dairy

Project Wave -- which we now know is being pursued by PepsiCo -- will be the largest yogurt plant in North America, according to an industry expert with more than 15 years in the field.

Jeff Stephen, a consultant with Productive Partners, said in an interview today that what Pepsi is planning is impressive and will be a huge benefit to the community and the local dairy industry.

"Pepsi isn't the kind of company that is going to go anywhere," Stephen said. "They're not going to cut back because of any shortage of money. This is everything you could ask for in a local community. They are going to be successful. Not everything will go to plan, but they will succeed. This is a major global commitment."

Based on industry reports, Pepsi wants to get into the yogurt business. The multinational firm is planning a merger of sorts with Theo Muller Group, a German company that makes seven different yogurt products.

Stephen said companies for years have been trying to crack the U.S. yogurt market in the belief that American consumers don't buy as much yogurt as they should. Europeans consume five or six times as much yogurt as Americans, Stephen said.

The key to the U.S. yogurt market, Stephen said, is to make yogurt with more body and texture, a yogurt that can be consumed as a meal or a key ingredient in a meal. Growth in the U.S. yogurt market has been thwarted, Stephen said, because too much of the product available in the U.S. is what Stephen called "crappy dessert yogurt."

The key to the U.S. market is Greek yogurt, which has more flavor, is more filling and has greater nutritional value.

That's the kind of yogurt that will be the basis of Alpina's product line. Alpina was the first big signing for Genesee County Economic Development Center in the new ag park. Alpina is building an initially 10,000-square-foot facility that will employ 50 people.

Pepsi's plans begin with a 300,000-square-foot facility that will employ 180 people, with a build out by 2033 of 16 production lines and 600 employees.

There is no yogurt plant in North America that's close to that size, Stephen said.

When Stephen saw what was being planned for Project Wave, as first reported on The Batavian, he figured Pepsi, whose plans with Theo Muller had already been reported by the Wall Street Journal, was a likely prospect for the property. A project of that size would almost certainly be a plant for a large corporation moving into a new product line. 

The deal bringing Pepsi to Batavia hasn't been signed yet, but construction has begun on the facility and Pepsi is clearly eager to get its new product to market by 2013.

Stephen just hopes Pepsi is planning a yogurt line based on Greek yogurt and not "crappy dessert yogurt," which he doesn't think will help Pepsi or other yogurt makers expand the U.S. market.

Whatever Pepsi does, he doesn't see the Pepsi products competing directly with Alpina, which will be producing a slightly higher end yogurt and going after niche markets.

Pepsi's main competitors will be Dannon and Yoplait.

Dannon, based in White Planes, is a pure dairy company and between its two main brands, controls about 38 percent of the yogurt market. Yoplait, owned by General Mills, has another 6 percent. The rest of the market is shared by regional players and store brands, some of which, Stephen said, are very good.

Another potential local player in the yogurt market is O-AT-KA Milk Products, which is owned by Upstate Niagara Cooperative. 

The rumor is that a current expansion at O-AT-KA is for the local plant to start making yogurt ingredients.

It's unknown who the ingredients will be sold to, but Upstate purchased a 100-year-old, one-line yogurt plant in Watertown about a year ago.

Charitably, Stephen said, the Watertown plant is "historic," but it shows Upstate's intention to move into the yogurt business.

Whatever product Pepsi brings to market, Stephen said, will be thoroughly researched and well marketed.

"I have very high respect for Pepsi," Stephen said. "They are efficient in manufacturing and production and very good marketers. They are not the kind of company that gives up."

It's unknown whether Pepsi will purchase its dairy products through O-AT-KA or directly from farmers (those are discussions that probably haven't even taken place yet, Stephen said), but as for farmers, Stephen said they will be happy working with Pepsi.

Pepsi, he said, takes an approach that being easy to work with helps lower costs.

"I think the farmers will want to do business with them," he said.

As for milk supply, the market will probably be shaken up for awhile initially, but the big farmers have little trouble adding capacity (more cows) and there should be an ample milk supply in Western New York to meet the needs of Pepsi, Alpina and O-AT-KA, and any other players that enter the market at the ag park.

