Stakeholders discuss export
April 24, 2015
By Alyssa Mitchell
MADISON, Wis. — As the dairy industry becomes increasingly globalized, exporting continues to gain traction for U.S. dairy manufacturers as an area of potential revenue growth.
At a session Thursday during the Wisconsin Cheese Industry Conference titled “World Markets Knocking at Your Door — What are you Going to Do,” partners in state and regional marketing organizations discussed the resources available to cheese manufacturers interested in making inroads into foreign markets, as well as opportunities and challenges in exporting.
“The numbers say it all — nearly 96 percent of today’s consumers live outside the United States,” says Ashwini Rao, economic development consultant with the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP).
Rao notes that exporting is not something for only large companies; in fact, small firms account for 97 percent of all exporters, she says.
DATCP’s Wisconsin International Agribusiness Center assists food and agricultural companies to build their export business. Services include “beginner exporter,” with one-on-one consultations and educational seminars; “intermediate exporter,” which overviews export documentation, market research and financing; and “advanced exporter,” which explores promotions and market development programs.
Exporting increases sales and profits and reduces dependence on existing markets, she notes.
However, exporting isn’t without its challenges. There can be administrative costs, the need to dedicate personnel to travel, a waiting period for payments on product shipped and other regulatory challenges to adjust to, Rao says.
“Taking the leap” on exporting requires four basic steps, Rao notes:
• Management commitment — In order to be a successful exporter, companies need to make a long-term commitment with a dedicated staff. It’s important to understand export procedures and have knowledge of the various role players in the process, Rao says.
• Planning and strategy — It’s very important to do foreign market research, Rao notes. What is the growth potential for product in other countries? How is it priced there? What product design, quality and functionality are consumers looking for?
• Product readiness — Potential exporters need an international marketing plan with defined goals, strategies and target markets, Rao notes. For example, companies should think about whether their current packaging and labeling will work in foreign markets. It also is wise to engage the services of a sales representative or distributor, or partner with a local firm in the desired market.
• Export mechanics — Companies need to examine if they have the financing and production capacity to meet export demand. It’s also important to be informed of regulatory and legal requirements for products in other countries, Rao notes.
“Export success includes critical factors such as a strong domestic base — typically — a long-term commitment to exporting, allocation of resources and a good product,” Rao says.
Merle Snyman, director of market research and analysis for the U.S. Dairy Export Council (USDEC), notes that the U.S. dairy industry has had an average growth of 21 percent per year for the last 10 years for dairy exports.
Making the right product, packaging and specifications for each customer can be challenging, she says.
Specifications can be challenging in markets like Korea, for example, as consumers there tend to buy in very small amounts, requiring very small packaging — something U.S. manufacturers need to adapt to in order to make inroads in retail and foodservice, she says.
However, the Asian markets are very innovative, she adds, using cream cheese for pizza sauces, yogurts and ice cream.
“Cheeses over there are used more as ingredients than as a snack,” she says.
Meanwhile, in Latin America, consumers want traditional fresh, white cheese, something the United States is able to provide being in close proximity, Snyman notes. Specialty cheese also is a growing market in South America, she adds.
The Middle East/North Africa region is one of the biggest growth markets for U.S. dairy, Snyman says, particularly for processed and bulk natural cheese.
Snyman notes that while the United States has the capacity to meet the growing world demand for dairy and is producing cheese varieties that foreign consumers want, U.S. exporters have more work to do to meet product specifications overseas.
“Where the U.S. hurts the most,” she adds, is in its commercial practices and presence overseas.
It can be very important to translate labels on packaging or convert pounds to other measurements, Snyman says. In addition, U.S. exporters need to make frequent visits to the markets in which they are selling.
“You have to see if your product is out there, if your marketing strategy is working and what the competition is doing,” she says.
The essentials of successful cheese exporting include establishing personal relationships, expecting/anticipating small initial orders, shipping flexibility and consistency as a supplier, she adds.
In the second half of Thursday’s session, a panel of Wisconsin cheesemakers — Andy Hatch of Uplands Cheese Co., Luke Buholzer of Klondike Cheese Co. and Ken Heiman of Nasonville Dairy — shared their exporting experiences.
Heiman says Nasonville dairy is exporting a no-salt Cheddar to China, Feta to Canada and other products to Chile and Morocco.
The no-salt Cheddar in particular was made due to product specifications in China, he notes.
“It all depends on what consumers are looking for. It’s what they want, not what we do,” he says.
Hatch says that while Uplands is a relatively small cheesemaker, which can present challenges with volume, it still is exporting about 3-4 percent of its product.
“Our product is very specific, so there isn’t much change there, but the labeling can be tricky,” he says, noting the challenges of a different order in month, date and year on packaging as well as converting pounds to kilograms.
Buholzer says Klondike Cheese exports 5-gallon pails of Feta as well as smaller retail sizes. The company exports mostly to Mexico and Central and South America.
All three companies share the consensus that exporting has been both rewarding and challenging.
For one thing, it can take some time to see payment on product shipped.
“It can take 45-60 days after a shipment to see the money,” Heiman says.
In addition, labeling and regulatory issues can create headaches, and language barriers can make it difficult to sort issues out, Buholzer says.
“Everyone needs to be on the same page about orders and what’s happening. Any discrepancy can delay the whole process,” he says. “You need to understand what all the labeling requirements are in the markets you’re shipping to.”
Heiman notes the challenges of waning orders in times of a stronger U.S. dollar.
“When the U.S. dollar gains strength, people just stop buying,” he says.
Hatch shared an instance of an issue with a product shipment in Japan and the challenges of getting to the bottom of the issue.
“I was 3 degrees separated from the decision-maker in Tokyo, and when things slowed, it was very difficult to get to the bottom of what was going on,” he says.
However, the experience is overall rewarding, he adds.
“It looks good to our domestic customers as we are developing relationships that help me as a cheesemaker and us as a company,” Hatch says. “Our cheese both in the U.S. and abroad is typically found in high-end shops. If it didn’t make money for us, I wouldn’t do it, but there are certainly other benefits as well.”
Trade Promotion Authority bill
passes in Senate committee
April 24, 2015
WASHINGTON — Legislation to authorize Trade Promotion Authority (TPA), which would establish firm rules and help streamline the passage of U.S. trade agreements currently in negotiation such as the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP), this week passed the U.S. Senate Committee on Finance with a 20-6 vote, along with three other related trade bills.
“By acting to further break down barriers for American exports, we successfully advanced a strong trade agenda that will help move America forward,” says Senate Finance Committee Chairman Orrin Hatch, R-Utah. “These bills will open new markets for American-made products, which is vital for job creation and economic growth. Our work is not yet done. We need to continue with our bipartisan efforts and work to push these measures through the Congress and enacted into law.”
Sen. Ron Wyden, D-Ore., Ranking Democrat on the Senate Finance Committee, says this legislation is a “fresh approach” that will send America’s trade policy in a more progressive direction.
“With this legislation, our standards for trade agreements will be higher,” Wyden says. “Our enforcement of trade laws will be much tougher and our workers will have the support they need. The process of negotiating and moving trade agreements will be more open, more transparent and more democratic.”
U.S. dairy industry groups have largely supported the passage of TPA legislation. (See “Dairy groups urge action on TPA legislation” in last week’s issue of Cheese Market News.)
The National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC) note that renewing TPA, which expired in 2007, is particularly important to the U.S. dairy industry because the United States now exports the equivalent of one-seventh of its milk production.
The International Dairy Foods Association (IDFA) notes that the TPA legislation being considered includes several key negotiating objectives, such as the reduction or elimination of tariffs, robust rules on sanitary and phytosanitary measures, and preventing the improper use of geographical indications (GIs), all of which make it easier and less costly for U.S. dairy companies to compete globally.
“TPA is key to making sure the U.S. dairy industry gets the best possible outcomes in trade agreements, and we strongly encourage Congress and the president to work together to enact it as soon as possible,” says Connie Tipton, president and CEO, IDFA.
The Consortium for Common Food Names (CCFN) applauds the inclusion of strong language in the TPA bill on the need to curtail improper use of GIs.
“The GI provision recognizes that we have a real problem of the European Union wielding the leverage of its free trade agreements to give advantage to select EU producers, and this is unacceptable,” says Jaime Casteneda, CCFN executive director. “This abuse of GI policy is harmful to U.S. exporters, as well as producers in many developing countries around the world.
“Leaders in the U.S. Congress — as well as U.S. negotiators — have been doing a tremendous service to food producers by repeatedly and plainly stating that these abuses cannot be tolerated,” he adds.
