Final Report - Dairy Markets · 2010-09-26 · I I I . Phase II Pre-Feasibility Analysis of a Chenango County Value-Adding Dairy Enterprise Final Report Introduction Review of Phase

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Phase II Pre-Feasibility Analysis of a Chenango County Value-Adding Dairy Enterprise, .: . : .:.: .' . ....

Final Report

PREPARED BY:

Yellow Wood Associates, Inc. 95 South Main Street

St. Albans, Vennont 05478 " (802) 524~6141

PREPARED FOR:

Agriculture Development Council of Chenango County, New York

August 4, 1998

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TABLE OF CONTENTS

Introduction Review of Phase I Focus of Phase II Research Conversion Factors

Markets for Value-Added Dairy Products The Process of Marketing a Value-Added Dairy Product

Definitions Direct Markets .

Fanners' Markets Direct Wholesale Markets

Small Gourmet Retail Outlets Home Delivery through Independent Fluid ProducerlHandlers

Traditional Wholesale Markets Brokers Distributors Retail Buyers

Markets for Specialty Cheeses, Fluid Beverages, and Organic Dairy Products Specialty Cheeses Fluid Beverages Organic Dairy Products

Certification Process for Organic Dairy Suitability of Chenango County Fanns for Conversion to Organic

Production Butternut Fanns Cooperative

1 1 1 3

4 4 4 6 6 8 8 8 9 9

10 11 12 12 15 16 17

18 20

Opportunities for Outsourced Manufacturing of Dairy Products 22 Potential Tolling Arrangements for Conventional Dairy Products 23 Potential Tolling Arrangements for Organic Dairy Products 27

Milk Quality and Milk Volume Required for a Value-Adding Enterprise 29

How a Value-Adding Enterprise Can Benefit Fanners 33

Organizational Models 37 Traditional Cooperative 37 New Generation Cooperative 40 Corporation 42 Limited Liability Corporation 43 Comparable Equity Investment in a Traditional Cooperative 44 The Effects of the Federal Milk Marketing Order on a Chenango Enterprise . 45

APPENDICES

New York State & Local Regulations Pertaining to Dairy Processing

, '( The Use of Membrane & Thennal Technologies to Add Value to Fluid Milk

Relevant Food Industry Trade Shows

Resources

Publications

Useful Websites

I I I .

Phase II Pre-Feasibility Analysis of a Chenango County Value-Adding Dairy Enterprise

Final Report

Introduction

Review of Phase I

Phase I of the Pre-Feasibility Analysis involved identifying the "universe" of uses for raw milk, including products created through the processing of whole fluid milk, fractionation of milk into various components, and products created from exotic milks. Additional areas of research included transgenic animals and the market for colostrum. Through consultation with the Agricultural Development Council, specific product groups including casein, transgenic animals, certain lactose-derived products, sheep, water buffalo, and yak were eliminated from further research due to limited opportunities. The remainder of Phase I focused on assessing the remaining elements of the "universe" in relation to six criteria:

1. Compatibility with Chenango County's natural, human, and infrastructural resources. 2. Market conditions and trends. 3. Barriers to market entry. 4. Capital and scale requirements for manufacture. 5. Profi tabili ty potential. 6. Availability of resources to shorten the learning curve of County farmers.

Phase I concluded with the identification of three product areas for further investigation: Fluid Beverages, Speciality Cheese, and Organic Dairy Products with continuing research into Ultrafiltration.

Focus of Phase II Research

The focus of Phase II research has been on investigating alternative approaches to assembly, production and marketing of Speciality Cheeses, Fluid Beverages, and Organic Dairy Products. We have defined the regulatory framework within which a Chenango County dairy processing enterprise must operate and examined alternative organizational models that might be used to bring an enterprise to fruition. We have learned enough to suggest a startup path for a Chenango County value-adding dairy enterprise. Our research in Phases I and II has also uncovered a variety of opportunities that may be suitable for pursuit by individual entrepreneurs.

Yellow Wood Associates, Inc. 95 S. Main St. Albans, VT 05478 (802)524-6141 1

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The Phase II report is designed to illustrate the necessary sequence for creating a Chenango value-adding enterprise. The goal of a value-adding enterprise is to find those market outlets for its value-added product that will bring the greatest return. The value-adding enterprise is managed to serve the market demand for its products; ie. it is market-driven. The number of farmers participating is defined by the volume of raw milk needed to produce the volume of value-added product which the market demands. The benefits for member farmers flow from the sale of raw milk and the sale of value-added products.

The creation of a value-adding enterprise, therefore, should include: (1) identifying specific market(s) and designing product(s) for the market(s), (2) determining how the enterprise will manufacture the product(s), (3) calculating the volume of raw milk required and how many farmers are needed to supply this volume of raw milk, (4) developing a clear method by whlch the value-adding enterprise will benefit member farmers, and (5) defining how these member farmers and the enterprise should be organized.

