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As organic milk sales slow, companies look to innovate

February 16, 2018

By Rena Archwamety

MADISON, Wis. — As fluid milk consumption continues to decline, organic milk sales have enjoyed increased growth over the past several years — though that growth recently has slowed.

Between 2012 and 2018, U.S. organic milk increased 13.8 percent by retail volume and 21.7 percent by retail value, according to data from Euromonitor International. However, volume decreased 0.7 percent between 2015-2016, and volume increased only 1.8 percent between 2016-2017, Euromonitor reports.

Similar to conventional milk, slowing in organic milk sales has been driven by the declining popularity of skim and 1-percent.
“When you look at organic regular white milk, sales have plateaued,” says Eric Snowdeal, senior brand manager, Organic Valley, La Farge, Wisconsin. “Historically we have seen whole milk growing, and skim and 1-percent have declined. It’s quite the same picture in conventional milk as well, and a pattern we’ve seen now for 5-7 years.”

Organic whole milk sales totaled 1.0 billion pounds in 2017, up 6.2 percent from the previous year, while 2017 sales decreased for organic reduced-fat milk (-0.4 percent), lowfat milk (-8.8 percent) and skim milk (-13 percent), according to Dairy Market News’ latest Organic Dairy Fluid Overview. Total organic sales are reported at 2.6 million pounds for 2017, flat with the previous year’s sales on an unadjusted basis.

• Meeting consumer needs

While total organic dairy products — including cheese, milk, sour cream and other items — are growing in household panel data, organic fluid milk has remained fairly stable, Snowdeal says. Organic dairy is up from 24 percent of U.S. households in 2014 to 29.1 percent in 2016, while organic milk is up from 12 percent to 12.2 percent. In comparison, he notes conventional milk during that same time period has declined from 93.2 percent of households to 92.9 percent.

In addition to lower skim and lowfat milk consumption trends, there are a number of factors that could be responsible for the slowing growth in organic fluid milk, Snowdeal says.

“Like regular milk, societal demographics are at play — there are fewer households with children, and that’s what drives milk sales,” he says.

Plant-based milk alternatives also are taking up more retail space and entering more households, especially those that already consume organic milk.

“But it’s not cannibalizing milk — milk is not going away, they’re both there,” Snowdeal explains. “In the world of more choices, can you quantify that less milk is being consumed because you have plant-based products? Maybe, but it’s not a one-for-one trade-off. What are those folks looking for? Can we produce a dairy-based beverage that is meeting their needs?”

Once organic milk has reached a plateau, SKUs will reach a natural leveling-off unless the industry offers new products and innovations, Snowdeal says, adding that there is opportunity in the market for more organic milk products.

“We’re seeing a lot more interest in quick service restaurants and organic single-serve milks in places like foodservice and airports,” he says. “We’re trying to look at occasions where people are saying they want to consume healthful dairy with all the benefits of protein and nutrients. It might not be at the kitchen table, but through functional beverages.”

For example, Organic Valley has introduced Organic Fuel and Organic Balance milk protein shakes, as well as Good to Go 11-ounce milk packaged in a modern-looking bottle and sold in convenience and drug stores.

“What we’ve definitely found is that people, when out and about in their busy lives, are looking for a glass or serving of organic milk, so we’re giving them those options,” Snowdeal says.

Organic Valley also offers a variety of organic milk options, including lactose-free and omega-3 enhanced milks, and 100-percent grass-fed in cream-on-top and homogenized varieties.

• Grass-fed growth

One organic milk segment that has seen tremendous growth is 100-percent grass-fed organic milk. Organic Valley introduced its Grassmilk line in 2012, and a number of other brands subsequently have introduced 100-percent grass-fed fluid milk products, including Maple Hill, Pure Eire, Traderspoint Creamery, Sweet Grass Organics and Oasis Creamery. Taste, perceived nutritional benefits and animal care are all factors driving consumer demand for this type of organic milk.

“In the organic fluid milk world, 100-percent grass-fed milk is the fastest-growing segment, with just over 100 percent growth (year-over-year in food and natural channels),” Snowdeal says.

A study on the increased levels of omega 3 fatty acids in milk from grass-fed cows is set to be published next month in the Journal of Food Nutrition. Lynne Snifka, media relations manager for Organic Valley, says Organic Valley anticipates demand for grass-fed milk will increase even more after this study is released.

Kinderhook, New York-based Maple Hill, which started out as a 100-percent grass-fed organic yogurt company, launched 100-percent grass-fed whole milk in March 2017 and 2-percent milk last summer. The half-gallon varieties are available across the country in retailers including Whole Foods, Publix, Amazon Fresh, Walmart, Natural Grocers and Sprouts.

“The desire to launch that was based on the fact that millennial moms are looking for the best nutrition possible for their children, and they get that through 100-percent grass-fed organic milk,” says Hannah Robbins, chief marketing officer, Maple Hill. “A lot of shoppers will switch to organic or grass-fed milk when their children are very young, moving from formula or being breastfed to whole milk. That’s also a time when they are very aware of what milk they’re buying.”

At $5.99 per half gallon, Maple Hill’s 100-percent grass-fed organic milk is generally more expensive than regular organic milk. But Robbins says when moms understand the value of that milk, they are willing to spend the extra money.

“From organic to grass-fed, it’s what we’re referring to as the ‘better organic’ — it’s the organic you thought you were getting, buying milk from cows that are only on grass,” she says. “Our pastures have over 150 types of grass ... we ensure our farmers understand pasture cultivation and have the highest-integrity paddock conservation. All make for happy, healthy cows.”

Following the success it has seen with its 100-percent grass-fed milk, Maple Hill plans to introduce new products in its fluid milk line later this year.

Organic Valley also is expanding its Grassmilk line, launching new 100-percent grass-fed half-and-half. It will be available in non-flavored pints for a retail price of $3.19 starting the first week in March.