Meanwhile, some remain critical of TPA, including the National Farmers Union (NFU), which says it objects to the fact that TPA only allows Congress to have an up or down vote on the final trade package, regardless of how many objectionable provisions it contains.
“TPA is just the continuation of the same old thing, trade agreements that make huge promises of prosperity and jobs to the American public and deliver nothing but bigger deficits, exported jobs and lost domestic agricultural sales,” says Roger Johnson, president, NFU.
President Obama has praised the TPA legislation, saying it will help the United States avoid mistakes from the past, seize opportunities for the future and state true to the nation’s values.
“My top priority in any trade negotiation is expanding opportunity for hardworking Americans,” Obama says. “It’s no secret that past trade deals haven’t always lived up to their promise, and that’s why I will only sign my name to an agreement that helps ordinary Americans get ahead. At the same time, at a moment when 95 percent of our potential customers live outside our borders, we must make sure that we, and not countries like China, are writing the rules for the global economy.”
U.S. Championship Cheese Auction raises $179,090
April 24, 2015
MADISON, Wis. — Cheese industry lovers and supporters gathered Wednesday evening at the Wisconsin Cheese Industry Conference (WCIC) here for the biennual U.S. Championship Cheese Auction, raising $179,090.
The auction is part of the biennial WCIC, hosted by the Wisconsin Cheese Makers Association (WCMA) and the Wisconsin Center for Dairy Research (CDR). Funds raised go toward support of future cheese contests, WCMA scholarships and a Member Education Initiative instituted by WCMA.
Each item for bid at the auction placed first in its class at the U.S. Championship Contest, held last month at Lambeau Field, Green Bay, Wisconsin. Some of the award winners were combined into one category for bid.
The largest bid of the night was placed on Item 46, the Grand Champion Cheese, a 200-pound Swiss Wheel made by Guggisberg Cheese, Millersburg, Ohio. The winning bid of $70 per pound — a total of $14,000 — was placed by Dairy Products Marketing Co. Inc., Fond du Lac, Wisconsin.
Other winning bids for top cheeses from the contest included:
• Item 1: AMPI Like It! — Cheese and Whey Systems, Marshfield, Wisconsin, purchased 40 pounds of Mild Cheddar made by AMPI-Blair, Blair, Wisconsin, for $250 per pound or a total of $10,000.
• Item 2: OMG LO’L! — Masters Gallery Foods, Plymouth, Wisconsin, purchased a combined 45 pounds of Medium Cheddar made by Land O’Lakes, Kiel, Wisconsin, and White Extra Melt Jalapeño Pasteurized Process Cheese, made by Land O’Lakes, Spencer, Wisconsin, for $275 per pound or a total of $12,375.
• Item 3: Great Lakes Gold — DSM Food Specialties USA, Menomonee Falls, Wisconsin, purchased 40 pounds of Sharp Cheddar made by Great Lakes Cheese, Adams, New York, for $100 per pound or a total of $4,000.
• Item 4: Awesome Agropur — R. Mueller Service and Equipment Co., Monroe, Wisconsin, purchased 40 pounds of Aged Cheddar made by Agropur, Weyauwega, Wisconsin, for $200 per pound or a total of $8,000.
• Item 5: Henning’s Best — Commodity Risk Management Group, Platteville, Wisconsin, purchased 11 pounds of Cheddar Midget made by Henning Cheese, Kiel, Wisconsin, for $275 per pound or a total of $3,025.
• Item 6: Glanbia Greats — GEA Westfalia Separator Group, Northvale, New York, purchased a combined 60 pounds of Bandaged Sharp Cheddar and White Cheddar and Chives made by Glanbia, Twin Falls, Idaho, for $60 per pound or a total of $3,600.
• Item 7: Amazing Arena — Kelley Supply Inc., Abbotsford, Wisconsin, purchased 6 pounds of Colby Deli Longhorn made by Arena Cheese, Arena, Wisconsin, for $375 per pound or a total of $2,250.
• Item 8: Mighty Meister — Cherney Microbiological Services, Green Bay, Wisconsin, purchased 40 pounds of Monterey Jack made by Meister Cheese, Muscoda, Wisconsin, for $125 per pound or a total of $5,000.
• Item 9: Tillamook Two — Custom Fabricating and Repair Inc., Marshfield, Wisconsin, purchased a combined 40 pounds of Colby Monterey Jack and Red & Green Jalapeño Pepper Jack made by Tillamook County Creamery Association, Tillamook, Oregon, for $325 per pound or a total of $13,000.
• Item 10: Foremost Foremost — Winona Foods, Green Bay, Wisconsin, purchased 12 pounds of Low Moisture Mozzarella made by Foremost Farms USA, Chilton, Wisconsin, for $350 per pound or a total of $4,200.
• Item 11: Dandy DFA — GEA Westfalia Separator Group, Northvale, New York, purchased 6 pounds of Part Skim Mozzarella made by Dairy Farmers of America, Turlock, California, for $150 per pound or a total of $900.
• Item 12: Agropur for Sure — DSM Food Specialties USA, Menomonee Falls, Wisconsin, purchased a combined 44 pounds of Mild Provolone and Smoked Provolone made by Agropur, Luxemburg, Wisconsin, and Feta made by Agropur, Weyauwega, Wisconsin, for $200 per pound or a total of $8,800.
• Item 13: Bella BelGioioso — ProActive Solutions USA, Green Bay, Wisconsin, purchased a combined 100 pounds of Mandarini, American Grana, Crema di Mascarpone and Crumbly Gorgonzola, Cow & Sheep, made by BelGioioso Cheese Inc., Green Bay, Wisconsin, for $135 per pound or a total of $13,500.
• Item 14: Oh Golly, Eau Galle! — D.R. Tech Inc., Grantsburg, Wisconsin, purchased 20 pounds of Aged Asiago made by Eau Galle Cheese Factory, Durand, Wisconsin, for $175 per pound or a total of $3,500.
• Item 15: Chalet Shines — Separators Inc., Indianapolis, purchased 40 pounds of Baby Swiss made by Chalet Cheese Co-op, Monroe, Wisconsin, for $50 per pound or a total of $2,000.
• Item 16: Klondike Gold — Emmi Roth USA, Fitchburg, Wisconsin, purchased a combined 25 pounds of Mediterranean Feta, Lowfat Feta and Greek Yogurt, 10 percent cream, made by Klondike Cheese Co., Monroe, Wisconsin, for $150 per pound or a total of $3,750.
• Item 17: Highest Havarti — Dairy Connection Inc., Madison, Wisconsin, purchased a combined 18 pounds of Havarti made by Fair Oaks Farms, Fair Oaks, Indiana, and Dill Havarti made by Edelweiss Creamery, Monticello, Wisconsin, for $50 per pound or a total of $900.
• Item 18: Baker’s Boss — R. Mueller Service and Equipment Co., Monroe, Wisconsin, purchased 10 pounds of String cheese made by Baker Cheese Factory, St. Cloud, Wisconsin, for $1,000 per pound or a total of $10,000.
• Item 19: Westby’s Bestby — Chr. Hansen, Milwaukee, purchased a combined 10 pounds of 4 Percent Cream Small Curd and Lowfat Strawberry Yogurt made by Westby Co-op Creamery, Westby, Wisconsin, for $300 per pound or a total of $3,000.
• Item 20: Blue Blue Ribbons — Dairy Connection Inc., Madison, Wisconsin, purchased a combined 15 pounds of Double Creme Gorgonzola made by Litehouse, Sandpoint, Idaho; Shakerag Blue made by Sequatchie Cove Creamery, Sequatchie, Tennessee; and Rogue River Blue made by Rogue Creamery, Central Point, Oregon, for $70 per pound or a total of $1,050.
• Item 21: Mill Creek Mastery (First Runner Up) — Cheese Market News, Madison, Wisconsin, purchased 11 pounds of Brick made by Mill Creek Cheese, Arena, Wisconsin, for $275 per pound or a total of $3,025.
• Item 22: Lovely Lactalis — DuPont USA, Beloit, Wisconsin, purchased a combined 20 pounds of Camembert made by Lactalis American Group, Belmont, Wisconsin; Marinated Fresh Mozzarella made by Lactalis American Group, Nampa, Idaho; and Rondelé Garlic & Herbs and Wee Brie Pasteurized Cheese made by Lactalis USA Inc., Merrill, Wisconsin, for $200 per pound or a total of $4,000.