This report is divided into five sections which correspond to the steps for creation of a value-adding enterprise:

• Markets for Value-Added Dairy Products • Opportunities for Outsourced Manufacturing of Dairy Products • Milk Quality and Milk Volume Required for a Value-Adding Enterprise • How a Value-Adding Enterprise Can Benefit Farmers

.• Organizational Models

Throughout the report we have attempted to identify the minimum volume of raw milk and minimum number of average-sized Chenango farms which would be required for a valueadding enterprise to be feasible. We have considered possible operational constraints for an enterprise at each of these stages: milk assembly, manufacturing & packaging, and market distribution.


Conversion Factors

A cow in Chenango County will produce on average 16,000 lbs. of milk over 305 days or approximately 52 lbs. per day. Over the coUrse of the year it is expected a cow will produce an average of 60 Ibs. per day in the Spring-Summer and 45 lbs. per day in Fall-Winter. I The average 70 head dairy fann is assumed to produce 31.5 cwt. per day in Fall-Winter and 38.5 cwt. per day in Spring-Summer. The lower figure of 31.5 cwt. per average fann will be used to estimate the minimum number of member fanns needed to provide"the volume required for distinct value-added products.

Minimum Milk Volume per Average Chenango Farm per day = 31.5 cwt.

10 Ibs. of raw milk are required to make lib. of cheese.

1 gal. of raw milk = 8.6 lbs. of raw milk

11.08 gals. of 3.5% butterfat raw milk are required to make 1 gal. of 40% butterfat cream

These factors are referred to throughout the report and/or underlie calculations which are made in the report.

I Personal communication with Dewey Hakes.

Yellow Wood Associates, Inc. 95 S. Main St. Albans, VT05478 (802)524-6141

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Markets for Value-Added Dairy Products

A successful Chenango value-adding dairy enterprise will need to understand different opportunities for marketing value-added dairy products. The enterprise will need to establish relationships with individuals and firms involved in the chain between a manufacturer and the end consumer. The creation of these relationships is not sufficient. A vibrant enterprise will constantly renew these relationships, research new market opportunities, and develop new marketing relationships.

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j The Process of Marketing a Value-Added Dairy Product

Market distribution channels include traditional wholesale of a commodity product through brokers and distributors; direct wholesale of a specialty product to stores, restaurants, and institutional or industrial buyers; and direct retail sale of a specialty product through owned

{ retail outlets, farmers' markets, home delivery, mail order, or on-farm stand. I

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Definitions

Within a wholesale market distribution channel, there are usually three agents between a product manufacturer and the final consumer: a broker, a distributor, and a retail buyer. Within certain direct channels, it is possible to make direct sales to a retail buyer without using a broker or distributor.

A broker negotiates a sale of the manufacturer's product(s) to a distributor. The broker is paid a commission fee, often based on a flat rate per unit of product volume. The broker fee is based, in part, on the volume of the transaction and the duration of time involved in arranging each sale to a distributor. The broker never takes title of the product. A broker will help the manufacturer to develop a marketing program for the product and promote the product among retail buyers and distributors. Although a broker will technically sell the product to a distributor, the broker first must sell the new product idea to retail buyers.2

In order for a broker to pioneer a new product(s) for a Chenango enterprise, the enterprise will need to conduct market research. During Phase III the enterprise must research and/or understand the following for each potential product:3

2 Ira Ginsberg of Ginsberg Institutional Foods

3 Frank Pensabene, lr. of Fee nix Brokerage and Ed Evers ofMc Dermott Food Brokers.


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• specific market channels where demand for similar products exists • what distinguishes their product from others in the market place • what style of packaging will appeal to the consumer in these market channels • what are the minimax and average price points for competitive products in the market • what are their product's needs in terms of appropriate shipping and handling • the function of promotion strategies, advertising programs, and retail shelf

organization

A distributor will purchase the product outright from the manufacturer, facilitated by a broker, and then sell it to a retail buyer. The distributor will increase the product price charged to the retail buyer from that paid to the manufacturer by a margin which covers costs and provides a net profit margin to the distributor. A distributor is not responsible for developing a new product nor creating a marketing/promotion campaign.

A retail buyer will only buy with a sales guarantee from the manufacturer. It is not the responsibility of the retail outlet to see that the product sells. In the past decade, the large chain

. retail supermarkets and even some smaller retail outlets have adopted an attitude that they are simply renting space to manufacturers to sell their products.4

The broker and manufacturer are responsible for the effective marketing of the product to the end consumer once it is in a retail outlet. If the product is not selling, the manufacturer and/or broker will change the marketing strategy and price structure to get it to sell. 5

4 Frank Pensabene, Jr. Feenix Brokerage.

5 Frank Pensabene, Jr. Feenix Brokerage.

Yellow Wood Associates, Inc. 95 S. Main St. Albans, VT 05478 (802)524-6141

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YW A contacted a sampling of food brokers, distributors, wholesale retail buyers, small gounnet retail buyers, farmers markets, and independent producerlhandlers who distribute dairy products through home delivery and direct sales to small retail outlets and restaurants. Our research did not include mail order or on-farm stand market opportunities. The resource contacts listed after each section begin with those individuals highlighted in this report, however, the list includes all resources who were contacted and/or would be useful for Phase III implementation.