• Organic expansion

Despite the recent stagnation in organic milk sales, companies still are looking at entering and expanding in the organic milk market.

Boulder, Colorado-based Aurora Organic Dairy, a leading producer and processor of store-brand organic milk, currently is building a second milk plant in Columbia, Missouri, which is expected to be operational in early 2019.

Umpqua Dairy, a milk processor that distributes conventional fluid milk across Oregon and in the Pacific Northwest, recently started bottling its own organic milk and distributing it to stores near its headquarters in Roseburg, Oregon. It plans to expand its distribution as demand grows.

Umpqua previously had purchased organic milk from another processor that bottled under the Umpqua name, but increased demand prompted the company to go through organic certification to allow it to bottle organic milk on-site.

“A lot of it is hopefully new customers as well as existing,” says Tina Jochum, marketing coordinator, Umpqua Dairy. “Organic still is a pretty low percentage of what we are selling, but as social consciousness comes about, there will be a segment who want organic. We wanted to be able to provide that as an alternative. It’s something we’re excited about, and we’re getting a lot of feedback that there is interest, which helps support the decision we’ve made.”

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Appointed ‘judicial officer’ to review California FMMO

February 16, 2018

WASHINGTON — In a call with industry stakeholders on Tuesday, Stephen Vaden of USDA’s Office of General Counsel announced that, in order to shorten a delay in finalizing a rule to implement a federal milk marketing order (FMMO) for the state of California, Agriculture Secretary Sonny Perdue has decided to pursue a “ratification option” where USDA will appoint a “judicial officer” to step into the pending California proceeding.

USDA last year released a proposed rule recommending the establishment of an FMMO for California. Written comments were accepted through May 15, 2017, and USDA said it would take time to consider all filings before issuing a final rule.

Last week, USDA announced that two pending Supreme Court cases have raised legal questions regarding the status of all administrative law judges (ALJs), including the ALJ who presided over the California FMMO hearing in late 2016. (See “USDA announces delay for California FMMO rulemaking” in last week’s issue of Cheese Market News.)

According to Vaden, if the Supreme Court were to hold that the appointments of ALJs do not comply with certain requirements set forth in the U.S. Constitution, the hearing record in the California FMMO proceeding would likely be vacated and the rulemaking process would need to start over.

Under such a scenario, Vaden estimated that the earliest that a California FMMO could be promulgated and implemented would be late 2020 or early 2021.

However, under Perdue’s decision to appoint a new judicial officer, because this judicial officer is not an ALJ, any decisions made by this individual would not be affected by the pending Supreme Court cases.

This week, USDA provided industry stakeholders with an updated timeline for the potential marketing order.

The judicial officer will be tasked with reviewing the entire hearing record in the California FMMO proceeding, including each of the exhibits that have been submitted.

Following this review, the judicial officer will reach an independent judgment on the hearing record.

If he or she ratifies the record as it currently stands, USDA would promulgate the final rule, and the producer voting process would be initiated. Under this scenario, Vaden says a California FMMO could be promulgated and potentially implemented as soon as November 2018.

If the judicial officer has questions regarding the record, however, USDA would need to establish a process that allows affected stakeholders to respond to those questions. If this were to happen, promulgation and potential implementation could be delayed until February 2019.

A link to a recording of the call with Vaden and stakeholders is available at www.ams.usda.gov/rules-regulations/moa/dairy/ca.
Late last week, several stakeholders including Dairy Farmers of America, Land O’Lakes, California Dairies Inc., Western United Dairymen (WUD), California Milk Producers Council and California Dairy Campaign sent letters to USDA raising concerns about the delay announced earlier last week.

Following Tuesday’s call, WUD said while removing the potential of having to start from scratch takes away the biggest risk to the process, the delay remains, and the uncertainty of not seeing a final decision continues to hang over producers’ heads.
“We appreciate the secretary’s effort towards improving a tough situation, but we are still disappointed in the delay this is causing,” WUD says.

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Magic Valley Quality Milk expands in Jerome, Idaho

February 16, 2018

JEROME, Idaho — Magic Valley Quality Milk Producers (MVQMP) is expanding its plant in Jerome, Idaho.

“The board of directors has approved a $20 million expansion project designed by Power Engineers and Dairy Industry Consultants with Petersen Bros. Construction as our general contractor and Advanced Process Technologies Inc. as our main milk process equipment supplier. The project will take 12 months to complete, and we expect to employ at least 15 new employees,” says Alan Stutzman, general manager, MVQMP.

MVQMP was founded more than 20 years ago as a milk marketing cooperative. The membership and board of directors recognize that while it is important to maintain the best relationship with its raw milk customers, it also is necessary to expand into the processing of milk in order to continue to be sustainable, the co-op says.

As a result of the investment, MVQMP intends to market ultrafiltered skim milk, condensed skim milk and cream. The project will involve the construction of a two-truck bay milk receiving building, expansion of the existing process area with new processing equipment and addition of office and employee facilities.

“We’re happy to see Magic Valley Quality Milk Producers growing in its Jerome location. It’s a great compliment to the city as a whole when businesses expand at their current locations. They are a terrific company, and we’re grateful for their investment in Jerome,” says David Davis, mayor of Jerome.

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USDA releases long-term price, production outlook

February 16, 2018

WASHINGTON — In its “USDA Agricultural Projections to 2027” released this week, USDA says it expects milk production to rise at a compound annual growth rate of 1.5 percent per year over the next 10 years.

The report notes that after a long downward trend, milk cows reached a low point of 9.01 million head in 2004. Since then, cow numbers have fluctuated but trended slightly upward, nearly reaching 9.33 million head in 2016. Milk cow numbers are expected to reach 9.55 million head by 2022 due to rising milk prices and relatively low feed prices, and hold steady through the remainder of the projection period.