• Item 23: Marieke Marvels — Wisconsin Aging & Grading Cheese Inc., Kaukauna, Wisconsin, purchased a combined 36 pounds of Marieke Gouda, Young, and Marieke Gouda, Smoked, Cumin, made by Holland’s Family Cheese, Thorp, Wisconsin, for $100 per pound or a total of $3,600.
• Item 24: Maple Gold Leaf — Jerry Dryer, Madison, Wisconsin, purchased 12 pounds of Traditional Gouda made by Maple Leaf Cheese Coop, Monroe, Wisconsin, for $300 per pound or a total of $3,600.
• Item 25: California Dreamin’ — Separators Inc., Indianapolis, purchased a combined 30 pounds of Cumin Gouda made by Oakdale Cheese, Oakdale, California; Chevre with citrus finish made by Cypress Grove Chevre, Arcata, California; Taupiniere, aged, made by Laura Chenel’s, Sonoma, California; Gopi Indian Yogurt made by Karoun Dairies Inc., San Fernando, California; and Drinkable Yogurt, Guava, made by Marquez Brothers International, Hanford, California, for $50 per pound or a total of $1,500.
• Item 26: W&W Winning — Dairy Products Marketing Co. Inc., Fond du Lac, Wisconsin, purchased 6 pounds of Queso Fresco made by W&W Dairy, Monroe, Wisconsin, for $150 per pound or a total of $900.
• Item 27: Nuestro Oro — D.R. Tech Inc., Grantsburg, Wisconsin, purchased 5 pounds of Queso Oaxaca Ball made by Nuestro Queso, Kent, Illinois, for $50 per pound or a total of $250.
• Item 28: Yummy Emmi — Loos Machine & Automation Inc., Colby, Wisconsin, purchased 12 pounds of GranQueso Reserve made by Emmi Roth USA, Monroe, Wisconsin, for $175 per pound or a total of $2,100.
• Item 29: Super Smear — GEA Westfalia Separator Group, Northvale, New York, purchased a combined 35 pounds of Cave Master Reserve, Greensward, made by Jasper Hill Farm & Murray’s Cheese, New York; Ashlyn made by Spring Brook Farm, Farms for City Kids Foundation, Reading, Vermont; and Aged Alpine Cheese made by Roelli Cheese, Shullsburg, Wisconsin, for $25 per pound or a total of $875.
• Item 30: Cabot’s Habit — Prolamina, Neenah, Wisconsin, purchased a combined 50 pounds of Hot Buffalo Wing Cheddar and 50 Percent Reduced Fat Cheddar made by Cabot Creamery Cooperative, Cabot, Vermont, for $150 per pound or a total of $7,500.
• Item 31: It’s Schnabeltier! — Wisconsin Aging & Grading Cheese Inc., Kaukauna, Wisconsin, purchased 11 pounds of Chipotle Pepper Gouda made by Schnabeltier, Rochester, Indiana, for $60 per pound or a total of $660.
• Item 32: Killer Cady — Great Lakes Cheese, Hiram, Ohio, purchased 5 pounds of Jack with Kalamata Olives made by Cady Cheese, Wilson, Wisconsin, for $1,000 per pound or a total of $5,000.
• Item 33: Sartori’s Spendor— Ecolab, St. Paul, Minnesota, purchased a combined 65 pounds of Peppermint BellaVitano, Sartori Smoked Alpine, Pastorale Blend and SarVecchio Parmesan made by Sartori Co., Plymouth, Wisconsin, for $100 per pound or a total of $6,500.
• Item 34: Arla Achieves — Cargill, Conover, Iowa, purchased 5 pounds of Smoked Edam Loaf made by Arla Foods, Kaukauna, Wisconsin, for $375 per pound or a total of $1,875.
• Item 35: Wisconsin Farm Gold — Wisconsin Aging & Grading Cheese Inc., Kaukauna, Wisconsin, purchased a combined 45 pounds of Fresh Mozzarella Ovoline made by Crave Brothers Farmstead Cheese, Waterloo, Wisconsin; Snowfields (15 months) made by Saxon Creamery, Cleveland, Wisconsin; Aged Pleasant Ridge Reserve made by Uplands Cheese, Dodgeville, Wisconsin; Evalon made by LaClare Farms Specialties, Chilton, Wisconsin; Petit Nuage made by Landmark Creamery, Albany, Wisconsin; and Ocooch Reserve made by Hidden Springs Creamery, Westby, Wisconsin, for $25 per pound or a total of $1,125.
• Item 36: King Kraft — Novak’s Cheese, De Pere, Wisconsin, purchased 5 pounds of Mozzarella String made by Kraft/Pollio Italian Cheese, Campbell, New York, for $200 per pound or a total of $1,000.
• Item 37: Penn-icle — Cherney Microbiological Services, Green Bay, Wisconsin, purchased 10 pounds of Lacey Swiss Cheese made by Penn Cheese, Winfield, Pennsylvania, for $100 per pound or a total of $1,000.
• Item 38: Pine River Perfect — Wisconsin Aging & Grading Cheese Inc., Kaukauna, Wisconsin, and Masters Gallery Foods, Plymouth, Wisconsin, got into a bidding war and ended up together purchasing 10 pounds of Aged Asiago Cold Pack made by Pine River Pre-Pack, Newton, Wisconsin, for $400 per pound or a total of $4,000.
• Item 39: Carr Valley Victors — B Team, Madison, Wisconsin, purchased a combined 25 pounds of Chunky Blue Cold Pack Spread, Cocoa Cardona and Cave Aged Marisa made by Carr Valley Cheese, La Valle, Wisconsin, for $25 per pound or a total of $625.
• Item 40: Super Swiss Valley — Novak’s Cheese, De Pere, Wisconsin, purchased 6 pounds of Cream Cheese made by Swiss Valley Farms, Luana, Iowa, for $50 per pound or a total of $300.
• Item 41: MMMMontchevre — Winona Foods, Green Bay, Wisconsin, purchased a combined 10 pounds of Honey Goat Cheese and Crumbled Fresh & Natural made by Montchevre-Betin, Belmont, Wisconsin, for $125 per pound or a total of $1,250.
• Item 42: Top CROPP — Chr. Hansen, Milwaukee, purchased 9 pounds of Cultured Butter, Organic, made by CROPP/Organic Valley, La Farge, Wisconsin, for $45 per pound or a total of $405.
• Item 43: Hillsboro Gold — Cherney Microbiological Services, Green Bay, Wisconsin, purchased 5 pounds of Unsalted Butter made by Hillsboro Riverview Dairy, Hillsboro, Wisconsin, for $55 per pound or a total of $275.
• Item 44: Pasture Pride — Wisconsin Aging & Grading Cheese Inc., Kaukauna, Wisconsin, purchased 5 pounds of Traditional Juustoleipa made by Pasture Pride Cheese, Cashton, Wisconsin, for $150 per pound or a total of $750.
• Item 45: Upstate Upstages — Chr. Hansen, Milwaukee purchased 5 pounds of Blueberry Greek Yogurt made by Upstate Niagara Co-op, West Seneca, New York, for $25 per pound or a total of $125.
Milk production in U.S. climbs 1 percent in March
April 24, 2015
WASHINGTON — Milk production in the 23 major milk-producing states during March totaled 16.88 billion pounds, up 1.1 percent from March 2014, according to data released this week by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Milk Production chart.)
February revised production in the 23 major states, at 15.14 billion pounds, was up 1.7 percent from February 2014. The February revision represents a decrease of 10 million or 0.1 percent from last month’s preliminary production estimate.
Production per cow in the 23 major states averaged 1,959 pounds for March, 2 pounds above March 2014. This is the highest production per cow for the month of March since the 23-state series began in 2003, USDA says.
The number of milk cows on farms in the 23 major states was 8.62 million head, 86,000 head more than March 2014 but 4,000 head fewer than February 2015.
For the entire United States, NASS estimates March production totaled 18.05 billion pounds, up 1.2 percent from a year earlier. Production per cow averaged 1,941 pounds, up 8 pounds from March 2014. There were 9.30 million cows on U.S. farms in March, NASS says, up 78,000 head from March 2014 but down 5,000 head from February 2015.
Milk production in the United States during the January-March quarter totaled 51.90 billion pounds, up 1.7 percent from the same quarter last year. The average number of milk cows in the United States during the quarter was 9.30 million head, 88,000 head more than the same period last year and 17,000 head more than the October-December 2014 quarter.
In March, California led the nation’s milk production with 3.70 billion pounds, down 2.9 percent from its production a year earlier. The decline was driven by both a drop in cow numbers as well as a decline in production per cow. NASS reports there were 1.78 million cows on California farms in March, down 2,000 head from March 2014 and unchanged from February 2015. Production per cow averaged 2,080 pounds in March, down 60 pounds from a year earlier.