Perhaps the worst news for other dairy businesses, Stephen said, is that if Pepsi wants to hire an employee, they will hire that employee. They will spend what it takes, he said, to get the best employees, especially in key positions.

But it's a great pool of employees that is attracting Pepsi to Batavia, Stephen said.

For years, he's been telling dairy companies to stop manufacturing in places like Los Angeles, New York and Philadelphia because the standard of living is so much better in smaller communities.

Employees can actually afford to buy a house in a place like Batavia. That isn't true in larger population centers. And, Stephen said, the schools are good, and that's attractive to a major employer.

"You have a pretty high quality of life," Stephen said. "It's a pretty attractive place to put people who are going to work for you for a long time."

Here's the verbatim testimony of Byron dairy farmer Robin Denniston-Keller given at the Senate hearing on the dairy industry held at GCC on Thursday.

It's titled "Legislative Responses to the Dairy Crisis: Reforming the Pricing Structure."

"...I am a proud American dairy farmer. My husband and I milk 100 Jersey cows and take care of another 100 young stock on our farm 10 minutes northeast of here in Byron, New York. It’s a privilege and honor to be asked to speak today.

"I’m not an economist or an expert on milk pricing, but I do feel I have common sense and a strong work ethic, which have served me well so far in life. I milk my own cows every day, and being up to my elbows in the results of lactation and excretion (generally not at the same time!) gives me a certain sense of reality!

"On our farm, our “pay price” for our milk produced in July 2009 was $13.26 per hundredweight. Put in consumer terms, $1.14 a gallon. This includes all protein and quality premiums received from Sorrento, the cheese plant we supply with pure, fresh Jersey milk. 

"Last year our July pay price was $24.23 per hundredweight, or $2.08 a gallon. I could spend my next three minutes ranting about the volatility and injustice of this, but that’s not constructive, and you can figure out on your own how I do the math to pay for our own health insurance, groceries, feed for the cows and calves, fuel for the tractors, hauling and fuel surcharge costs to send the milk to the processor, and the numerous other bills staring me in the face each month!

"Our 100-cow dairy benefits from the MILC program. We are at the perfect size to maximize our usage of the program. Our MILC government payments are currently a little more than 10% of our monthly income.

"Solutions to milk pricing issues -- please remember, as I said before, I’m not an economist or a milk pricing expert! Time heals all wounds, however, how do we stop the bleeding now?

Increase solid-non-fat fluid milk standards.

I like to call this the “No more blue skim milk” suggestion. Since 1962, California has had higher minimum standards for nonfat solids in fluid milk than the rest of the United States. Raising the United States standards to match the California standards will accomplish the following:

• Improve the nutrition benefits of milk. For example, California 2% milk has 21% more calcium than does 2% milk in other states. In addition, higher solids result in better tasting milk.
• Utilize more milk solids in consumer products and reduce the amount of nonfat dry milk produced for CCC purchase. This June, Dairy Farmers of America estimated that if the California Standards had been in effect for the rest of the U.S. during 2008, an additional 300 million pounds of milk solids would have been included in fluid milk sales. This represents more milk solids than were in all the CCC nonfat dry milk purchases through July 2009. California retail milk prices have remained competitive with, not higher than, the rest of the U.S.

Urge Agriculture Secretary Vilsack to have USDA purchase cheese for nutrition programs.

• This single action would accomplish several goals: Help to bolster milk prices and ease the current crisis faced by many dairy producers across the country; reduce outlays in dairy safety net programs (MILC payments and CCC purchases); and by donating the purchased cheese to food banks and other charitable organizations; USDA would be providing humanitarian nutrition services.

Cheese inventories are poised to be much higher than normal heading into this fall. This supply is weighing on the market and suppressing prices. A purchase of 100 million pounds of cheese would bring inventories more in line with past levels, and would bolster farm milk prices. Even a modest rise in milk prices would provide relief for dairy producers, reduce MILC expenditures, and lower CCC purchases of cheese.

