Several dairy processing announcements in recent months by cooperatives offer farmers hope the Michigan milk price will improve before the end of 2018.
Michigan State University professor of agricultural economics Chris Wolf says it is difficult to say what support more processing will provide, but farmers should expect a price bump.
“Increased processing capacity should at least provide some relief from dumping and distressed milk sales, which should lower the ‘market adjustment’ deduction that Michigan farmers have been seeing in their milk check,” he says.
The biggest plant announcement has yet to determine a site location. The joint venture will be owned 50% by Glanbia, an Irish-headquartered nutrition company; Dairy Farmers of America and Select Milk Producers will share the balance of the equity. Michigan Milk Producers Association (MMPA) will continue to participate in the project as a strategic milk supplier to the new facility.
John Wilson, senior vice president and chief fluid milk marketing officer with Dairy Farmers of America, says the plant will mirror the cooperative’s current partnership at their Southwest Cheese Plant in New Mexico. “We supply the milk, and we share in the profits. And it’s been a very sustainable business model for us and one we’re bringing to Michigan,” he says.
John Dardis, senior vice president of group sustainability and U.S. corporate affairs for Glanbia, says Michigan’s steady growth in milk production makes it an ideal location for its dairy processing venture.
“We’ve watched the figures for a few years now and 6% growth in milk in 2016 was obviously attractive on the back of previous growth,” he says.
Dardis says they are honing in on possible locations for a new dairy processing facility, but close to cows in central Michigan is a possibility. “The location of the plant is very much down to the location of the cows,” he says.
The $400 million cheese and whey plant should be operational by 2020 and process 8 million pounds of milk per day. “We’re playing to some key mega trends here as well — healthy lifestyle, healthy living, on-the-go nutrition,” Dardis says. “Cheese and whey protein fit that consumer demand,”
Wilson believes cheese is a growth engine for the U.S. dairy industry, and the plant will help meet growing demand. “It’s a very long and sustainable trend in growth of cheese consumption not only here but worldwide, and that’s also true for the whey products that come off of the cheese-making process,” he says.
According to Wilson, whey protein concentrates and isolates are one of the faster-growing markets in the U.S. and in other parts of the world because consumers are interested in consuming more protein. “We’re confident that even though this is a pretty large plant, the demand is going to grow to match the supply,” he says.
Dardis says he is excited to locate a facility in a state with strong dairy research opportunities. “The top dairy scientists in the world are located at Michigan State University and the University of Michigan. We’re always interested in a pipeline of talent, and that’s a nice nugget,” he says.
Foremost Farms breaks ground
Once part of the Glanbia joint-venture first announced in January 2017, Foremost Farms has moved forward separately with a venture of its own. On Nov. 9, the co-op announced plans to construct a dairy campus on a 96-acre parcel in Greenville in central Michigan.
The company broke ground on the project mid-March. “We believe more investment is needed in Michigan, and we are supportive of the other projects moving forward along with ours,” says Foremost Farms President and CEO Michael Doyle. “We have an extremely aggressive construction timeline with the goal for Phase 1 of the project to be completed by Oct. 15 and to be processing milk by early November.”
The plant will be the first major step forward in helping to balance the supply of milk in the region and to cut transportation costs.
“Initially, most of these milk solids will be consumed in our current manufacturing facilities in Wisconsin, with a significant reduction in transportation costs from current state,” he explains. “The intent is to grow this dairy campus through partnerships to utilize these milk solids in the production of value-added products on site.”
CHEESE GROWTH: John Wilson with DFA believes cheese is a growth engine for the U.S. dairy industry and the new Glanbia plant will help meet growing demand.
The strategy as a manufacturing company to control its own destiny led Foremost Farms away from participating in the Glanbia project, which was announced in early 2017.
“Through internal discussions about the strategic need to unify our seven-state milk supply, coupled with discussions with other companies and our strategic alliance partner MMPA, the potential for Greenville to grow into something significant relatively fast materialized,” he says. “We felt the flexibility Greenville offered over other investment options was a better strategic fit for the needs of our company.”
Foremost Farms is in discussions with two to three other companies on potential future business relationships on the Greenville dairy campus site. Once complete, the plant will process up to 4 million pounds of milk a day, with the ability to take in 6 million pounds a day. Milk will be separated and condensed for distribution to other Foremost dairy processing facilities in the Upper Midwest.
Foremost Farms and MMPA signed a memorandum of understanding in March to maximize members’ returns through mutual investments. “The partnership is designed to ultimately generate savings through efficiencies and create strategic benefits for our members,” Doyle says.
Joe Diglio, MMPA general manager says, “The intent of this MOU is to further address the imbalance in supply and capacity limits we currently are experiencing in this part of the country. Both cooperatives are committed to working together for the benefit of our collective memberships throughout the region,” he says.
According to Doyle, Foremost Farms and MMPA started working together in December 2014 with the reverse-osmosis investment at MMPA’s plant in Constantine, which removes water from milk before the milk solids are transported to Foremost Farms cheese plants in Wisconsin.
“The RO system was needed as the first step toward managing our milk supply in Michigan,” Doyle says. “This MOU is intended to further develop our strategic alliance to look at joint investments and a marketing partnership mutually beneficial to both organizations.”
Cass City expansion
According to Wilson, DFA’s Cass City plant has completed its Phase 1 process, which condenses milk for use at other processing facilities in the country.
“There will be a Phase 2 at some point; it’s still under study,” Wilson says. “We’re certainly looking at what our options are there.”
Wilson says Dairy Farmers of America is optimistic about Michigan’s milk supply, which is expected to keep growing. “Besides the big cheese plant, we’re going to have an opportunity to do more in Cass City as well,” he says.
Heslip works as the Michigan anchor and reporter for Brownfield Ag News.