Wisconsin followed with 2.44 billion pounds of milk in March, up 3.6 percent from its production a year earlier. Wisconsin was home to 1.28 million cows in March, up 5,000 head from a year earlier and unchanged from a month earlier. Production per cow in Wisconsin averaged 1,910 pounds in March, up 60 pounds from March 2014.
The next highest milk-producing states in March were New York and Idaho, both at 1.17 billion pounds and up 1.1 percent and 1.3 percent, respectively, from a year earlier. Rounding out the top five states was Pennsylvania with 941 million pounds, up 1.3 percent from its production a year earlier.
Award-winning Guggisberg Cheese works on Swiss production expansion
By Kate Sander
MILLERSBURG, Ohio — For the last few years, Guggisberg Cheese Inc. has been the top winner in the U.S. Championship Cheese Contest’s Swiss class. This year, though, the company outdid itself with the biggest award of all — overall U.S. champion at last month’s contest.
The 200-pound Swiss wheel took top honors out of 1,892 contest entries. Out of a possible 100 points, the Swiss wheel scored 98.496 in the final round of judging, during which judges re-evaluated the top 16 cheeses at an evening charity gala to determine the overall champion.
The winning cheese, made at Guggisberg Cheese’s Sugarcreek, Ohio, plant, was a team effort, says Richard Guggisberg, company president. Guggisberg credits the company’s success to upholding the long-standing traditions of superior quality, authenticity, dedicated employees and a genuine concern for customers’ satisfaction.
This year’s award-winning cheese is a little different from the other cheeses the company makes, but the same level of care goes into all of them, Guggisberg says. Most of the cheeses the company makes are in 200-pound blocks, but this year’s winning Swiss was made in a wheel. The cheese, made from pasteurized milk (as are all of Guggisberg Cheese’s products), was also aged for 90 days as opposed to the usual 60 days.
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Specialty cheese is in more
channels as demand grows
April 17, 2015
By Alyssa Mitchell
MADISON, Wis. — Once available largely among niche cheesemakers and at specialty retailers, specialty cheese varieties now are gaining traction in the commodity and foodservice sectors, and larger cheese companies also want a share of this growing market.
The specialty food industry is a bright spot in the U.S. economy, notes a new report from the Specialty Food Association produced in conjunction with research firms Mintel International and SPINS/Information Resources Inc. (IRI). In 2014, sales of specialty food topped $100 billion for the first time, with retail and foodservice sales reaching a record $109 billion.
The report, “The State of the Specialty Food Industry 2015,” tracks U.S. sales of specialty food through supermarkets, natural food stores, specialty food retailers and foodservice venues. Specialty foods are broadly defined for the report as products that have limited distribution and a reputation for high quality.
Retail sales of specialty food sales grew 19 percent from 2012 to 2014 vs. a tepid 2-percent increase for all food, the report notes. The industry, fueled by small businesses, now boasts 15 segments that exceed $1 billion in sales, including cheese, yogurt, coffee, meat, poultry and seafood, chips, pretzels and snacks, and candy.
“The time is now for specialty food,” says Ron Tanner, vice president of philanthropy, government and industry relations for the Specialty Food Association. “Consumers are looking for new tastes, foods with fewer and cleaner ingredients, health attributes and products that are made by companies with values they care about. All of these define specialty food.”
The top 10 best-selling categories have shifted since 2013, the report notes. Cheese is still tops with $3.7 billion in sales, but coffee and cocoa have jumped past frozen and refrigerated meat, poultry and seafood to claim second place. Bread and baked goods entered the top five, bumping out yogurt.
Retail sales of specialty food hit a record $85.5 billion in 2014, representing 78 percent of total U.S. sales of specialty food. Foodservice sales account for the other 22 percent of all specialty food dollars, reaching $24 billion in 2014. Foodservice is an increasingly important sector, with an impressive growth of 30.7 percent since 2012, the report says.
The Wisconsin Milk Marketing Board (WMMB) estimates that Wisconsin alone produces about 46 percent of the specialty cheese made in the United States, a share that has remained fairly steady over the past decade, indicating that national specialty cheese production growth mirrors the growth WMMB is seeing within Wisconsin.
According to WMMB analysis of data from IRI, within the retail channel, specialty cheese sales totaled 664 million pounds in 2014 and accounted for 17 percent of the retail cheese market.
Meanwhile, within the food processing channel, specialty varieties account for about 15 percent of the cheese used as an ingredient, with hard Italian varieties and Blue cheeses accounting for most of this volume, WMMB says.
WMMB adds that within foodservice, the top specialty cheeses in terms of volume usage by restaurants are Parmesan, Feta and Blue cheeses.
Specialty cheese usage is much more prevalent among full-service restaurants, which account for about 80 percent of the volume of Parmesan, Feta and Blue cheeses used in restaurants, with the remaining 20 percent being used in limited-service restaurants, WMMB adds. However, almost all specialty cheese varieties tracked by WMMB in foodservice are used by at least some limited-service restaurants, showing that specialty cheese as a whole is becoming increasingly mainstream.
“In every product category, consumption is more specialized and focused on high end and flavor,” says Edward Zimmerman, founder of The Food Connector, a sales and marketing company serving the wholesale food industry. “Witness craft beer, flavored sausage, even pretzels. Specialty flavors and products are the mainstream now, and manufacturers love it because it gives them an opportunity to develop a differentiated offer with better margins. Consumers love it because they can enrich their lives with an affordable luxury.”
Ned Dorman, director of foodservice for Great Lakes Cheese, Hiram, Ohio, says the growth in demand for specialty cheese spreading to the foodservice and commodity sectors makes sense since cheese is a “wonderful flavor system” in all segments of the food industry.
For example, more customers in the commodity and foodservice sectors now are shifting from more “traditional commodity” Cheddar to Aged Cheddar such as Great Lakes Cheese’s Adams Reserve New York Cheddar, Dorman says.
“Your Cheddars and Swiss cheeses are still there, but we’re also seeing more growth in these niche items for the excitement and wow flavor factor,” he says.
In addition, most specialty cheeses have high functionality, so the expansion into more restaurants and foodservice channels make sense, Dorman says.
Jeff Kent, senior director of cheese marketing at Foremost Farms, Baraboo, Wisconsin, notes the company is now making and delivering extended-length cheeses, various shapes and developing flavored and condiment-added cheeses for its customers who supply the national retail delis and the foodservice sector.
“In the commodity sector, we’ve seen growth in demand for extended-length loaves because this type of product results in labor efficiencies, creates less trim and increases throughput for cheese slicers,” he adds. “For foodservice, the growth in pre-shredded cheese has been phenomenal. Many purveyors used to shred their own and now purchase it already shredded.”
• David vs. Goliath
Zimmerman notes that like many innovations, small, niche firms create the revolution of the innovation. But as consumer acceptance and adoption grows, larger firms with more efficiency gain the expanding market share — however, with products not as specialized, he adds.
“Product introductions become commoditized and less authentic but at lower price points, which reels in even more consumers,” he says. “Ultimately, the revolution turns to evolution and the cycle begins anew at the smaller, artisan stage. Everyone wants to be part because new and exciting food experiences make consumers, grocers and foodservice operators happy.”
Zimmerman notes one advantage larger companies have is distribution.
“A specialty company selling 500 pounds of product 1,000 miles away is at a freight disadvantage,” he says. “The large company that sells 30 items to a distributor or end-user can easily add that 500-pound order. In fact, they can reduce the order to a few cases. Especially on short shelf-life products, this is a huge advantage.”
In regard to small vs. large manufacturers, Kent notes that a processor always introduces inefficiencies initially until the process is refined and the volume grows to a profitable level.
“Another challenge is training the work force to manufacture the product in a consistent, quality manner,” he says.
Still, consumers’ first preference is for high quality, so whether cheese comes from a small or a large plant doesn’t necessarily drive their purchase decision, he adds.
“Large companies can start off with small batches, but as demand for the product increases they can support the growth of that product and continue to meet customer expectations,” Kent says. “Larger companies do have efficiencies of scale that allow them to support a certain pricing structure.”
Dorman agrees it comes down to economies of scale.
“Larger companies can do production runs more efficiently and have the distribution channels in place,” he says.
• The attraction of U.S. cheese
The booming popularity of specialty cheese varieties has boosted U.S. cheesemakers’ visibility and ability to compete with their foreign counterparts, particularly with the rise of “American Original” varieties as well as higher-quality Cheddar, Italian and others.
