katrina, age 10. Alan and Brenda; children Jacob, age 14, and Tyler, age 11
> Crops in 2009: Field corn, 645 acres; feed- and food-grade soybeans, 500; hay (timothy, orchardgrass, alfalfa), 311; wheat, 275; seed barley, 170; canning tomatoes, 150; green beans, 140; popcorn, 57; grapes, 20

Conservation Is Critical
Living in an area where water pollution is a major issue, Walter Schmidt instituted conservation tillage in the 1960s, long before it was widely promoted.

Sons Alan and Hans also have taken a proactive, rather than reactive, approach. They have entered 120 acres that abut local waterways in conservation programs and have adopted nutrient-management systems, such as filter strips, grassy buffers, tree buffers and winter cover crops.

“It’s important that farmers put as many BMPs [best management practices] on the ground as possible,” Hans says. “We don’t want to be blamed for runoff.”

Precision agriculture via GPS reduces overlap of seed, fertilizer and chemical applications, reduces soil compaction and results in cost savings and environmental benefits. Data collected help the brothers make better management decisions. “Using a lightbar to spread poultry manure lets us apply the optimum rate, but not overdo it,” Alan says.

Because these practices also provide wildlife habitat, the Schmidts received the Maryland Wildlife Farmer of the Year award in 2006.

In 2008, Schmidt Farms received a cost-sharing grant to build an agrichemical handling facility, a permanent structure with a diked loading pad—the first in the county. The facility consolidates numerous tanks and sprayers into one location. Not only is it safer environmentally, it is more efficient.

Teaching Conservation. Due to their proximity to Washington, D.C., the Schmidts frequently get requests from groups who want to visit a farm. They often let government administrators, foreign visitors or city folk ride in the tractor and even let them drive it on the return trip across the field. They use these opportunities to teach how farmers are farming responsibly.

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