Direct Markets

Fanners' Markets

Arnie Weiss owns and operates Meredith Mountain Farms which buys top quality cheese from McCadam and Cabot and then cuts, smokes, flavors, and packages for retail sale. The finn sells product at the Delhi and Cooperstown Farmers' Markets. Mr. Weiss believes roughly 300-500 lbs. of cheese can be sold on a sunny two-day weekend at medium-sized farmers' markets. He thinks close to 2,000 lbs. could be sold at the large Central New York Farmers' Market in Syracuse on a sunny two-day weekend. He also would recommend having a booth at the New York State Fair to help introduce the Chenango enterprise's products to consumers.

The greatest value from selling at fanners' markets is the opportunity to get direct feedback from customers about your product. The volume which can be marketed through farmers ' markets will depend on the number of days of operation per year and the influence of weather upon the consumers.

YWA investigated seven farmers' markets in the region: Downtown Syracuse Farmers' Market, Central New York Regional Market, Ithaca Farmers' Market, Albany Farmers' Market Association, Albany Capitol Buildings Farmers' Markets, Binghamton Farmers' Market, and the New York City Green Markets.

The Ithaca and NYC Green Markets have restrictions which would prohibit.participation of a Chenango enterprise. Opportunities to market a Chenango enterprise dairy product were -found at:

Downtown Syracuse Farmers' Market is an outdoor seasonal market which operates on Tuesdays from 7:00 a.m. to 4:00 p.m. Many of the customers are business people on their lunch hour. The market would encourage anyone wishing to sell dairy products, especially cheese. The product should be an individual serving size to accompany a lunch. Refrigeration would have to be provided by the seller. Fees are $11 O/year for producers and $285/year for dealers.

Yellow Wood Associates, Inc. 95 S. Main SI. Albans, VT 05478 (802)524-6141

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Central New York Regional Market in Syracuse is open year round with plenty of free parking, banking and A TM services, a restaurant, an ice distribution company, and seasonal special events. The market is considering refurbishing older retail spaces on the premises and may offer pennanent retail outlet spaces in the near future. The market serves wholesalers and retailers as well as individual consumers. This would be a good place to develop relationships with distributors and wholesalers while experimenting with direct sales options. Dairy products would be a new and different addition, although some wholesalers carry dairy products from larger producers like Hudson Fanns. A recent upgrade provides electricity in some stalls but refrigeration would have to be provided by the seller. Fanners pay $520/year for a stall.

Albany Capitol Buildings Farmers' Market includes two sites within the state capital complex serving mostly the 13,000 New York State employees. They are open 3 days a week in the summer-fall and there is an indoor, winter market one day a week. There is electrical power available. The winter market is able to house 30 vendors and averages 18-20. There are 70 summer spaces. Fees are determined on a sliding scale ranging from $12 to $25 per week. The focus is on non-perishable products which office workers can purchase during their lunch break. Cheese would be a welcome addition.

Binghamton Farmers' Market is a small market, averaging 12-14 vendors, which operates July to mid-October on Tuesdays and Fridays from 8:00 a.m. to 2:45 p.m. There is a paved surface, no roof, no electricity. The seller would need to provide refrigeration. $25 irutial fee plus $10 per day. They would love to have a regular cheese vendor.

Resource Contacts

Arnie Weiss, Meredith Mountain Fanns, 607-746-3857 Chris Togias, Central New York Regional Market Authority, 315-422-8647 Charles McFadden, Downtown Syracuse Fanners' Market, 315-422-8284 Kurt Vincent, Albany Capitol Buildings Fanners' Market, 518-474-5986 Brendan Corr, New York City Green Markets, 212-477-3220 Jonathan Thomson, Albany Fanners' Markets, 518-457-4383 Ann Elrod, Ithaca Fanners' Market~ 607-539-3297 Rosemarie Henkle, Binghamton Fanners' Market, 607-772-8860


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Direct Wholesale Markets

Small Gounnet Retail Outlets

Todaro Brothers is a chain of gounnet retail outlets in New York City. This finn would be most interested in specialty cheeses and not in a fluid beverage or organic dairy products. They carry 200 types of cheese, 95% of which are imported. The finn prefers to buy direct from manufacturers and currently buys cheese from single-farm cheese producers including Ronny Brook Farms. The minimum volume the finn would want to buy is 10 cases of 12 eight ounce wedges or blocks per week (60 lbs.). The Chenango enterprise would need to provide marketing and promotional support to Todaro Brothers.