Zimmerman notes that while there will always be a segment of the market that will prefer imported cheeses, U.S. producers now can offer similar domestic products at lower prices.
“This supply will expand the market,” he says. “The real test will be if American products make inroads in Europe. Thirty years ago, Europeans scoffed at California wine — not today. I suspect cheese will follow a similar path.”
Foreign-based companies in recent years seem to be showing increased interest in the U.S. cheese market through acquisitions and business partnerships.
For example, Montreal-based Saputo Inc. acquired Richfield, Wisconsin’s, DCI Cheese Co. from Fairmount Cheese Holdings Inc. in 2011 to create a new Saputo Specialty Cheese segment.
Saputo has had a U.S. Dairy Division for some time with locations throughout the United States, but with the acquisition of DCI, the company sought to increase its presence in the growing specialty cheese category, Terry Brockman, president and COO of Saputo’s U.S. Dairy Products Division, said of the acquisition in a 2012 article. (See “DCI uses creative marketing, social media to showcase specialty cheese” in the Sept. 14, 2012, issue of Cheese Market News.)
As U.S. consumers have become increasingly interested in specialty cheeses over the past 15 years, Saputo Cheese USA continues to prioritize and develop its specialty cheese portfolio, notes Dominique Delugeau, senior vice president of specialty cheese and deli sales and marketing for Saputo Cheese USA Inc.
“The acquisition of DCI Cheese Co. complemented the activities of Saputo Cheese USA Inc. and has contributed to increasing Saputo’s presence in the specialty cheese category in the U.S.,” he says. “We sell and distribute specialty cheese and hold an important portfolio of import licenses for specialty cheese manufactured abroad.”
Delugeau notes that many customers are asking suppliers to support their needs through consolidation in supply chain and category management, offering a “one-stop shop” approach when possible.
“As one of the largest specialty cheese marketers in the U.S., Saputo Cheese USA Inc. offers a broad portfolio to meet customer needs,” he says.
“Large multi-national cheese companies want growth,” Zimmerman notes. “Since the 1970s, U.S. per capita cheese consumption rose from 19 pounds annually to over 33 pounds. These companies want a share of the U.S. market.”
Delugeau notes that many factors have contributed to the growth of specialty varieties and U.S. cheesemakers’ ability to compete with their European counterparts.
“There are more artisan cheesemakers in the U.S. today than ever before who continue to master their craft and provide a greater variety of products,” he says. “The rising cost of imports also provided an opportunity for artisan cheesemakers in the U.S. to grow domestic specialty varieties.”
• The trend continues
Stakeholders and researchers agree that demand for specialty cheese varieties won’t be waning anytime soon.
The top end of the market will continue to drive demand for unique upscale specialty options, Delugeau says, noting bold flavors, specialty peppers and extra-aged products are still popular. In addition, cheese hybrids represent new ventures made possible with new technology, such as Frigo Cheese Heads Cheddar Cheese with Parmesan Notes Premium Snacking Cheese.
“Artisan cheeses are being used in new ways in the foodservice sector — for example, pizzas and flatbreads featuring specialty cheeses such as goat, Asiago or Gorgonzola,” he adds.
Dorman notes usage of specialty cheeses is growing to different varieties on pizzas, in Mexican food, on burgers and even in Italian food.
Kent says where U.S. manufacturers of specialty cheese can really shine is in supplying extended lengths for slicing, making cheese that works well in ultra-thin applications, fresh Mozzarella and specialty shapes for snacking.
Zimmerman notes that new uses for specialty cheeses include cheese as salad toppings, cheese plates, adult macaroni and cheese and many more choices on burgers and sandwiches.
“Look for more sales in items like Swiss, Parrano, goat cheeses and mixed-milk offers,” he says.
California dairy groups, milk
supplier file FMMO proposals
April 17, 2015
SACRAMENTO — Two California dairy groups and a California milk supplier recently filed alternative proposals with USDA’s Agricultural Marketing Service (AMS) in response to a petition filed in February by three California dairy cooperatives.
California Dairies Inc. (CDI), Dairy Farmers of America Inc. (DFA) and Land O’Lakes Inc. on Feb. 5 petitioned USDA to hold a hearing to consider establishing a federal milk marketing order (FMMO) for California. (See “Calif. dairy co-ops submit proposal to join FMMO” in the Feb. 6, 2015, issue of Cheese Market News.)
Under existing regulations, California dairy farmers operate under statewide milk pricing plans. The majority of farmers in other states operate under a FMMO, which provides uniform dairy prices for milk based on market prices. Under proposed federal order language submitted by the cooperatives, California would have the same pricing formulas/system as all other federal orders for all classes of milk. (For more details on the cooperatives’ proposal, see “U.S. dairy industry reacts to idea of California federal order” in the Feb. 13, 2015, issue of Cheese Market News.)
Proponents of an FMMO believe the failure of California’s state system to pay a fair price has cost California’s dairy producers nearly $2 billion since 2011.
In response to the cooperatives’ request that USDA hold a hearing on the matter, USDA said that prior to determining whether to conduct a hearing, the agency requests additional proposals be submitted regarding the provisions of a potential California FMMO. Alternative proposals were due April 10.
Late last week, trade association Dairy Institute of California, the California Producer Handlers Association (CPHA) — made up of four producer-handler dairy farms including Foster Dairy Farms Inc., Modesto; Hollandia Dairy Inc., Escondido; Producers Dairy Foods Inc., Fresno; and Rockview Dairies Inc., Downey — and Ponderosa Dairy, which is located on the border with California in Amargosa Valley, Nevada, and supplies fluid milk to California, submitted alternative proposals in response to USDA’s request.
Dairy Institute says “there are no significant disorderly marketing conditions that warrant” a California FMMO proposal or hearing.
Recognizing that USDA may proceed with an FMMO hearing, however, Dairy Institute has proposed a federal order plan patterned after the other 10 federal orders now operating across the United States, while the plan proposed by the three co-ops contains fundamental features not found in the other orders, Dairy Institute says.
Under Dairy Institute’s plan, pooling would be administered the same as it is with all other federal orders, but under the co-ops’ plan, pooling would be mandatory, Dairy Institute notes.
“If a new FMMO is adopted for California, it should be structured and operated like all the other federal milk marketing orders,” says Rachel Kaldor, Dairy Institute’s executive director. “But the co-ops are proposing a plan that ‘cherry picks’ from the current state system, creating a hybrid federal system that would put California’s dairy industry at a competitive disadvantage with other states."
Creating a different set of rules for California would make the state’s dairy industry even less competitive in national and international markets, ultimately hurting producers and processors alike, Kaldor adds.
She says consideration of a new federal order for California “will be a long and deliberative process, with an opportunity for all participants to be heard. We look forward to the discussion.”
CPHA says that with the co-ops’ proposed California FMMO language, “all of the current producer-handlers who hold exempt quota from pooling would be subject to pooling, eliminating nearly all of the value in the investments and strategic business decisions they made over nearly 50 years to maintain their respective exempt quota.”
CPHA urges preservation of the exempt quotas that have become the backdrop against which remaining producer-handlers have invested and structured their businesses, in addition to the current proposal for exemption for producer-handlers with production less than 3 million pounds per month, the association says.
“In essence, this would grandfather into a new California FMMO the exempt treatment for the producer-handlers who have invested in this exemption,” CPHA says. “Preservation of the producer-handler assigned exempt quota would also leave in place the proposed exemption for smaller producer-handlers (under 3 million pounds per month) to potentially qualify as exempt from the pool as well.”
CPHA says that if the quota system is to be maintained in any California FMMO, it should also preserve the quota exemption treatment for the producer-handlers, as these exemptions are the result of a series of years’ worth of legislative compromises and business structuring decisions.
“The industry has come to rely on the current pooling system, with producers of all types structuring their businesses to best utilize the quota system and any available quota exemptions,” CPHA says. “Just as producer-handlers have benefited from their quota exemption, producers have benefited from increases in their allocated quota and ability to purchase additional quota. If the exemptions were not maintained in the new system, then the producer-handlers should be compensated with some type of exchange for regular quota that recognizes the additional value that the exempt quota gave to the producer-handlers.”
In addition, CPHA proposes that the degrees of family consanguinity be removed to allow for a continuation of transfers within the family definition.
“This would allow for the producer-handlers to continue to maintain the CPHA as a family-run organization so long as they do not transfer the entities out of the family ownership structure,” CPHA says.
Meanwhile, Ponderosa Dairy in its proposal notes that as an out-of-state dairy, it has not been able to purchase or own quota under California’s program — but, alternatively, it is permitted to receive the plant-blend price for its milk, the average of class utilization for the plant.