Trends in farm consolidation are expected to continue, leading to economies of scale. Coupled with technological and genetic developments, the long-term output per cow is expected to continue its growth over the next decade. Average milk per cow is expected to rise from 22,975 pounds in 2017 to 24,565 pounds in 2022 to 26,205 pounds in 2027.

Domestic demand is expected to continue to grow at a strong pace, with commercial use of dairy products rising faster than the growth in U.S. population over the next decade. Demand for cheese is expected to rise due to continued greater consumption of prepared foods and increased away-from home eating. Butter demand also is expected to grow, in part due to changing consumer perceptions about health implications of consuming milk fat, USDA says. The decline in per capita consumption of fluid milk products also is expected to continue.

Global demand for U.S. dairy products is expected to continue to grow over the next 10 years, with the largest increases in exports of products with high skim-solids content, such as nonfat dry milk and whey products. By 2027, dairy exports are expected to be 4.3 percent of milk production on a milk-fat milk-equivalent basis and 21.3 percent on a skim-solids milk-equivalent basis,USDA projects.

Nominal farm-level milk prices are expected to increase over the projection period largely due to robust increases in both domestic and global demand. After fluctuating in the near term, the prices of dairy products are expected to rise steadily over the second half of the projection period, USDA adds. The all-milk price in 2022 is forecast at $16.85 per hundredweight, rising to $18.60 in 2027.

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Whitehall Specialties’ formulations aim to meet evolving customer needs
Company says innovation is essential for future growth

By Kate Sander

WHITEHALL, Wis. — Problem solving — whether it’s improving functionality, nutrition or value — is what processed cheese manufacturer Whitehall Specialties concentrates on daily for each of its customers.

“Innovation is at the core of what we do,” says Karl Kramer, Whitehall Specialties’ president and CEO. “We offer new products and concepts based on our extensive, industry-renowned formulation expertise.”

Headquartered in Whitehall, Wisconsin, Whitehall Specialties offers customers a broad line of high-quality, high-value cheese products, natural and imitation cheese blends, cheese substitutes and imitation/analog cheeses.

Building on its foundation of formulation expertise, innovation, manufacturing excellence and long-standing customer relationships, Kramer — who has been at the helm of Whitehall for almost three years — seeks to take the company to the next level by enhancing its unique, value-added product offerings to better meet the ever-changing needs of its customers. This includes meeting the demands of customers looking for “better for you” products, cleaner labels and other high-growth opportunities, he says.

Whitehall offers a full range of cheese types in various configurations, including block, loaf, shredded, diced, sliced, dried and grated, as well as other specialty styles. The company has hundreds of base recipes that can be customized to meet customers’ specific requirements with respect to flavor, cost, functionality and nutritional aspects, Kramer says.

The company’s largest customer base is industrial customers, who use Whitehall products as ingredients in a variety of finished food products. This is followed by retail, for which Whitehall offers both branded and private label products.

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USDA announces delay for California FMMO rulemaking

February 9, 2018

WASHINGTON — USDA in Tuesday’s Federal Register announced a delay of the California federal milk marketing order (FMMO) rulemaking proceeding, citing the Agricultural Marketing Service’s (AMS) intention to await a U.S. Supreme Court decision on a different but related legal matter prior to proceeding with the rulemaking.

AMS in February 2015 received a proposal from three dairy cooperatives to call a hearing to promulgate an FMMO in California. AMS received additional proposals in April 2015. A hearing was held in September 2015, and AMS published a recommended decision in February 2017. (See “USDA will publish a proposal to establish California FMMO” in the Feb. 10, 2017, issue of Cheese Market News.)

The proposed FMMO incorporates the entire state of California and would adopt the same dairy product classification and pricing provisions used throughout the current FMMO system. The proposed FMMO provides for the recognition of producer quota as administered by the California Department of Food and Agriculture (CDFA).

Should USDA recommend a new FMMO, affected producers will be eligible to vote through their cooperatives’ bloc voting for members. In order to implement the order, two-thirds of producers must vote in support.

In the Federal Register notice published Tuesday, AMS notes that its hearing held Sept. 22, 2015, was presided over by Administrative Law Judge Jill S. Clifton. In November 2017, the Solicitor General of the United States submitted a brief to the U.S. Supreme Court in the case of Lucia v. Securities and Exchange Commission, and it is the government’s position that administrative law judges are “inferior officers of the United States, subject to the Appointments Clause of Article II of the Constitution. The Solicitor General urged the court to resolve a Circuit Court of Appeals split concerning the constitutional requirements for all administrative law judge appointments. The Supreme Court indicated last month it will review the case.

AMS notes that at all times material to the hearing for the prospective promulgation of an FMMO for California, Judge Clifton presided over the proceedings on behalf of USDA. At the time of the hearing, USDA believed Clifton to be an employee of the department and her appointment was completed in accordance with agency procedures. However, if the court determines that administrative law judges are inferior officers of the United States rather than employees, Clifton’s original appointment as an administrative law judge would be brought into question, AMS says.

The court is expected to hear oral arguments in Lucia during the current term and to render its decision on or before the end of its term June 30, 2018.

AMS notes as of Nov. 29, 2017, the U.S. Department of Justice no longer will argue in the federal courts that administrative law judges are employees rather than inferior officers unless the Supreme Court determines otherwise.

“Consequently, it is prudent and appropriate for AMS to delay further proceedings in this FMMO rulemaking until the court renders its decision in Lucia,” AMS says.

AMS says questions may be directed to Erin Taylor, acting director of AMS, at 202-720-7311 or by email at erin.taylor@ams.usda.gov.

The Dairy Institute of California notes the FMMO in California proceeding is marking its third anniversary since its initiation in February 2015.

“We appreciate that external events can intervene in the regulatory process, but we also note that the California Department of Food and Agriculture has had two pricing hearings during this same time to respond to producer concerns about the value of whey in our Class 4b formula,” says Rachel Kaldor, executive director, Dairy Institute of California.