Gourmet Garage is another chain of gourmet retail outlets in NYC. The chain would be interested in organic or conventional specialty cheeses. The firm prefers to buy direct from small farm producers and not use brokers or distributors. A Chenango enterprise would need to develop descriptions of their product(s) and fax this infonnation to the finn, then follow-up with free samples for them to try. A line of products is more attractive to a store like this than a single product. The minimum volume the finn would want to buy is 10 cases of 12 eight ounce wedges or blocks per week (60 lbs.). The maximum volume ofa high selling product that the finn could move through the stores is 50 cases per week (300 lbs.). The company has good relations with the New York Times Food and Wine section writers, and thinks they could coordinate a positive promotional effort for a new, quality product.

Resource Contacts

Mike Spano, Todaro Brothers, 212-532-0633 Rob Prusac, Gourmet Garage, 212-966-2887

Home Deliverv through Independent Fluid ProducerlHandlers

There are ten independent producerlhandlers in New York State. These are individual farms who bottle their own fluid milk and/or produce their own dairy products from their own milk production. Kurt Edwards of Model Dairy Farm in Gloversville, New York currently delivers bottled milk to 200 homes daily and a few select restaurants. He would be interested in providing a Chenango enterprise cheese product to his home delivery customers. For example, he estimates that initially he might be able to seIJ 2{l eight ounce blocks of cheese per week (10

·lbs.). The Chenango enterprise might investig"ate whether the other independent producerlhandlers in the state would be interested in a similar arrangement.

Resource Contacts Kurt Edwards, Model Dairy Farm, 518-661-6214 Mrs. Ronny Osofsky, Ronny Brook Farm, 800-772-6455 Francis Hogan, Hogan's Dairy, now retired, 518-747-4981

Yellow Wood Associates, Inc. 955. Main 5t. Albans, VT05478 (802)524-6141

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Brokers

Gasparini Sales, Inc. is a 70 year old, family run cheese brokerage based in Syracuse. The finn acts as a manufacturer's representative for 15 cheese companies. The finn markets cheese to the food service deli sector: pizza/sub shops, institutional buyers, restaurants, supennarkets. In a supennarket, for example, the cheese they broker is found in the store deli case or behind the glass for "in the moment" deli cheese slices. This finn does not market cheeses in the dairy case.

This finn would need a minimum volume of 2,000 lbs. per week to market to smaller retail outlets and the food service ·industry. The minimum volume sale to a regional supennarket chain stores is 4,000 lbs. per week. This finn earns between $0.02-0.03 /lb. of cheese for brokering a sale of basic commodity cheeses such as mozzarella and cheddar, and $0.04-0.10/lb. for a specialty cheese with smaller volume transactions.

Feenix Brokerage specializes in brokering complete cheese programs to retail outlets. A cheese program refers to products of 20 different manufacturers that would make up 80% of the 150 distinct cheese products found in the deli cheese case of a given store. This finn does not broker cheese to the dairy case. The deli case is where market growth continues to occur and supports higher margins. As this finn brokers complete cheese programs, the finn is interested in possibly brokering a few select Chenango products as part of their overall cheese program.

This firm would require a minimum one-year contract with automatic renewal if agreeable to both parties. A contract for launching a new, different product would either have a severance package clause or a six-month guarantee. The finn mayor may not require an up-front retainer depending on the degree of product and market development that would be the finn's responsiblity.

Advantage Food Marketing is a food broker that represents Stonyfield Fanns and Morning Star dairy products. The finn specializes in product and market development. The finn would like to work with a Chenango enterprise to develop potential market opportunities. The finn would ' require a retainer agreement for $2,500 per month to develop a Chenango enterprise product and marketing strategy.

Resource Contacts

Edward Gasparini, Gasparini Sales, Inc., 315-471-1438 Frank Pensabene Jr., Feenix Brokerage, 518-456-7664 Michael Kalman, Advantage Food Marketing, 516-625-2600 Bob Pignato, National Food Brokers Association, 703-758-7790 Charles Stube, Stube Co., 315-682-6479 Doug Demarchey, Bratt-Foster, Inc., 315-488-3480 Frank Carmichael, Sommer Associates, Inc., 518-452-1834 Ed Evers, Mc Dennott Food Brokers, 518-783-8844


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Distributors

Circle Food Marketing Co. is a food broker/distributor of dairy products, although the firm prefers to act as a distributor and rarely simply brokers product. The firm would very much like to have the opportunity to market a Chenango product. The minimum volume of specialty cheese the firm would distribute is 2,000 Ibs. per week. The firm would prefer to purchase the product from a Chenango enterprise and mark it up 9% for sale to smaller wholesale distributors who then actually sell the product direct to retail firms.