While the three co-ops’ have proposed that Nevada milk should receive the lowest of two blend prices, according to Ponderosa Dairy’s comments to USDA, that “would fundamentally alter the pricing that has been available to Nevada raw milk shippers ... and would frustrate Ponderosa’s investment in Nevada, which was made against the backdrop of the California system.”
Echoing the Dairy Institute’s stance, Ponderosa Dairy says the co-ops’ have not presented sufficient evidence of a need to promulgate an FMMO in California. It also maintains that Nevada raw milk does not cause disorderly marketing for California, and the co-ops’ proposal “erects a trade barrier” that discriminates against out-of-area milk producers.
Ponderosa Dairy recommends that if an FMMO hearing is held, a provision could be added to the California order that removes the trade barrier and retains the plant-blend status historically afforded to Nevada milk, “so that out-of-area producers are not subsidizing quota for California producers.”
USDA will hold three outreach meetings in California next month to provide a forum to review proposals received regarding a possible California federal order. The meetings will begin at 9 a.m. on three dates: Tuesday, May 5, at California State University, Chico; Wednesday, May 6, at Piccadilly Inn Airport, Fresno; and Thursday, May 7, at Los Angeles County Farm Bureau, Palmdale.
UF milk technology could
April 17, 2015
By Chelsey Dequaine
MADISON, Wis. — The Center for Dairy Research (CDR) currently is studying the benefits of standardizing ultrafiltered (UF) milk to a lactose-to-protein ratio. CDR says traditionally, cheesemakers only standardize the total solids content of cheesemilk, or the protein-to-fat ratio.
Dr. Mark Johnson, CDR assistant director and distinguished scientist, says the technology eliminates defects associated with excessive acid development, eliminates inconsistencies in the final product and streamlines cheesemaking.
Ultrafiltration of milk reduces the volume of water in milk. In order to reduce the amount of lactose in the water that remains, Johnson says water must be added back. The new process begins with condensing the milk using ultrafiltration.
“The big advantage is the savings of water usage,” he says. “Cheesemakers are already taking water out of whey using membranes and reusing it within the dairy plant, but we are removing water out of milk and adding it back after removing the lactose – that’s news. This technology will help a lot, especially with the current water shortage in the West. You have to buy tap water and pay to get rid of it. Why not use the water that came from the cow?”
Another advantage of the technology is the reduction of whey volume. Companies will not be using tap water to dilute the lactose.
Over the last decade, CDR has studied types of curd washing procedures and the use of membrane filtration in cheese production. Combining curd washing and ultrafiltration for cheesemaking seemed to be the next logical step.
“We’ve been making adjustments, but we said use this ultrafiltration technology to make adjustments in the milk,” says John Lucey, CDR director. “It’s a paradigm shift for cheese plants. It may take a while for cheesemakers to understand the value of this process. We are making them aware of this as an opportunity, that this approach has value and demonstrating that value to them.”
Johnson also says the technology is significant in the cheese industry because using UF milk standardized to a lactose-to-protein ratio reduces pH variability in the final product.
In the UF membrane, cheesemakers remove water, lactose and anything dissolved in it. UF milk is more condensed and improves the cheese yield. For example, if a cheese had 3 percent protein, it would have 3.5 percent protein when using UF milk, according to Johnson.
Lucey says the technology can be utilized with any cheese. For cheeses such as Cheddar, cheesemakers can use the technology for consistency.
“It’s a change in approach to get better control in the cheesemaking process,” he says.
Lucey says historically, cheesemakers were more interested in fat and protein and standardized cheesemilk for total solids in the milk to a protein-to fat-ratio, never bringing in the lactose part of the process.
“Cheesemakers don’t standardize lactose in milk,” Lucey says. “Think about controlling or standardizing the milk. Figure out the lactose-to-protein ratio you want, adjust that in the milk and make the cheese. Then there is no need for curd washing.”
When cheesemakers control lactose in the milk it is easier to control the cheese. Lucey says not to focus on the total amount of protein or fat ratio, but to factor in the lactose level.
“Lactose contributes to the acidity, which is important in defects and texture,” he says. “If you control the lactose in cheesemilk, you are setting yourself up for successful cheese. If you ignore it, you can run into defects like having to wash the curd.”
If done in a plant, which CDR recommends, cheesemakers can use permeate, run the permeate through the nanofiltration membrane and use that water instead of adding tap water. Once the milk is made, Johnson says it can be put in the vat to make the cheese.
“Cheesemaking efficiency increases,” Johnson says. “This technology will streamline cheesemaking. We can control the pH in tight limits and prevent excess acid cheese. The milk would be perfect so cheesemakers can get what they need for pH purposes.”
Johnson provides an example: when making Gouda, cheesemakers remove 25 percent of whey and add water back. Using standardized UF milk eliminates that step altogether.
The issue with too much acid production isn’t in cheesemilk, but in the final product. The cheese can be brittle, taste acidic, may not melt properly or there could be calcium lactate crystals.
“Using ultrafiltration is state-of-the-art, but standardizing the milk to a lactose-to-protein ratio is not,” Johnson says. “We can better control the pH and get to the point of making cheese faster because of the limited amount of sugar.”
When factors such as lactose, fat and protein are controlled, cheese manufacturers are able to produce the same cheese daily. Johnson says CDR is working on determining milk lactose amounts based on how much protein is in the milk.
“In the times we’ve completed this technology in the lab it has worked beautifully,” Johnson says. “We are excited about it. We think this could be the way of the future.”
He adds there is a lot of interest, but to CDR’s knowledge this technology has not been used yet in commercial cheese production.
CDR also has overcome challenges using UF milk to eliminate the difference in all-around quality from traditional processes.
CDR is continuing to work on the lactose-to-protein ratio cheesemakers should use in cheese varieties and plans to be able to provide hard data.
“The goal is putting in a better process to standardize the milk to eliminate inconsistences,” he says. “The best outcome of CDR is giving cheesemakers technology to facilitate them to make more constant quality cheeses.”
Stakeholders in dairy
comment on FMMO system
April 17, 2015
WASHINGTON — Dairy industry stakeholders submitted comments to USDA’s Agricultural Marketing Service (AMS) this week in response to the agency’s review of the federal milk marketing orders (FMMOs) as part of a government-wide look at the effect of regulations on small businesses and a request for comments issued in February. Comments were due this week.
In its comments, the International Dairy Foods Association (IDFA) notes that the FMMO system is particularly burdensome to small dairy companies, saying it increases costs, makes small companies less competitive and hurts the fluid milk business.
AMS defines small entities as companies with fewer than 500 employees.
IDFA says while only some of its members are small entities, nearly all members have customers that are small entities, and IDFA notes the significant impact that the federal order regulations have on these customers, as well as small dairy companies.
The comments also note the unnecessary regulatory costs imposed by the regulations ultimately can cause families to purchase less milk or consume non-dairy alternatives and miss the essential nutrients that come from dairy products.
In addition, some small dairy processing companies are regulated under state authorities in one location and under a federal order in another, IDFA says, noting these differences impose a significant reporting burden, and the companies often must pay for costly accounting and legal services to interpret the complex federal and state regulations.
“FMMOs were created to address the U.S. dairy industry of the 1930s,” IDFA says. “While there may have been reasons at that time to impose market-intrusive regulations to address concerns of some industry sectors, those concerns no longer exist. Simply put, there is no longer a need for the federal government to require fluid milk bottlers to pay a higher price for milk than manufacturers of other products.”
In its comments, the National Milk Producers Federation (NMPF) says that FMMOs have a positive impact on the substantial number of small milk-producing entities that exist in the United States.
“Indeed, the orders are conceived, designed and implemented for the fundamental purpose of doing so for all milk producers delivering milk to handlers regulated under them,” NMPF says. “The provision of minimum prices paid by handlers for milk according to use and the subsequent payment to individual farmers or cooperative associations of farmers on the basis of a uniform or average price for all milk sold both ensure that payments to farmers will be made in a timely manner and will be more reflective of supply and demand conditions than in the absence of FMMO.”
Requiring regulated processors, or handlers, to pay minimum prices for milk according to use ensures that there will be an adequate level of funds available in a federal order pool to pay a minimum uniform price to all individual farmers or cooperative associations of farmers that supply milk to a marketing area, NMPF adds.
Dairy processors that are small entities also benefit from the stable market conditions that are provided by the orders, which require that fluid milk demand always be met, NMPF says.