“The contrast in flexibility between a federal and state system could not be more stark,” Kaldor says. “Our hope is that when USDA is able to release its final rule, California dairy farmers make the best decision based on the best information, for their and the industry’s future success.”

Meanwhile, CDFA recently denied a petition for a hearing on increasing milk prices, citing the pending federal order. Last month, the California Dairy Campaign (CDC) and Western United Dairymen (WUD) sent a petition to CDFA Secretary Karen Ross requesting an emergency hearing to consider increases to Class 1, 2, 3, 4a and 4b prices for the period of April 1, 2018-March 31, 2019. (See “CDC, WUD request hearing on milk pricing changes” in the Jan. 26, 2018, issue of Cheese Market News.)

“The department is acutely aware of the impact to dairy families of sustained low milk prices caused by global milk production and ample dairy product supplies that are outpacing global market demand,” Ross says in a letter to CDC and WUD. “The entire California dairy sector is currently facing financial stress.”

However, Ross says after consideration of the petition, CDFA is denying the request for a hearing “because it is inappropriate to hold a hearing while California dairy producers are exercising self-determination with regards to implementing a federal milk marketing order in California.”

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Congressional spending bill includes reforms for dairy

February 9, 2018

WASHINGTON — A spending package passed by the House and Senate today includes dairy policy reforms.

The reforms included in the congressional disaster assistance package are much-needed improvements to the dairy safety net and come at a time when many of America’s dairy farmers are struggling financially after a third year of stagnant prices, says Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF).

NMPF sent a letter Thursday to leaders of the Senate and House, urging passage of the larger spending bill that contains reforms to the Margin Protection Program (MPP) for Dairy and provides access to additional risk management tools from USDA. These key dairy-related elements in the bill will create $1.2 billion in baseline spending for the next farm bill, paving the way for additional improvements to MPP, NMPF says.

In the letter sent to House Majority Leader Mitch McConnell, R-Ky., Minority Leader Chuck Schumer, D-N.Y., Speaker Paul Ryan, R-Wis., and Minority Leader Nancy Pelosi, D-Calif., NMPF outlined the difficult economic situation facing dairy producers today, including declining milk prices and global export challenges. The proposed dairy policy changes will better help farmers weather this challenging environment, the letter says.

The MPP reforms in the dairy package include:

• Raising the catastrophic coverage level from $4 to $5 for the first tier of covered production for all dairy farmers;

• Adjusting the first tier of covered production to include every dairy farmer’s first 5 million pounds of annual milk production (about 217 cows) instead of 4 million pounds, a recognition of the growth in herd sizes across the country;

• Reducing the premium rates, effective immediately, for every producer’s first 5 million pounds of production, to better enable dairy farmers to afford the higher levels of coverage that will provide more meaningful protection against low margins;

• Modifying the margin calculation to a monthly (from bimonthly) basis to make the program more accurate and responsive to producers in difficult months;

• Waiving the annual $100 administrative fees for underserved farmers; and

• Directing USDA to immediately reopen the program signup for 2018.

The disaster package also lifts the $20 million annual cap on all livestock insurance, including the Livestock Gross Margin (LGM) program. This will allow USDA to develop a wider variety of additional risk management tools that will be especially important for larger dairy producers and can complement MPP.

“We applaud Sens. Patrick Leahy, D-Vt., and Debbie Stabenow, D-Mich., for spearheading the badly needed reforms to the MPP, which will make the program a more effective safety net for dairy producers,” Mulhern says. “These critical provisions are based on their proposal that was approved by the Senate Appropriations Committee last summer in a bipartisan vote. The reforms also reflect the assistance of Sens. Thad Cochran, R-Miss., and Pat Roberts, R-Kan., as well as key members of the House.”

Mulhern adds NMPF also commends Reps. Mike Conaway, R-Texas, and Collin Peterson, D-Minn., for crafting language to remove the existing cap on livestock insurance products, including the LGM-Dairy program.

“This will give dairy farmers the opportunity to access a variety of additional risk management tools that can complement MPP, and it garnered bipartisan support from our Senate allies. Taken together, these changes will provide important risk management tools for dairy farm operations of all sizes,” Mulhern says.

NMPF says it now will focus on working with the Senate and House agriculture committees on shaping the 2018 Farm Bill. The added resources established by the fixes to the MPP and LGM programs “help pave the way for final adjustments to the dairy safety net for the next five years as Congress crafts a new farm bill,” Mulhern says.

Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA), notes that IDFA last year joined with NMPF to present the House Agriculture Committee with the organizations’ basic requests for the new farm bill, which included improving the safety net for dairy farmers.

“I am happy to say that the budget package worked out by a bipartisan group of congressional leaders ... includes provisions that will do just that,” Dykes says.

“This effort sets us up to tackle the 2018 Farm Bill, due Sept. 30, efficiently and effectively,” he adds. “It is a win for the dairy industry as a whole and we are grateful to the members of the House and Senate who made it happen.”

Meanwhile, U.S. Senator Kirsten Gillibrand. D-N.Y., this week announced new legislation, the Dairy Premium Refund Act, to return insurance premiums to farmers who paid millions of dollars for an insurance program that she says left them empty-handed when milk prices plummeted.

Gillibrand says thousands of dairy farmers paid millions of dollars to USDA for MPP coverage, but when milk prices and feed prices fall at the same time as they did last year, farmers often lose money on every pound of milk they sell, and few farmers receive an insurance payment.

“Right now, our dairy farmers are in the midst of a serious financial slump through no fault of their own,” she says. “Milk prices are now much lower than the cost it takes for farmers to produce that milk, and farmers are struggling to pay their workers and their bills.”

Gillibrand says while MPP was supposed to help dairy farmers in these situations — and even though farmers have paid millions of dollars into the program — “they’ve barely been paid out a dime.”

Gillibrand’s legislation would ensure that dairy farmers automatically receive a check in the mail at the end of the production year for any insurance premium funds not used to pay claims to them during the previous year.