Northeast Cooperatives is a distributor of food products .to local food cooperatives throughout the Northeast. The dairy products that they purchase are 50% conventional but BST free, 50% organic. The firm would be most interested in an organic American or Italian commodity cheese variety. Specialty cheeses do not move sufficient volume through the cooperatives for the firm's earning potential. Northeast Cooperatives actually could not distribute a Chenango enterprise product until next spring due to warehouse space limitatIons. The firm is expanding its capacity and would be interested in a new product or new product lines next summer. The minimum volume the firm would need is 12 cases of 8 oz. wedges (12 wedges to a case) per week, or a total of 72 pounds of cheese per week. A contract could be negotiated for whatever time period is mutually agreeable. The firm would mark-up the cheese price by 20-25% for retail sale.

Ginsberg Institutional Foods is a distributor of dairy products and other food stuffs to various institutional channels: industrial food service sectors (sub and pizza shops, schools, prisons, corporate cafeterias), "white table cloth" restaurant sector, and health industry/nursing homes. This firm would require a minimum of 2,000 Ibs. shipments of product per week. The firm is interested in carrying a Chenango enterprise product.

Resource Contacts

Herbert Jacobs, Circle Food Marketing Co., 516-536-1010 · Chris Hunt, Northeast Cooperatives, 800-334-9939 ext 314

. Ira Ginsberg, Ginsberg Institutional Foods, 518-828-4004 Jim Wright, Deli Boy, 315-488-0037 Charles Stube, Stube Co.,315-682-6479 Dino Paptarus, Dairyland USA the Chefs' Warehouse, 718-.842-8700'


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Retail Buyers

Regional Supermarket Chains

YW A did not interview dairy buyers from regional supermarket chains. However, two brokers and one distributor expressed their belief that it may be possible to market a Chenango enterprise product in regional supermarket chains. It has been suggested that the Chenango enterprise should discuss development options with Wegman's, Topps and/or Price Chopper. By offering an exclusive sales agreement to one of these supermarket chains, the chain might provide significant market research and promotional assistance.

A Chenango enterprise should target product(s) to the supermarket deli case and not the dairy case. Deli case products offer greater market potential and higher retail prices. Distribution

. of dairy products through a regional supennarket chain will require sufficient weekly volume, e.g. a minimum of 4,000 lbs. of cheese per week. Gaining entry for a Chenango product may require one time payments of slotting fees . An industry rule of thumb estimates the cost of slotting fees for an entire chain to be equal to one to four cases of free product, one time per store.

Institutional Food Service

Ira Ginsberg, of Ginsberg Institutional Foods, and Ed Evers, of Mc Dermott Food Brokers, both believe that the "white table cloth" restaurant sector within institutional food service is one area where the consumer would support a market premium for a Chenango product tied to small family farm/quality of life issues and quality taste. However, the volume demanded by this sector is limited and, as a sole marketing channel, could not support the start-up of a new product. The health industry/nursing home institutional food service would also support a premium dairy product if it had health qualities with heightened value for senior citizens. The industrial food service sectors (sub and pizza shops, schools, prisons, corporate cafeterias) want acceptable quality at the lowest price. It would be very difficult for a Chenango enterprise to compete in the latter sectors.


Markets for Specialty Cheeses. Fluid Beverages, and Organic Dairy Products

Specialty Cheeses

Cheese fits well within current consumer trends toward healthy, wholesome, and readyto-eat food products. U.S. cheese production has increased steadily over the last 20 years. Worldwide demand for cheese is rising at a rate among the highest for any food product, fueled by strong growth in food service sales and use of cheese as an ingredient. U.S. sales of cheese in 1997 amounted to 28 lbs. per capita, up nearly a half pound from 1995. There is still capacity for growth in per capita consumption; we lag far behind the French, Italians, and Greeks in our yearly per capita consumption of cheese. There are 3 sectors of the cheese industry: retail, food service, and ingredients. All of these sectors are increasingly demanding specialty cheese products. Dairy industry specialists see opportunities for small-scale production of specialty cheeses as U.S. consumers develop increasingly sophisticated palates. Specialty markets are relatively short-term and difficult to predict. Small-scale producers have an advantage to the extent they are capable of rapid response to new ideas and trends. .

Tim Orner, of Dan Carter, Inc., a dairy industry consultant, expects a small specialty cheese operation should have no problem profitably marketing its product through a range of channels including direct retail outlet sales and mail order, or via contract with an institutional or industrial partner. Orner noted that New York State is an excellent place to produce specialty cheese due to proximity of markets.

The term specialty cheese appears to mean different things to separate market niches. For the supermarket deli case, a flavored commodity cheese such as pepper corn Monterrey jack or colby swiss is viewed as a specialty cheese. In high end gourmet specialty retail outlets specialty cheese means European style soft cheeses, brie, camembert, goudas, and blues.

