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State of the Industry

State of the Industry:
Dairies both large and small see opportunity in Michigan

By Rena Archwamety

Editor’s note: As part of our monthly “State of the Industry” series we take a look at the cheese and dairy industry across the United States. Each month we examine a different state or region, looking at key facts and evaluating areas of growth, challenges and recent innovations. This month we are pleased to introduce our third “State of the Industry” — Michigan.

MADISON, Wis. — Michigan’s west coast and Upper Peninsula, with their expansive shoreline, orchards, vineyards and resorts, are not unlike California, according to Don Coe, managing partner of Black Star Farms, a winery in Suttons Bay, Mich.

“Michigan, the west coast particularly, grows over 200 crops and commodities,” he says. “The west coast of Michigan, like the west coast of California, allows us to grow specialty commodities. We have cherries, orchards, a wonderful variety of crops.”

Specialty cheese is another commodity that has formed a partnership with Michigan’s growing agri-tourism trade.

Visitors won’t see cows grazing across Black Star Farms’ 120 acre grounds on Michigan’s Upper Peninsula. But they can peer through the tasting room’s big picture windows to see curds and whey being stirred at the farm’s resident creamery Leelanau Cheese Co., winner of the 2007 American Cheese Society “Best of Show” award for its Aged Raclette.

“It’s all visually accessible,” says John Hoyt, owner of Leelanau Cheese, which moved onto Black Star’s property in 2000 after outgrowing its old space at a nearby converted gas station.

Hoyt adds that the foot traffic from locals and tourists helps sales. “It’s a definite plus. If I had to sell all my cheese wholesale, I might not be in business right now.”

Small cheesemakers in Michigan like Leelanau are increasingly finding specialty niches to set themselves apart from the competition.

“We have a few large plants processing the vast majority of milk, then we have little plants still hanging on and finding a niche,” says John Partridge, associate professor and dairy foods extension specialist, Michigan State University.

“Small manufacturers are trying to capitalize on the tourist trade. Michigan has a pretty good tourism trade with the lake shore, a variety of terrains and quite a few interesting spots to spend time,” he says. “That is helping small producers and processors. I think it’s coming on a little stronger now than it has been.”

On the other end of the dairy spectrum large processors continue to hold a strong presence in Michigan, which recently jumped from ninth to seventh in the nation for milk production.

“It’s grown fairly significantly,” says John Dilland, general manager of the Michigan Milk Producers Association (MMPA) cooperative, which markets about half of the state’s milk. “The last couple of years production grew 5 to 6 percent over the previous years.”

In 1997 Michigan produced just more than 5.4 billion pounds of milk. That volume has grown almost every year, up to 6.1 billion in 2002 and 7.6 million in 2007.

Dilland attributes production growth to a parallel growth in the size of farms from additional family members joining the farm or expansions to increase economies of scale.

Similar to much of the country, large dairies have taken over an even larger share of the state’s milk production over the past decade. In 1997, 33 percent of Michigan’s milk production came from dairies with more than 200 milk cows. That number nearly doubled in 2007, with 64 percent of the state’s milk produced by large dairies.

“There has been a fair amount of expansion. Dairy herds are getting larger as opposed to an increasing number of dairy farms,” Dilland says. “Some new dairies come in, but most of the new growth comes from the expansion of existing operations.

“A substantial portion of the milk is produced on the large dairies,” Dilland adds. “About 20 percent of the members produce about two-thirds of the milk in the state.”

Large processors also make up a strong and growing presence in Michigan’s dairy industry.

Leprino Foods is the largest cheese manufacturer in the state. It operates two plants in Michigan, one in Remus since 1987 when it entered into a long-term milk supply agreement with MMPA and another plant in Allendale since 1989. The Remus plant produces string cheese, and the Allendale facility produces shredded and diced Mozzarella as well as sweet whey.

The plants employ more than 350 people in Michigan and together produce more than 100 million pounds of cheese each year.

“Michigan offers two factors critical to the successful manufacture of our products: a dedicated work force and consistent high-quality milk,” says Sue Taylor, vice president of dairy policy and procurement, Leprino Foods. “Certainly the high quality work force, economic considerations, geographical location and milk supply were major factors in our decision to invest in Michigan.”