Currently, these leftover funds are given to the U.S. Department of Treasury rather than to the farmers who paid them, she says, noting this bill proposes no new spending, would provide payments retroactively since MPP was implemented in 2015 and would apply to all future MPP program years.

“My bill would put all of those unused insurance premiums back into the pockets of our dairy farmers, who work day and night to provide milk for our families and deserve better than the raw deal they’re getting with the current dairy insurance program,” Gillibrand says.

CMN


NMPF: Study misleading about safety risks of milk

February 9, 2018

WASHINGTON — The National Milk Producers Federation (NMPF) this week admonished the authors of a recent study that linked milk to disease outbreaks around the world. In a letter dated Feb. 6, NMPF says the authors need to better clarify that any significant dairy-related food safety risk is only associated with the consumption of raw milk, not commercially-available dairy foods sold in the United States and other developed nations. NMPF says it is actually raw, unpasteurized milk that is a demonstrable source of pathogens.

The study, authored by researchers from McGill University in Quebec, compares nutrition in cow’s milk to that in plant-based beverages. The study, published in the January edition of Journal of Food Science and Technology, and a press release posted by the university, initially noted that while cow’s milk is the most nutritious, it also is a source of allergies and lactose intolerance, and that the presence of various pathogens like Salmonella spp and E. coli O157:H7 in milk have been associated with disease outbreaks around the world.

Beth Briczinski, vice president for dairy foods and nutrition, NMPF, says media attention to this claim is disconcerting and has to be addressed.

“Cow’s milk is one of the most regulated food products on the market today,” she says. “To publish such an egregious claim in a scientific journal could damage consumer trust in this great beverage, which is why we insist that the study’s authors issue a correction to the journal article and revise its press release immediately.”

The NMPF letter notes that raw milk is a key vehicle in the transmission of human pathogens like E. coli, Listeria and Salmonella, and that the U.S. Centers for Disease Control and Prevention (CDC) have reported that more than 70 percent of foodborne outbreaks involving dairy are attributed to raw milk, which is illegal in Canada and in many U.S. states.

“There is no basis for your statement linking milk consumption to worldwide foodborne outbreaks,” the letter says. “Such a comment has the potential to do incredible, unjustified harm to our industry and has the potential to cause fear in consumers who are seeking nutrient-dense and safe products for themselves and their families.”

Following the letter, McGill updated its press release to make the claim more specific to raw dairy products, saying, “The presence of various pathogenslike Bacillus spp, Listeria spp, Salmonella spp and Escherichia coli O157:H7 in milk and milk products, especially made from raw, unpasteurized milks have been known to be sources of foodborne illnesses and diarrhoeal diseases around the world.”

NMPF says the Journal of Food Science and Technology also invited it to submit a letter to the editor with its concerns, which NMPF says it plans to do Monday.

“This episode is a perfect example of why NMPF engages in efforts to restrict access to the sales and distribution of raw milk,” says Chris Galen, senior vice president, communications, NMPF. “As this report shows, if even supposedly well-educated food safety experts don’t distinguish between raw and pasteurized products when communicating about dairy, how can the public?”

A number of U.S. states are considering legislation to make raw milk more easily accessible for consumers, including most recently Virginia and Iowa. The Virginia bill, HB 825, would allow consumers to purchase raw milk through herd-sharing ownership agreements in the state and remove existing regulations prohibiting sales of raw milk for consumption. Currently, herd share programs in Virginia are unregulated. This week the bill was scheduled to be heard by Virginia’s House Subcommittee on Agriculture, Chesapeake and Natural Resources, but there was a vote to strike it from the docket.

NMPF and the International Dairy Foods Association sent a letter last month to Virginia’s Department of Agriculture and Consumer Services opposing this proposed legislation.

“Creating herd ownership agreements through HB 825 is a clear loophole — allowing raw milk producers to skirt Virginia state law requiring all milk and milk products in the state be pasteurized for sale to final consumers, retailers or foodservice establishments — and putting vulnerable consumers at risk,” the groups say.

The Iowa bill, HF 2055, would allow dairy farmers in the state to sell raw milk directly to consumers and outline labeling requirements. Iowa’s Local Government Subcommittee recommended the bill for passage Jan. 30.

CMN


Atalanta Corp. acquires ANCO from Schratter

February 9, 2018

ELIZABETH, N.J. — Atalanta Corp., a food importer specializing in cheese, charcuterie, deli meat, grocery and seafood products from around the world, has acquired ANCO Fine Cheese, a business unit from Schratter Foods Inc.

The All Nations Cheese Organization (ANCO) is one of the largest and broadest specialty cheese importers in the United States.

“For decades, ANCO has been one of the most established importers of specialty cheese to the U.S.,” says Tom Gellert, president of Atalanta. “Together with Atalanta’s own rich history, we have a unique opportunity to solidify our position as leaders in the specialty cheese and deli categories.”

He adds that Atalanta and its parent company, The Gellert Global Group, are looking forward to gaining great synergies from ANCO’s network of strong relationships with suppliers, customers and the addition of a great team of people.

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Latest round of NAFTA talks ends with limited progress

February 2, 2018

WASHINGTON — As the sixth round of NAFTA renegotiations wrapped up in Montreal this week, U.S. Trade Representative (USTR) Robert Lighthizer indicated that talks are progressing slowly but some core issues were addressed.

“We believe that some progress was made. We finally began to discuss some of the core issues. So this round was a step forward, but we are progressing very slowly,” Lighthizer says.

“The United States views NAFTA as a very important agreement. We are committed to moving forward,” he adds. “I am hopeful progress will accelerate soon. We will work very hard between now and the beginning of the next round, and we hope for major breakthroughs during that period.”
Jaime Castaneda, senior vice president of strategic initiatives and trade policy for the National Milk Producers Federation, attended the Montreal talks to continue to advocate directly to negotiators about U.S. dairy farmers’ priorities in negotiations.