Brokers and distributors interviewed for this report confirmed that specialty cheeses have strong market potential. The majority advised a Chenango enterprise to focus on specialty

. cheese rather than fluid beverages or organic dairy products. The research identified the following market opportunities within the supermarket deli case:

• blocks of speciality hard cheeses for slicing at the deli counter and/or in presliced packages--sandwich cheeses

• raw milk cheddar and flavored cheddars, specifically horseradish, roasted garlic, onion/chive, and roasted onion

• Danish havarti • rennet-less cheese • kosher cheese of high quality • low fat cheese with excellent taste • BST-free cheese


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In regard to high-end gourmet retail outlets, Mike Spano, of Todaro Brothers, and Robert Prusac, of Gourmet Garage, believe there is a strong opportunity for domestic production of European imported cheeses. Their client base would be attracted by a marketing strategy that focused on supporting local small family farms in upstate New York. However, they recommend not trying to closely imitate a European import. Rather, a Chenango enterprise should develop its own unique specialty cheese that would appeal to the same market but not be interpreted as a cheap domestic substitute.

The table on the following page summarizes the percentage of 5,000 lbs.of speCialtY • cheese which could be distributed weekly through various market channels. This aIp.ount of .

specialty cheese could be viably produced by an enterprise 008 average-sized Chenango farms with one day a week production of cheese from one day a week milk supply. · .

. Our research to date has identified outsourced manufacturing opportunities for the production of specialty commodity cheeses targeted to the deli pase. We have not identified opportunities to have high-end gourmet specialty cheeses custom made by outsourced manufacturers. Phase III research will have to investigate what possibilities exist within an economically feasible geographic range.


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Possible Market Distribution Channel Opportunities for Specialty Cheese Products

Channel

A Regional ~upermarket Chain 7

Distributor for Small Retail and Food Service Sector

Farmers' Markets8

GourmetlNatural Foods Retail Outlet

Home Delivery9

Minimum Volume

4,000lbs.lweek

2,000 lbs.lweek

300 lbs.lweek

75 lbs.lweek

10lbs.lweek

Maximum V Qlume Minimum % of Product Volume that Can be Marketed6

unknown 80%

unknown 40%

2,000 lbs.lweek 6% to 40%

300lbs.lweek 1.5% to 6%

unknown 0.2%

6 Assuming an enterprise of 17-18 farms producing 5,000 lbs of cheese one day a week. This is the minimum percent of weekly volume which could be marketed through a single entity in each type of market channel.

7 A one time payment for "slotting fees" of one to four cases of free product per store may be charged by a regional supermarket chain for carrying a Chenango enterprise product.

8 Representatives of the Downtown Syracuse Farmers' Market, Central New York Regional Market in Syracuse, the New York State Office of General Services operated State Capitol Farmers' Markets, and the Binghamton Farmers' Market all expressed strong interest in cheese products. Arnie Weiss of Meredith Mountain Farms provided estimates of marketable volume through farmers' markets assuming the market operates bo~ Saturday and Sunday and the weather is good.

9 There are 10 individual farm producerlhandlers in New York State that provide home delivery of fluid milk. Kurt Edwards of Model Dairy Farm in Gloversville, New York indicated interest in distributing 20 eight-ounce packages per week of a Chenango enterprise's cheese for home delivery. The potential for this method of distribution with other producer/handlers remains to be investigated.

Yellow Wood Associates, Inc. 95 S. Main St. Albans, VT 05478 (802)524-614 I 14

Fluid Beverages

During the 1990s, the market for manufactured dairy products has been growing faster than the market for fluid products. The market demand for fluid is more than amply supplied. In our discussions with food brokers, distributors, and retail buyers of dairy products, very few saw a demand for specialty fluid beverages.

The average fluid milk plant size more than doubled from 1988 to 1993. In 1993, a total of358individual firms processed fluid milk in the U.S. Of these, 340 are local firms operating a single fluid plant. However, the majority of these firms are providing private label services for established brand names and/or supermarket chain stores. In 1992, 29 cooperatives processed fluid milk products but they controlled only 16% of all fluid milk products sold in the U.S. Supermarket chains that operate their own fluid plants only controlled 19% of total fluid sales in 1993, but 63% of all fluid milk sales were private label store brands.

Dairy buyers for New York State supermarket chains buy fluid milk principally from only four vendors. Most supermarket buyers have annual or monthly contractual arrangements with fluid plants with pre-determined prices. The selling points for a fl~id milk supplier are willingness to tailor promotional programs to the retailers' needs and reliability of delivery. Price and quality are not important factors because there is little distinguishable difference between the price and quality of one supplier over another. 10

There have been some examples of individual or small groups of farmers bottling and marketing their own fluid beverages. Ten individual farm producer/processors of fluid milk were registered with the New York State Department of Agriculture as of June, 1996. These processors distribute through home delivery and small retail outlets. Only one of these individual processors has succeeded in entering their product in a supermarket chain. It is unlikely that the volume of fluid beverages produced by even a small scale Chenango enterprise could be wholly marketed through home delivery channels.