Overhaul the dairy price discovery program.

I believe that our current milk-pricing structure is based on the trading of 2% of the cheese in this country on the Chicago Mercantile Exchange. This small amount of cheese determines my mailbox price. Or, in other words -- what the check I get in the mail says I will be paid for the product I’ve spent the last month getting covered in manure and other fine things to harvest!

This whole process goes against my good old common sense. Large milk processors were convicted for price manipulation as recently as 2006; clearly a more fair and broad based pricing mechanism is needed. We need a new set of tools in our milk-pricing toolbox. 

Sometimes I wonder why I am in a business where, I buy everything retail and sell my product wholesale, and the pricing mechanism is based on what I would call a “house of cards”? Way of life, being my own boss, pride of ownership, producing good food for an expanding world; they’re all good reasons. But if I’m not treated fairly, it’s time for me to wake up and find another life. I digress. Back to my suggestions.

Imports -- Charge promotion fees on imports.

United States dairymen contribute 15 cents for every hundredweight of milk we produce towards dairy promotion. I believe the new Farm Bill instructs USDA to charge importers
seven and a half cents for every hundredweight of dairy products imported. Dairy promotion basically helps create a larger market for dairy products. Importers benefit from that increased demand for dairy that our domestic producers have paid for, so it only seems fair to have importers contribute into the promotion program. 

At issue here is the fact that USDA has not implemented this fee, and it discourages me to see the lack of timeliness on legislation implemented into law. Seven and a half cents is not much, but I think charging importers this fee would decrease the amount of imported dairy products flooding our domestic market. 

I believe in fair trade, and I feel this fee charged to importers would somewhat level the playing field, and I’m encouraged that this promotion fee works for WTO reasons as well. 

Proceed with Extreme Caution before implementing Growth Management or Supply Management Programs.

While some producers and organizations are promoting growth management or supply management plans as a long-term solution to the dairy economy problems, I have some issues with these plans. Again, not an expert, and applying my common sense, I’m concerned that without solid knowledge of the impact of any such plans, I am not in favor of “jumping out of the frying pan and into the fire.”

Mandatory supply management goes against all my gut instincts, and my belief in the efficiency and productivity of the American Dairy Farmer. Last year’s high milk prices at the farm level resulted from a booming export market for American dairy products. We live in a global economy, and putting handcuffs on the American dairy industry with mandatory supply management seems to me to set us up for failure. We only have to look “across the pond” to see Europe struggling to get away from its quota system.

Finally, a sincere thank you to Senator Gillibrand and your staff for your efforts on increasing the MILC rates and indexing these payments for inflation. I am a proud American Dairy Farmer, and taking handouts does not please me, but this truly is a time of need for my fellow dairymen and me. Thank you for your efforts and your interest in the intricacies of dairy pricing. Thank you for listening to my suggestions, and I’m looking
forward to working together to resolve the dairy pricing issues we currently are facing and those in the future."

BATAVIA, NY -- About 200 people attended a formal Senate hearing this afternoon at Genesee Community College focused on a dairy industry in crisis and possible solutions.

New York Sen. Kirsten Gillibrand heard testimony from producers and processors, economists and dairy industry experts. At the end of the two-hour hearing, which started about a half hour late, she said she was taking some good ideas back to Washington to use in developing long-term fixes.

The dairy industry is hard hit by: a pricing structure that's based on only 2 percent of the industry's products: higher fuel and feed costs; trade inequities; the expense of meeting increased regulations and standards not required by international competitors; and by a swiftly fluctuating market -- stemming from changing demands, the impact of product perishibility and supply -- plus many other factors.

It's a tough business and it requires a certain youthfulness to do the heavy physical labor, 365-days-a-year, with a liklihood of losing money at the end of the year instead of making a profit.

One of the surest ways of increasing the health of the dairy industry, is to increase consumer demand for its products. Several spoke in favor of the federal government doing more to help out, such as buying more milk for school breakfast programs, stocking up food banks with cheese or buying powdered milk for women and infant nutrition programs. In other words, use more Department of Agriculture money going toward food purchases anyway to beef up dairy consumption.