“Our view is that there are many issues that Canada needs to fix on dairy — both in the tariff realm and its harmful nontariff policies like Class 7,” Castaneda says, referring to Canada’s Class 7 pricing policy, which undercuts skim milk powder prices on the global market. (See “Dairy industry seeks action over Canadian trade policy” in the April 7, 2017, issue of Cheese Market News.)

“We know that dairy is front and center in USTR’s deliberations on how to successfully achieve a modernized NAFTA agreement that results in new benefits to U.S. exports,” Castaneda adds. “We are optimistic that NAFTA will be successfully renegotiated, keeping all the benefits that agriculture currently enjoys, while addressing what needs to be fixed such as the dairy-related issues we have spotlighted.”

Michael Dykes, president and CEO of the International Dairy Foods Association, also attended the most recent NAFTA round and says he is optimistic that U.S. negotiators will work to preserve U.S. dairy markets in Mexico and address global market problems resulting from Canada’s Class 7 pricing.

“While updating and modernizing appropriate elements of NAFTA and the U.S.-Korean Free Trade Agreement are important, it is imperative for the United States to take aggressive and simultaneous steps to pursue new trade agreements,” Dykes says. “We must cultivate global trade policies that provide a level playing field for U.S. dairy.”

The next round of NAFTA talks will be held next month in Mexico City.

President Trump in his State of the Union address this week mentioned a commitment to eliminating “unfair trade deals” but did not elaborate on agreements such as NAFTA.

“Family farmers and rural residents are looking to President Trump to deliver on his promises to fix the nation’s failed free trade agreement framework and crumbling rural infrastructure,” says Roger Johnson, president of the National Farmers Union.

“The president, rightly so, spoke to how our past trade agreements disadvantage the working class, family farmers and their communities. These agreements operate under a failed framework that the president can begin to fix by replacing NAFTA with an agreement that addresses our massive trade deficit and lost sovereignty,” Johnson adds. “Unfortunately, President Trump has gone about this in a fashion that isn’t conducive to positive relations with our trading partners. The administration must produce a better NAFTA and avoid massive market disruption through a NAFTA withdrawal.”

Zippy Duvall, president of the American Farm Bureau Federation, adds that as President Trump “works to reframe our trade agreements as fair and reciprocal, he goes in with the understanding that we need a trade agenda that secures greater access to ag export markets.

“American agriculture is a bright light in our overall balance of trade and with solid trade policies in place, we will continue down that path,” Duvall adds.

CMN


Michigan seeks capacity as milk production increases

February 2, 2018

Editor’s note: As part of our new series, “From Cow to Curd: A Look Across the Nation,” Cheese Market News takes 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 first state — Michigan.

By Rena Archwamety

MADISON, Wis. — Michigan has no shortage of milk. Over the past decade, as average U.S. milk production has increased 17 percent, Michigan’s milk production increased 43 percent from 2007-2017, says Barbara Koeltzow, dairy program manager, Michigan Department of Agriculture and Rural Development (MDARD).

“In general patterns, the number of dairy farms is continuing to decrease over time, but the total number of dairy cows and total number of milk produced is increasing tremendously over the same period of time,” Koeltzow says. “The trend has been going on since the early 2000s, and it doesn’t seem to be slowing down.”

In December, Michigan dairies produced a total of 933 million pounds of milk, up 2.5 percent from a year earlier, according to the latest USDA milk production statistics. Milk yield in December was among the highest in the nation at 2,180 pounds of milk per cow, and Michigan was home to 428,000 head of milk cows, up 3,000 head from the end of 2016. The state ranks No. 6 in the nation for milk production.

Dairy producers in Michigan range from small Amish farms that still milk by hand and ship milk in cans, to ultra-efficient, technologically-advanced producers who use robotic milking installations and rotary parlors, Koeltzow says.

For all its producers, Michigan offers an ideal climate for cow comfort. The Great Lakes help to moderate weather fronts, increasing temperatures about 10 degrees in the winter and decreasing them by about 10 degrees in the summer as the air moves across the lakes. Certain areas do experience heavy “lake effect” snowfall. While this can sometimes cause milk transportation delays, it typically doesn’t affect the dairy cows since most are housed and fed in freestall or comfort stall barns with covered feeding areas, Koeltzow says.

Michigan has attracted dairy farmers from other states and countries. Its ample water resources have brought dairy processors from California who were under pressure due to drought. Dutch and Irish immigrants have come to Michigan to dairy farm as well.

“The Dutch immigrant dairy farmers have been drawn to Michigan because there is a significant Dutch population in the Grand Rapids area that stems from families that immigrated in the 1800s,” Koeltzow says. “The Irish immigrants typically have a direct family connection in Michigan. Both groups definitely ask questions about the climate, availability of water, environmental regulations, feed sources, etc. when making their decision to relocate.”

Other growth and expansion, she says, comes from native Michiganders who see how economics are playing out and are planning for next generations of families to stay in agriculture.

The state government and agriculture department also deserve credit for making Michigan a good place for dairy, Koeltzow notes.

“MDARD and its dairy program have a national reputation for being true partners with our industry, really going the extra mile to help them out and answer their questions — not just be a regulator,” she says.

Producers and processors agree that Michigan is a dairy-friendly state in terms of legislation and regulation.

“Challenges that might be faced in other industries, we have the advantage of having the ear of those who are decisionmakers and understand the challenges of farming,” says Joe Diglio, general manger of the Michigan Milk Producers Association (MMPA) cooperative based in Novi, Michigan.

“The state is very cooperative in terms of inspections and helping when new regulations come down. From a regulatory perspective, they’re outstanding,” says Mike Balane, national sales manager of Benton Harbor, Michigan-based Old Europe Cheese.