Other major dairy facilities in the state include General Mills’ Yoplait yogurt plant in Reed City, MMPA plants in Ovid and Constantine that manufacture dry and condensed milk, liquid dairy blends and butter, and five plants owned by Dean Foods that produce a variety of products.

“We’re seeing a similar pattern here as most other places with consolidations taking place,” Partridge says. “Dean has bought significant process capacity here in the state through mergers.”

Some of the existing large plants also are increasing capacity, including General Mills which recently invested $32 million to expand its Yoplait facility.
“We’re fairly centrally located from the standpoint of getting product out to the West and East Coast,” Partridge says. “As long as we have a good, high-quality milk source in the state, I don’t see the processors here moving away. We will maintain that industrial side.”

Helping to maintain consumer demand for dairy in Michigan is the Michigan Dairy Market Program, which collects an assessment of 10 cents per hundredweight on all Grade A milk produced in the state and is subject to a continuation referendum every five years.

“The program’s last referendum was conducted last fall and Michigan dairy producers once again approved continuation of this successful program by an overwhelming majority,” says Cheryl Schmandt, executive director, Michigan Dairy Market Program.

The program provides funding to the American Dairy Association of Michigan (ADAM) and the Dairy Council of Michigan (DCM), both non-profits that implement dairy promotion programs. ADAM and DCM conduct more than 200 separate programs annually to promote Michigan dairy sales and educate consumers. An upcoming promotion involves a pilot program with several Michigan grocers to provide coolers at checkout lines featuring single-serve milk, yogurt and string cheese.

“Agriculture is the second leading industry in Michigan, generating over $63 billion of economic activity annually and employing over 1 million people,” Schmandt adds. “Dairy is the top ranking segment of Michigan’s agricultural industry providing over $5 billion of economic activity annually.”

And while the large dairies and processors claim the lion’s share of that economic activity, small businesses also are experiencing a resurgence.

“We’re seeing the same thing here that a lot of states are seeing,” Partridge says. “Small producers set out on their own to be producers/handlers. There has been an increase in the number of small dairy plants and processing operations in the state, including a herd of water buffalo.” (di Bufala Farms, Fremont, Mich., plans to eventually make Mozzarella from its buffalo milk.)

Partridge says that with more successful small dairy processors in the state, there has been talk of putting together a state association representing different dairy segments.

“Now that more small plants are back, they are looking for resources, looking to share ideas,” Partridge says. “There would be some milk, some cheese, some ice cream. There’s not a big concentration in one, but the talk is of more of a combined association to give it more of a critical mass.”

Agrotourism and partnerships like Leelanau Cheese and Black Star Farms might be one topic these small dairy businesses will be discussing, particularly with some recent support the state government has shown in this area.

In 2006, Michigan’s state government formed the Farm Marketing and Agri-Tourism Association, which makes recommendations and follows up with legislation to encourage agricultural tourism.

Coe of Black Star Farms was appointed in 2006 to serve a four-year term as a state agriculture commissioner with focus on agri-tourism and value-added agriculture.

“Farms either are growing bigger, or small farms are doing more with their property,” Coe says. “To be successful a small farmer has to do more than just grow something. They have to grow, process, retail and market activities all from the farm. Agri-tourism is occurring in this.”

Coe again stresses how agri-tourism and his winery’s partnership with Leelanau Cheese has helped both businesses.

“We both enhance each other. Leelanau is an artisan cheesemaker, and we are artisan wine and brandy makers,” he says. “In a winery as well as a creamery, you rely on a majority of sales from direct contact with the consumers, visitors to the farm. I feel strongly that that’s the way for small artisan producers to break through competing products in the marketplace.”

Hoyt adds that the location doesn’t hurt, either.

“The summer residents on the small lakes around here are starting to come and open up their cottages, so we were quite busy (Easter) weekend,” he says. “Then we have the tourists, people on vacation, going camping, coming to hotels and casinos. There’s a little something for everyone.”

And while Michigan may not yet be as noted for its small artisanal dairies as Vermont or California, Hoyt says he’s proud to be a pioneer as a local agricultural destination.

“It’s nice that we’re able to put Michigan on the map,” he says, “as far as being a dairy state.”

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