To compete with a ever-increasing variety of thirst-quenching beverages, the dairy industry needs to develop new products and boost the flavor, "mouth feel," and nutrition of milk without adding fat or calories.

They also called for leveling the field when it comes to trade. Why does an American dairy farmer have to pay a 15-cent per-hundred-weight fee for marketing and promotion, when the foreign importer does not yet still enjoys the benefits?

One good way to boost oversees consumption is to sell more solid milk product, which is in great demand worldwide. But more production plants are needed. Yet a capital expansion program for Batavia has been on hold since 2005 pending USDA approvals.

Rep. Eric Massa said he'll enlist his colleagues to pressure the USDA to speed things up if Kim Pickard-Dudley drafts him a letter on why the capital expansion program is critical for Western New York. She spoke as a representative of the farmer-owned Upstate Niagara Co-op.

Robert Church advocated "market-driven solutions" and federalizing uniform industry standards, so states like California, do not have unfair advantage over Western New York's dairy industry. He's herd manager for Patterson Farms, a 980-cow operation west of Auburn.

"You said one-size-fits-all," Massa told Church. "My job is to protect New York. That's what I'm here to do."

The problems faced by New Mexico, California or Arizona dairies, compared to here, are vastly different because their circumstances are different, Massa said, about as different in fact as Mars is from Pluto.

"California cows are happy cows," so goes the marketing slogan, but Massa said here it's more like "New York cows are really angry cows."

Congressman Massa, Senator Gillibrand, and Congressman Lee listened to two panels.  The first Producers and Processors, the second consisted of Economists and Experts.

The best lines of the day....Congressman Massa, after learning that each NY dairy farmer must contribute to a national promotion fund, part of which is used by the State of California to promote their California Happy Cow ads in New York State. Fifteen cents per hundredweight is levied on all milk marketed commercially in NYS.

He asked, "Why can't we produce ads for...let's say... New York Happy Yankee Cows, and play them in California?".

When told that it is tradition that  dairy farmers' have responsibility to transport milk to the processor...just like lobster fisherman must arrange transportation of their catch from the ship to the cannery.

Congressman Massa mused, "I don't know how to milk a lobster."

With all this talk about Lamb Farm, I went hunting and found their website.

It is well worth the time to look through it all.  Make sure you click on the videos of the clipper and the milking merry go round.

Fascinating.

http://lambfarmsinc.net/index.html

County Legislator Charles Zambito, Elba, presents a proclamation in honor of dairy month to Dairy Princes Mackenzie Reynolds and Eric Zuber.  Following the proclamation, ice cream sandwiches, an annual tradition, were handed out to every person in the chamber. Um, good.

As The Batavian reported two months ago, Genesee County's dairy farmers have been squeezed by falling prices and higher production costs -- with prices being driven from excess milk supplies during the recession.

The New York Farm Bureau, lead by local dairyman Dean Norton, has convinced the federal government to increase dairy exports, which should help tighten supply and bring prices back in line with production costs.

The move comes after months of advocating from Farm Bureau's farmer/members who directly lobbied USDA with Congressional visits in Washington, sent e-mail messages and called or wrote hundreds of letters to Agriculture Secretary Thomas Vilsack.

"Our members should be proud of their hard work in lobbying for USDA to activate the Dairy Export Incentive Program to help alleviate our dairy crisis," said Dean Norton, president of New York Farm Bureau and a dairy farmer from Batavia.

Local dairy farmers are hurting, according to Dean Norton, president of the New York Farm Bureau.

Prices have plummeted -- because of decreased demand for dairy products at home and abroad -- while costs have increased substantially. 

Currently, milk is selling for $10.50 to $11.50 per 100 weight (about 8.5 gallons), while the cost of production is $15 and $16 per 100 weight.

Last year, milk sold for about $20 per 100 weight.

"The area economy stinks and it's a tough year," Norton said. "Receipts are down and individuals might be exiting the dairy industry."