Our Family Farms of Western Massachusetts and Vermont Family Farms are two groups of farms which are bottling and marketing fluid milk. The Massachusetts group has had sales limited to 7% of the fluid sales in Franklin County, Massachusetts. Crowley Foods has been copacking the fluid milk for Vermont Family Farms. According to Crowley's judgement the venture is a failure with market sales just limping along. William Byrne Jr. of ByrneDairy said the fluid market is highly competitive and cut throat.

While the market demand may exist for a Chenango fluid beverage, the market will not support a premium price for the product. As discussed in a latter section, there is little valueadded to fluid milk and thus little opportunity to generate additional net return benefits for farmers. There are regulatory barriers to marketing fluid milk, complicated by uncertainty as to the future of the federal milk market order system. A bottling and marketing effort would entail · a high degree of regulation.

10The Structure of Dairy Markets: Past Present Future. ERS AER-757. Alden C. Manchester and Don P. Blayney.

Yellow Wood Associates, Inc. 95 S. Main St. Albans, VT05478 (802)524-6141 15

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Organic Dairy Products

Valid market data for organic dairy products is not readily available. The infrastructure for tracking scanned sales at supermarkets and other retail outlets has not distinguished organic from non-organic dairy products until recently. Natural Food Merchandiser conducts an annual nationwide survey of natural food retailers. The survey is of a sample of the total natural food retail market. The figures indicate that sales of all organic dairy products in these outlets grew from $120 million in 1996 to $186.3 million in 1997. SPINS-Nielsen scanning data for sales in mainstream supermarket chains indicates that sales of organic fluid milk increased from $15.8 million in 1996 to $30.7 million in 1997. Sales of organic kefir and yogurt increased from $5.5 million to $10.6 million over the same period.

The growth of the market is clear, however, the total volume of the market is limited. Assume a gallon of organic fluid milk sold for $3 in 1997. This means 10.23 million gallons were sold in supermarkets that year. This corresponds to only 87.98 million pounds of organic milk production. It would only take 78 average size Chenango fanns to supply this recorded national demand in supermarkets.

Let us add the $186.3 million in natural food retailer sales and the $41.3 million in supermarket sales. If all of these sales were for fluid organic milk, it would require 652.4 million pounds of milk to satisfy this demand. It would take 583 average size Chenango fanns to satisfy this recorded national demand. This is clearly an underestimate of the total organic dairy market, however, it indicates the relatively small size of the market.

There is disagreement among the food brokers and distributors interviewed for this report regarding the market potential for organic dairy products. Four conventional dairy food broker firms, Stube Co., Gasparini Sales, Inc., Circle Food Marketing Co. , and Ginsberg Institutional Foods and two specialty retail chains Todaro Brothers and Gourmet Garage have not observed any demand from their clients for organic dairy products. They do not see organic dairy products as a significant market opportunity for a Chenango enterprise. The market is growing but is

. limited by the high retail premium charged for organics. .

A few industry experts do see market potential for organic dairy products. However, a majority said the branded marketplace for organic dairy products is controlled by Horizon, Organic Valley, Organic Cow, and Stonyfield. The market is limited and competition is very strong. Economies of scale are becoming a factor as the major players seek to integrate secure volumes of milk supply with proprietary processing and manufacturing facilities.

Among proponents of organic dairy products, the market potential was identified as organic commodity cheese and not organic fluid milk. Both Feenix Brokerage and Northeast Cooperatives see demand for organic American or Italian commodity cheeses. There is little demand for organic specialty cheeses. The demand for organic dairy products exists within retail ' outlets which sell directly to the end consumer. According to Me Dermott Food Brokers, there is currently no demand for organic dairy products within any of the institutional food service' sectors.


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Certification Process for Organic Dairy

A number of different certifying agencies exist: Organic Crop Improvement Association International (OCIA), Organic Growers and Buyers Association (OGBA), Organic Forum, Farm Verified Organic (FOB), and the Northeast Organic Food Association of New York (NOFANY). The decision of which agency to use to certify a particular farm should be based on where the farmer intends to market their products. Often either the processors, manufacturers, and/or retail buyers will accept certification only from specific certifying agencies. Occasionally processors/manufactures, if certified by one agency, may only accept raw inputs that are certified by the same agency.

For this research, YWA reviewed in detail the certification regulations ofNOF A-NY.

NOFA-NY Organic Dairy Certification Requirements

NOF A-NY certification requires that both crop production and livestock management conform to organic standards. A cow herd and the milk it gives may be certified organic after a minimum transition period of 90 days during which livestock health practices and certified organic forages and grains have been used. The certification of crop fields requires that no synthetic pesticides, herbicides or fertilizers have been used for the past three years. If crop fields cannot be certified initially, NOF A-NY allows grains and forages to be fed to young stock during the three-year transition period. The farm must have adequate storage facilities to separate non-certified feed from certified feed.