“Requiring regulated processors to pay minimum prices for milk according to use ensures that all processors will pay the same amount for their single largest cost item, raw milk,” NMPF says. “In the absence of such regulation, large processors would have greater ability to source milk at lower cost due to the much larger volumes they purchase and they could sell their processed products at correspondingly lower prices, thus pressuring the operating margins of the smaller processors.”
While processors of milk and dairy products and others frequently allege that the minimum pricing and other provisions of FMMOs raise the price of milk above the level necessary to attract an adequate supply of milk for processors’ needs in a market area, to the detriment of processors and consumers, objective evidence and analysis solidly refute this allegation, NMPF adds.
In conclusion, NMPF says the FMMO program provides numerous benefits to the many small entities which it regulate, both milk producers that are small entities and processors of dairy products that are small entities.
“Accordingly, NMPF believes that no change to the program is needed for the purpose of reducing any significant economic impact of program rules upon a substantial number of small entities,” the organization says.
Meanwhile, in its comments, the Wisconsin Cheese Makers Association (WCMA) argues against the dry whey value in the Class III price for cheesemilk in FMMOs.
WCMA notes that nearly every WCMA manufacturer is a small business by the government standard.
In a previous survey by WCMA, 78 manufacturing sites reported no capacity to dry whey, yet the Class III milk price includes the value of dry whey in its “other solids” computation, WCMA notes.
Even manufacturers that process whey into whey protein concentrate (WPC) don’t earn the value of dry whey, WCMA says.
“Revenues from 34 percent WPC sales were 50 cents below dry whey in January 2014 but fell to over $1.50 lower than dry whey by November and have been more than $1 below dry whey since last June,” the comments say.
WCMA concludes that the dry whey value should be removed from regulation, replaced with the value of separated, raw wet whey.
“Smaller plants that cannot invest in whey processing will do what they must — what they’ve already done — and that is make value-added cheeses to survive,” WCMA says. “If they don’t find added revenue on the cheese side, they depart the market. But at least their fight to succeed will be in the free marketplace, and they won’t fail because of a federally-mandated Class III price, loaded with an unfair dry whey value, bled them dry.”
Strength in U.S. cheese prices
poised to weaken in near-term
April 10, 2015
By Alyssa Mitchell
MADISON, Wis. — While spot markets on the Chicago Mercantile Exchange (CME) have been relatively calm in recent weeks, analysts anticipate price weakness ahead, particularly for cheese, as stocks continue to grow.
“Cheese has been about as flat as can be,” says Eric Meyer, president of HighGround Dairy, Chicago. “It’s been a snoozer of a year so far for the U.S. cheese market.”
Mike North, president of Commodity Risk Management Group, Platteville, Wis., notes that while spot markets have been relatively calm, futures markets have fluctuated.
“This is normal and expected as we try to balance the realities of divergent fundamentals — spring flush, California drought, growing inventories, strong domestic demand, etc.,” he says. “I would expect seasonal norms to take over in coming months — lower prices in the next few months with stabilizing/firming prices as we move into late summer/early fall.”
In the face of growing inventories and weaker global prices, particularly at the most recent Global Dairy Trade (GDT) auction in New Zealand, U.S. cheese prices continue to be fairly well-supported, largely due to continued strong domestic demand, analysts say.
CME Cheddar blocks rose to $1.58 per pound last week. This week, blocks fell 0.25 cents Monday to $1.5775 and have remained there through the week.
CME Cheddar barrels, meanwhile, reached $1.60 per pound March 31, fell to $1.5950 per pound April 1 and bumped up to $1.61 Tuesday, where they have remained through the week.
“Orders received by most Midwest cheese manufacturers continue to be consistently strong, leading to maintaining high levels of production,” says USDA’s Dairy Market News.
Dairy Market News notes that extra milk often is available and is being purchased to achieve desired production levels.
“Many plants have found that they can be opportunistic and hold out for milk discounts of $2 or more under class and generally find sellers,” Dairy Market News adds. “There is some surprise expressed at how long milk has been available at a discount in the Midwest. The storage capacity available to plants varies. Some manufacturers continue to make as much cheese as available milk allows, with no concern to storing what can’t be immediately sold.”
However, some plants are now facing fuller storage facilities which may begin to affect manufacturing schedules in the near future, Dairy Market News notes.
“More, than less, volatility is likely ahead of us as the market attempts to regain balance between supply and demand,” says Sara Dorland, managing partner with Ceres Dairy Risk Management LLC, Seattle.
Dorland notes that cheese sales seem to be strong.
“Based on European cheese prices, I do not expect to see U.S. prices surge; then again, based on current order flow, I don’t expect them to fall,” she says. “That said, cheese has the potential for a sharp correction should weather become an issue for the summer.”
Meyer says he’s been amazed at the lack of declines in cheese and butter prices, particularly cheese, especially when comparing to GDT and EU prices.
With decent stocks building, as well as milk production growth, Meyer says cheese prices are likely to weaken considerably in the next 60 days, possibly dipping into the $1.30s.
• Bearish export outlook
Meyer says that U.S. cheesemakers who are buying up milk and building stocks are keeping U.S. cheese and milk prices at levels that remain profitable for dairy farmers.
However, “that won’t help us on the export side, nor is it signaling to producers to slow production,” he says. “From an export standpoint, we’re not doing ourselves any favors.”
Meyer says while the Cooperatives Working Together program will move some cheese along, U.S. prices are too wide of a range ahead of global prices.
Butter at the CME, which dipped into the high $1.60s in mid-March, has been supported above $1.70 per pound since March 27, reaching $1.7525 per pound on Thursday, where it remained today.
“On the butter side, we’re totally uncompetitive in the export market,” Meyer says. “However, we’re not growing butter production like we are with cheese, and milk production in California, a larger butter producer, is slow.”
Dorland notes butter stocks are still very tight.
“Stocks have the potential of building over the next 60 days but have yet to do so,” she says. “Lower year-over-year output is not a move toward more stocks. Historically, when stocks are at this level at the start of the year, the CME butter price spikes over $2 per pound at some point. Without an appreciable build in the next 30-60 days, butter prices could start to head higher.”
The combination of premium U.S. pricing, strong dollar valuation and growing U.S. inventories lends itself to lesser export activity for commodity prices, and ultimately, lower prices, North says.
He adds it also is inviting for import growth.
“Last year’s butter import growth is fairly instructive of what we should expect,” North says.
“Obviously price spreads were much greater, but with the added strength in the U.S. dollar, those import considerations grow.”
• Milk production, MPP payments
Meyer says that U.S. milk prices need to move a good $2 per hundredweight lower, and hold there, to give dairy producers a signal to make less milk.
“I think we’re going to see spring milk production numbers that are strong, barring a weather event,” he says. “California should have year-over-year growth, and I think production will be exceptional in other parts of the country, up 2 percent year over year.”
Dorland says that milk production is likely to continue to climb through early summer. She adds, however, that it could be a “rolling flush” that starts in the West due to the mild and above-average temperature warmer weather.
The Northeast still has winter-like weather conditions, with forecasts of warmer weather coming this weekend, she adds.
“The flush is on its way, but it could be delayed a bit,” she says. “More milk, more products — that could weigh on the CME for a bit.”
Meanwhile, USDA this week announced that the first payments under the Margin Protection Program (MPP) for Dairy, implemented as part of the 2014 Farm Bill, are headed to holders of the $8 coverage level.
MPP replaced the Milk Income Loss Contract program in the 2014 Farm Bill and is effective through Dec. 31, 2018. MPP offers dairy producers catastrophic coverage, at no cost to the producer other than an annual $100 administrative fee, and various levels of buy-up coverage. Catastrophic coverage provides payments to participating producers when the national dairy production margin — the difference between the all-milk price and average feed costs — is less than $4 per hundredweight. Producers may purchase buy-up coverage that provides payments when margins are between $4 and $8 per hundredweight. To participate in buy-up coverage, a producer must pay a premium that varies with the level of protection the producer elects, according to USDA’s Farm Service Agency (FSA).
FSA notes the average actual dairy production margin for January and February fell below $8 per hundredweight, meaning those who $8 hold coverage levels under MPP will receive a payment for the first time since the program was implemented late last year.
However, based on the data from USDA, limited amounts of farmers elected to take more than the minimum coverage, Dorland notes.
“At the end of the day, $8 insurance for $8 in margin results in a net check of $0,” she says. “That means for those that elected $8 coverage, the first month was a net expense. In fact, national margins would have had to fall to $7.25 per hundredweight just to break even for farms with less than 4 million pounds annually.”
Dorland adds, however, that for an insurance program, and those who elected coverage at a cost-effective level, the program is working.