Exports have dropped and domestic demand has been driven down as people eat out less during the recession, so there is shrunken demand for dairy products.

To help address the plunging prices, Cooperatives Working Together (CWT) has initiated a herd retirement program, which will help reduce the number of milk-producing cows and lower supply.  Bids must be postmarked by May 1.

Dairy farmers throughout the nation are hurting according to The Rural Blog:

“The number of dairy cows being sent to slaughter has risen by about 20 percent from last year, as desperate farmers cull their herds and sell at fire-sale prices,” Sue Kirchoff writes for USA Today. “Adding to the problem, banks are less willing or able to extend farmers’ loan payments amid the financial turmoil.” John Murawski reports for the News & Observer in Raleigh, "Several dozen dairy farms in North Carolina are expected to go under this year." (Read more)

The National Dairy Federation has called on President Obama to aggressively address the problem, or thousands of jobs could be lost.

“There are several reasons for the implosion: oversupply, falling export demand and continued high prices for supplies such as feed,” Kirchoff explained. “The dairy sector in the past has been less prone to huge price swings than other areas of agriculture, but that’s changing as the industry relies more on the markets and less on government programs.”

Agriculture Secretary Tom Vilsack announced a program to buy 200 million lbs. of nonfat dry milk surpluses for domestic low-income programs.

Neighboring Wyoming County is being especially hard hit by the downturn in the dairy market, according to a story by Tom Rivers.

The $60 million in reduced revenue is compared to 2008 prices, when dairies averaged about $17.50 per hundredweight. This year the prices are forecast to average $12.80 for the year. The prices are expected to climb above the current $11 level and top $14 in September, which is still below most farms' production costs.

The county's 47,970 cows, which outnumber the county's residents, produced $178.9 million worth of milk products in 2007, by far the most in the state.

"The market is saturated and these prices are likely to be with us until mid-summer," Norton said.

This is a perfect recipe for a great Superbowl appetizer!

You couldn't ask for more perfect timing on this one folks—that is, as long as you've already got the ingredients in the house. In this fifth episode of Cooking With the Dairy Princess, Anika Zuber shows us how to prepare a rich, white chocolate, hot chocolate.

Mmm.

From the Daily News (Thursday):

• Plans are in the works for a dairy tourism center in Batavia that would include a gift shop, a cafe, interactive displays and other features pertaining to the dairy industry. The center may be located near the entrance to the new ag-tech park next to the Genesee County Fairgrounds. Reporter Tom Rivers writes about "a committee" that is planning the center, but never mentions the name of the committee, whom it reports to, nor how it was created. He also lists some "organizers," but never tells us what they are organizing. How are they related to the committee?

• Horizon Wind Energy produced plans for a shrunken-down version of the Dairy Hills Wind Farm project in Perry. The project that originally called for 60 wind turbines was scaled down to "about 38" wind turbines. Reporter Matt Surtel writes that the company will work through "appropriate studies" over the next few weeks that will then be submitted to the Perry Town Board. Not sure what kind of studies, nor why they are appropriate.

• Batavia native Stacey Lynn Shepard, a staff writer for The Bakersfield Californian, was honored for her environmental reporting at the Gruner Awards Banquet in Fresno, earlier this month. Her stories about an oil refinery in Kern County, California, can be found at the newspaper's Web site. Her profile page can also be found there.

• The Bank of Castile will no longer postpone bank transactions made at its branches after a certain time. Whether you make a deposit at 9:40am or 4:15pm, your transaction will go through that day — not the "next" business day.

• In police news, a Batavia man found with nearly a pound of marijuana was charged with third-degree criminal possession of marijuana; an Avon man was charged with DWI at Ellicott Street; a Batavia man was charged with harassment and criminal mischief after a woman told police that he choked her.

• City police are investigating a hit-and-run that happened Tuesday morning at Center and Main streets. They are looking for a large white truck that backed into a green Hyundai. Call (585) 343-6350 if you have information.

For the complete stories, the Daily News is available on local newsstands, or you can subscribe on BataviaNews.com.