• Capacity for growth


Michigan is home to large cheese processors such as Old Europe Cheese and Leprino Foods Co., as well as smaller artisan producers such as Leelanau Cheese Co. in Suttons Bay and Zingerman’s Creamery in Ann Arbor. Major fluid milk processors include MMPA, Prairie Farms, Agropur and Meijer. Despite this, if Michigan has a weak point in its growing dairy industry, Koeltzow says, it is that there is not nearly enough capacity to process all the milk it produces. Around 35 percent of milk produced in Michigan has to go out of state to be processed.
This has provided opportunity for many of the dairy plants in Michigan to expand, with ample room for future growth.

Balane notes that Old Europe Cheese, which was founded in 1987 by parent company I.L.A.S. of Spain, has expanded its facility multiple times. When it first started, Old Europe processed a couple hundred thousand pounds of Feta, Muenster and Swiss a year. It eventually switched its focus to Brie, Camembert and other continental-style cheeses, and in 2018, it expects to surpass 7 million pounds of cheese.

“Every year there is another expansion,” Balane says. “This year we are confident there will be an expansion in cheesemaking. A year ago it was our bakery (for its Baked Brie), two years ago our curing room. We’re due shortly for another curing room expansion.”

Old Europe’s facility previously was a dairy plant belonging to MMPA, and MMPA remains the sole milk and cream supplier for Old Europe’s cheese production.

MMPA represents about 1,100 farms — mostly in Michigan with some also in Wisconsin, Ohio and Indiana — and marketed 5.1 billion pounds of milk last year. The cooperative operates two Michigan manufacturing facilities of its own in Ovid and Constantine. Its largest plant in Ovid, Michigan, has a daily capacity of 5 million pounds of milk and processes approximately one-third of all milk marketed by MMPA. MMPA has invested more than $100 million in the Ovid facility over the last 10 years, and in 2010 increased milk processing capacity at this plant by 60 percent. This plant manufactures condensed milk, dry milk powder, cream and butter.

MMPA’s Constantine, Michigan, plant has a capacity of 2 million pounds of milk per day and processes approximately 600 million pounds of milk each year into butter, cream, condensed skim, nonfat dry milk and instant milk. In 2014, MMPA and Foremost Farms USA formed a strategic alliance and invested $10 million to install reverse osmosis technology at this plant.

The majority of the dairy ingredients produced at these plants are sold in the foodservice business, and MMPA also is involved in the fluid milk market in Michigan, particularly through its partnership with Kroger Co.

“We’re always looking at opportunities to expand — not just processing capacity, but product development,” Diglio says. “When we look at additional capital to spend, we look at our diversified product mix. How do we add upon our portfolio to align with our customers’ strategic vision?”

More than 350 Michigan dairy farms are members of Dairy Farmers of America (DFA), and these farms produce more than 3 billion pounds of milk each year. DFA member milk is processed at its wholly-owned plants in Adrian and Cass City, Michigan, as well as by a number of key customers in the region.

“We are currently exploring a number of scenarios for the expansion of the 33,000-square-foot Cass City facility. Exact details are still being finalized at this time,” says John Wilson, senior vice president and chief fluid marketing officer, DFA. “Additionally, we are continuing to work in partnership with others on the development of a new cheese and whey production facility in Michigan.”

DFA, MMPA and Glanbia are exploring a joint venture stand-alone cheese and whey facility in Michigan. In an announcement last year, the companies projected that the plant would process 8 million pounds of milk per day and be commissioned in the second half of 2019.

“The project, I would consider to be in an accelerated position at this point in time. We’re seeing desire to look at options location-wise,” Diglio says of the joint venture. “We’re looking currently at where the facility would be located that optimizes not only the milk supply, but the outbound of product that would be produced there.”

Foremost Farms USA, a Wisconsin-based cooperative with members in seven states including Michigan, previously was part of the group discussing this joint venture, but now it is planning its own dairy processing facility in Greenville, Michigan. The new dairy campus is projected to receive up to 6 million pounds of milk per day and be operational around the end of the year.

• Overcoming challenges


With all its growth opportunities, Michigan’s dairy industry faces challenges of finding enough workers to support its production and processing needs. Processors also can face infrastructure challenges.

“A big issue that new facilities coming into the state or existing facilities who want to expand struggle with is that the wastewater treatment systems in our cities and towns really lack the capacity to deal with the amount of wastewater treatment required when you talk about a dairy plant,” Koeltzow says. “Ag development folks work really hard looking for grants and trying to be innovative in solving problems, or if there is anything cost-sharing wise that they can help out with. It often comes down to what the municipality also can give for cost sharing and expanding wastewater systems.”

A low unemployment rate nationally and in the state also poses a challenge when it comes to finding workers for Michigan farms and plants.

“I would say probably the biggest challenge the state has is workers,” Diglio says. “While the industry is growing in the state, having proper resources to handle the production growth can be very challenging as well as cumbersome to address. Especially when talking about immigration reform, which is really needed to address this issue.”

Balane says Old Europe often finds employees through family members or friends of those who already work there, but filling positions still can be difficult.

“It’s very challenging, the workforce,” he says. “We’ve raised wages, offered competitive healthcare to entice workers. It’s getting better.”

All indications point to continued growth in cows, milk and the need for more processors. Koeltzow says MDARD projects there will be more than half a million head of milk cows sometime within the next 10 years.

“We’re going to keep putting up more milk, and hopefully we can find some processors and provide the resources they need to bring more processing capacity to our state,” she says.

Wilson says DFA anticipates that milk production will continue to grow in Michigan, primarily due to feed supplies as well as an agriculturally-friendly government and a reasonable environment from a regulatory perspective.

“Michigan is definitely an area ripe for growth with a surplus of quality milk and ideal proximity to serve not only major U.S. markets, but also the global marketplace,” Wilson says. “Like the rest of the U.S., milk production growth in Michigan relies on continued development in domestic demand and increased export opportunities.”

Diglio says he believes projects like the jointly-owned cheese and whey facility will be key to meeting the challenges and opportunities of Michigan’s growing industry.