“Rarely do people buy insurance hoping the insurance pays out — that means something went catastrophically wrong,” she says. “In this instance, if producers understand that MPP is simply a cost that needs to be budgeted each year and it is there on the chance something goes awry in markets, the program can be a solid risk management tool.”
House pushes for dairy access in TPP;
USTR releases report
April 10, 2015
WASHINGTON — Dairy industry organizations this week praised the more than 75 House members who signed a bipartisan letter urging the Obama administration to negotiate a strong market-access outcome for the U.S. dairy industry in the Trans-Pacific Partnership trade agreement.
Led by the co-chairs of the Congressional Dairy Farmer Caucus, the House members sent a letter to U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack saying
Canadian and Japanese dairy market barriers must be addressed in any final TPP agreement to allow more U.S. dairy exports. The TPP involves trade negotiations between the United States and 11 other nations.
A majority of the House members signing the letter have voted in support of at least one of the U.S. free trade agreements approved in 2011, which are the most recent to date. Spearheading the letter were Congressional Dairy Farmer Caucus co-Chairs: Reid Ribble, R-Wis.; Peter Welch, D-Vt.; Joe Courtney, D-Conn.; Suzan DelBene, D-Wash.; Tom Reed, R-N.Y.; Mike Simpson, R-Idaho; David Valadao, R-Calif.; and Timothy Walz, D-Minn.
“We recognize that you must juggle a wide range of priorities,” the representatives say in the letter. “However ... we believe that winning an overall positive market access result for the U.S. dairy industry is critical to the success of the TPP negotiations.”
The National Milk Producers Federation (NMPF), the U.S. Dairy Export Council (USDEC) and the International Dairy Foods Association (IDFA) commended the House members’ action, noting that dairy producers and processors agree on the importance of a balanced, positive TPP market-access outcome for their industry.
“The U.S. dairy industry has a $4 billion trade surplus worldwide and supports tens of thousands of jobs here at home, yet we still face substantial hurdles in major market,” says Tom Suber, USDEC president. “TPP should expand our ability to compete through new access and more fair rules of trade.”
Jim Mulhern, NMPF president and CEO, says that given that the TPP is likely to introduce more competition in a number of key markets, this agreement must result in a net boost in export opportunities for U.S. dairy producers.
“The U.S. cannot give a pass to major countries like Canada and Japan while at the same time increasing access for major competitors into our own market,” Mulhern says.
Connie Tipton, IDFA president and CEO, adds, “Significant market access for all dairy products must be on the table in negotiations with Japan and Canada. If this is to be a true 21st century trade agreement, U.S. dairy exporters should not be limited on what they sell into these markets.”
A report on trade barriers released last week by the Office of the U.S. Trade Representative (USTR) details these concerns over dairy market access to Japan, Canada and other countries. In Canada, the report notes technical barriers to trade include compositional standards for cheese that limit ingredients and require use of a minimum percentage of fluid milk that must be used in the cheesemaking process. Tariff classifications of dairy products also have slowed or stopped trade of certain U.S. products to Canada.
In Japan, high tariffs on U.S. exports of dairy and other agricultural products hinder U.S. exports, the report says. Japan’s tariffs on U.S. products include 40 percent on processed cheese, 29.8 percent on natural cheese and 22.4 percent on shredded frozen Mozzarella.
The full USTR 2015 National Trade Estimate Report on Foreign Trade Barriers is available at https://ustr.gov/sites/default/files/2015%20NTE%20Combined.pdf.
USDA lowers production forecast
by a billion pounds
April 10, 2015
WASHINGTON — Dry conditions in the west, constraining per-cow milk production, led USDA this week to lower its 2015 milk production forecast to 210.0 billion pounds, down 1.1 billion pounds from its forecast in last month’s “World Agricultural Supply and Demand Estimates” report.
In the same report, USDA also lowered its forecasts for 2015 dairy exports due to relatively weak international prices and the strong U.S. dollar. On a fat basis, the forecast for U.S. dairy exports was lowered to 10.7 billion pounds for 2015, down from 10.8 billion pounds in last month’s report. On a skim-solid basis, the export forecast was lowered to 36.5 billion pounds, down from 37.3 billion pounds in last month’s report.
Meanwhile, the 2015 forecast for imports is up on a fat basis to 4.4 billion pounds, up from 4.1 billion pounds in last month’s report. The forecast for imports on a skim-solid basis is unchanged at 5.5 billion pounds.
U.S. product price forecasts for cheese and butter are raised in this month’s report on domestic demand strength. Cheese is forecast to average in the $1.625-$1.675 per pound range in 2015, up from last month’s forecast of $1.600-$1.660. Butter is forecast to be in the $1.705-$1.785 range, up from last month’s forecast of $1.670-$1.760.
However, relatively weak exports of nonfat dry milk (NDM) are expected to pressure NDM prices lower to average in the $1.090-$1.130 range, down from last month’s forecast of $1.205-$1.255 for 2015.
The forecast for dry whey prices in this month’s report is unchanged at $0.490-$0.520.
The Class III price forecast is raised on the strength of cheese prices to $16.20-$16.70 per hundredweight, up from $15.95-$16.55 in last month’s report.
However, the Class IV price forecast is reduced to $14.45-$15.05, down from last month’s forecast of $15.30-$16.00, as a lower NDM price forecast more than offsets a higher butter price.
The 2015 all-milk price mid-point in the range is unchanged, with USDA forecasting it to be in the $17.10-$17.60 range.
Groups file suit over
USDA change to organic rule
April 10, 2015
WASHINGTON — A number of organic stakeholders recently filed a lawsuit in federal court, saying that USDA violated the federal rulemaking process when it changed established procedures for reviewing the potential hazards and need for allowed synthetic and prohibited natural substances used in producing organic food.
A coalition of 15 organic food producers and farmer, consumer, environmental and certification groups asked the court to require USDA to reconsider its decision on the rule change and reinstitute the agency’s customary public hearing and comment process.
The groups note that the $35+ billion organic market relies heavily on a system of public review and input regarding decisions that affect organic production systems and the organic label. The multi-stakeholder National Organic Standards Board (NOSB), appointed to a 5-year term by the secretary of agriculture, holds semi-annual meetings to solicit public input and to write recommendations to the secretary on organic policy matters, including the allowance of synthetic and non-organic agricultural materials and ingredients.
By adopting the Organic Foods Production Act of 1990 (OFPA), the groups say Congress created standards for organic certification and established the NOSB to oversee the allowance of synthetic materials based on a determination that they do not cause harm to human health and the environment and are necessary in organic food production and processing, given a lack of alternatives. Under the law, a review of these materials takes place on a 5-year cycle, with a procedure for relisting if consistent with OFPA criteria.
Plaintiffs in the lawsuit say that the USDA organic rule establishes a public process that creates public trust in the USDA organic label, which has resulted in exponential growth in organic sales over the last two decades. The lawsuit says the unilateral action taken by USDA to adopt major policy change without a public process violates one of the foundational principles and practices of OFPA.
At issue in the lawsuit is a rule that implements the organic law’s “sunset provision,” which plaintiffs say has been interpreted since its origins to require all listed materials to cycle off the National List of Allowed and Prohibited Substances unless the NOSB votes by a two-thirds majority to relist them. In making its decision, plaintiffs say the NOSB is charged with considering public input, new science and new information on available alternatives.
In September 2013, USDA announced a definitive change in the rule so that materials can remain on the list in perpetuity unless the NOSB takes initiative to vote any of them off the list. The plaintiffs say this decision was made without any public input.
“The complaint challenges the unilateral agency action on the sunset procedure for synthetic materials review, which represents a dramatic departure from the organic community’s commitment to an open and fair decision making process, subject to public input,” the plaintiffs say in a joint statement. “Legally, the agency’s decision represents a rule change and therefore must be subject to public comment. But equally important, it is a departure from the public process that we have built as a community. This process has created a unique opportunity within government for a community of stakeholders to come together, hear all points of view, and chart a course for the future of organic. It is a process that continually strengthens organic, supports its rapid growth, and builds the integrity of the USDA certified label in the marketplace.”
The plaintiffs in this case, represented by counsel from Center for Food Safety, include: Northeast Organic Dairy Producers Alliance, Beyond Pesticides, Center for Food Safety, Equal Exchange, Food and Water Watch, Frey Vineyards, La Montanita Co-op, Maine Organic Farmers and Gardeners Association, New Natives, Northeast Organic Farmers Association Massachusetts, Ohio Ecological Food and Farm Association, Organic Consumers Association, Organic Seed Growers and Trade Association, PCC Natural Markets and The Cornucopia Institute.