“This is not a one co-op issue, it’s an industry issue. Seeing that, I believe the way to address capacity challenges is through collaboration,” Diglio says. “My belief is that projects like the joint cheese plant, as well as other opportunities with industry partners, will certainly be discussed, reviewed and addressed collaboratively as an opportunity for all of us to address. The challenge is the value-added piece — how do you continue to extract value for dairy producers here.”

CMN


Annual U.S. production of cheese is up 2.6 percent

February 2, 2018

WASHINGTON — Total U.S. cheese production, excluding cottage cheese, was 1.089 billion pounds in December, 2.6 percent above December 2016’s 1.062 billion pounds and 3.0 percent above November 2017’s revised 1.057 billion pounds, according to preliminary data released Thursday by USDA’s National Agricultural Statistics Service. (All figures are rounded. Please see CMN’s Dairy Production chart on page 15.)

Adjusting for the length of the months, December cheese production was 0.3 percent below November 2017 production on an average daily basis.

December’s preliminary production data brings U.S. production for the year to 12.475 billion pounds, up 2.6 percent from 12.158 billion pounds in 2016. 2016 was a leap year, and when adjusted for the additional day in 2016, cheese production in 2017 was up 2.9 percent on an average daily basis.

USDA will release updated 2017 cheese production numbers later in the year.

In December, production of Mozzarella, the nation’s most-produced cheese, totaled 363.4 million pounds, up 1.4 percent from December 2016. Italian-type cheese production, of which Mozzarella is the largest component, totaled 466.6 million pounds, 0.9 percent above December 2016.

Cheddar production in December totaled 317.1 million pounds, up 3.2 percent from December 2016. American-type cheese production, of which Cheddar is the largest component, totaled 432.9 million pounds, 2.9 percent above December 2016.

Wisconsin led the nation’s cheese production in December with 288.7 million pounds, an increase of 2.6 percent over its production a year earlier. California followed with 217.4 million pounds, up 0.1 percent from a year earlier.

The next three cheese-producing states in December were Idaho with 84.7 million pounds, up 3.7 percent from December 2016; New York with 77.7 million pounds, up 8.3 percent; and New Mexico with 66.7 million pounds, down 2.2 percent.

NASS reports U.S. butter production in December was 170.3 million pounds, 4.2 percent above December 2016’s 163.4 million pounds and 15.5 percent above November 2017’s 147.4 million pounds. When adjusting for the length of the months, December butter production was 11.8 percent higher than November production on an average daily basis.

The preliminary December numbers bring total 2017 U.S. butter production to 1.844 billion pounds, up 0.2 percent from 1.839 billion pounds in 2016. When adjusting for 2016 being a leap year, 2017 butter production was up 0.5 percent on an average daily basis.

CMN


Dairy groups laud USDA proposal on milk in schools

February 2, 2018

WASHINGTON — Putting lowfat flavored milk back into schools will bolster the nutrition intake of America’s children, according to comments submitted this week to USDA by leading U.S. dairy organizations.

In joint comments, the National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA) praise a proposed USDA rule for the positive effect it will have on the problem of declining school milk consumption. (See “Industry applauds USDA rule expanding school milk options” in the Dec. 1, 2017, issue of Cheese Market News.)

In 2012, USDA eliminated lowfat flavored milk as an option in the school meal and a la carte programs, which resulted in students consuming 288 million fewer half-pints of milk from 2012-2015, according to NMPF and IDFA.

“Removing lowfat flavored milk causes schools to fail the test of how best to provide optimal nutrition for students,” says Beth Briczinski, vice president of dairy foods and nutrition, NMPF. “Fortunately, USDA recognizes the need to be more flexible in providing schools a range of milk options to enhance the dietary intake of the nine essential nutrients milk offers.”

Milk is the No. 1 source of three out of four nutrients of public health concern because they are under consumed: potassium, vitamin D and calcium.

“We appreciate USDA’s commitment to reverse declining school milk consumption by providing students with access to a variety of milk options, including the flavored milks they enjoy,” says Cary Frye, senior vice president of regulatory affairs, IDFA.

Last summer, Agriculture Secretary Sonny Perdue announced USDA would reinstate lowfat flavored milk as an option allowed by the department. According to the interim rule published on the Federal Register site in November, school districts can solicit bids for lowfat flavored milk in the spring before the 2018-19 school year, giving milk processors time to formulate and produce a lowfat flavored milk that meets the specifications of a school district. It now allows schools to offer lowfat flavored milk during the next school year without requiring schools to demonstrate either a reduction in student milk consumption or an increase in school milk waste.

In their comments, NMPF and IDFA say the interim rule is consistent with the 2015-2020 Dietary Guidelines for Americans (DGA), which does not suggest that flavored milk should be fat-free or that there is any reason to avoid lowfat flavored milk.

In fact, the DGA “acknowledges the potentially positive role of moderate amounts of sweeteners in making foods like milk and yogurt more palatable,” the groups say, noting lowfat flavored milk offers the same nutritional benefits as white milk, but with a taste more children prefer.

In addition, with recent formulation changes, flavored milk is now available with significantly lower levels of calories and added sugar, NMPF and IDFA add.

The two groups note USDA’s interim rule also aligns with the recent re-examination of fat — and dairy fat specifically — in the American diet. As more scientific studies find that advice to reduce fat intake was misguided, they also appear to show that full-fat dairy foods play either a neutral or beneficial role regarding the risk of several chronic diseases.

While the two dairy groups acknowledged that the interim rule does not compel schools to offer more milk options, both hope the option to do so will attract more students to school meal programs and increase the average daily consumption of milk.

CMN


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Today's Cheese Spot Trading
February 20, 2018


Barrels: $1.4825 (+1/4)
Blocks: $1.5450 (+1/2)


Click here for more market activity
Cheese Production
U.S. Total Dec.
1.089 bil. lbs.


Milk Production
U.S. Total Dec.
18.043 bil. lbs.

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