All cows must be raised on certified feed and with certified health management practices for one year prior to freshening. The milking herd must have access to managed pasture with edible forage during the grazing season, and rotational grazing is strongly encouraged. Homeopathic medical treatments and preventative herd health management is encouraged. The milk from a cow that has been treated with antibiotics cannot be certified organic until 90 days after treatment. If the cow is dry when treated with antibiotics, the 90 days begins with the first milking after freshening. .

Non-organic breeding bulls may be used for siring animals to be included in the organic herd. Artificial insemination is a regulated practice under the certification rules that must be preapproved. Embryonic transfer is not a permitted practice.

A farmer interested in being certified for organic dairy production must ' first have NOF ANY conduct a pre-application review which includes an on-farm visit. This review must be scheduled three months before the farmer intends to begin the 90 day transition period for the herd. The pre-application review costs $130, however $65 of this cost is applied to the subsequent certification fee. The certification process is intended to be completed during the 90 day transition period. The certification process includes a second on-farm inspection.


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The certification fees are based on the projected gross income of all certified fields, livestock, and products. The certification fees range from $275 to $2,275 (for gross income> $500,000) for the first year. The farmer must be re-certified annually and the re-certification fee is based on actual gross sales of the first year of certification. The re-certification fees are $50 less than first year fees at each range of the gross income scale. The farmer must also cover the cost of soil testing required as part of the certification process.

No on-fann inspections are conducted between October 1 and February 1, so it is advisable to begin the pre-application review process by April 1st to be certified before year's end.

In order to process or manufacture a certified organic dairy product, the entire process must be certified. However, the certification is held by the entity which markets the product. If a Chenango enterprise were to out source the manufacture of an organic product, the manufacturing facility must be either certified itself or complete an application and inspection process. In the latter case, the Chenango enterprise would hold the certification fo'r that manufacturer's processing facility and pay the costs associated with certification.

Suitability of Chenango County Farms for Conversion to Organic Production

The choice to convert to organic dairy production should not be made solely to take advantage of a market niche. The decision to adopt organic production requires a philosophical and whole-fann management perspective.

Key factors for conversion from conventional to organic dairy farming include : strong management skills,good financial situation, low and manageable debt load, available pastureland and cropland, good herd health history. Herd size for organic production averages around 35 to 40. Herd size is constrained by two factors: ability to produce organic feed and forage on farm, and ability to monitor and practice preventative herd health strategies. I I

The extent to which transitioning frums experience decreases in crop productivity and milk production depends on the quality of soils and the quality of herd health prior to conversion. Organic crop production relies on crop rotation regimens. Continuous cropping of corn, season

after season, will not be successful in an organic system.

II Gary Shenberger of Vermont Organic Grain, organic dairy farmer.


The current industry-wide infrastructure for supplying organic feed grain to organic dairy farms is inadequate. Obtaining sufficient, high quality organic grains at a cost-effective price is difficult. Feed buying pools of dairy farmers and the development of regional organic grain processing mills would be required to support a significant expansion of organic dairy farms in Chenango County.12

Findings of June _ J 6, J 998 Discussion with J 5 Chenango Co. Agricultural Service Providers held at the Cornell Cooperative Extension offices in Norwich, New York

Conversion to organic-based farming requires a top notch manager. It is estimated that 20-25% of the existing farmers have the necessary management skills to successfully convert to organic production. Conversion of a larger percentage of County farms would require an improvement in management skills on the part of the farmers. However, an even smaller percentage of County farmers are believed to have the capital reserve necessary for the transition period to organic production. Those currently moving to rotational grazing will have less of a transition and therefore would require less capital reserves to successfully convert.

A sampling of agrichemical dealers serving Chenango County generally agreed that 60% of the land currently being cropped has chemical herbicide, pesticide or fertilizer use. A larger number of acres are transitioning into rotational grazing resulting in long-term reductions in chemical use on these lands. However, these lands often receive a large use of fertilizers in the first year to establish a good grass crop, reducing the use of fertilizer after a good grass crop is established.

An estimated 40% of Chenango County hayland and cropland is believed to be relatively free of chemical residues. This represents a potentially valuable source for organic hay and grains if the land were to become certified and the crops were properly marketed.

The move toward rotational grazing may decrease the percent of chemically treated crop _ land in the future. Those farms going into rotational grazing are getting out of the production of corn and into small grains. Small grain production, combined with proper cover crop usage, reduces but does not eliminate the use of chemical treatments. However, these farms will require less effort to convert to organic production. These farms were also observed to be on the "best" -soils in the County and have good managers.

Of the 6-8 major large animal vets covering Chenango County, there is no homeopathic veterinary medicine practiced that we are aware of. Those producers using homeopathic medicine are doing so on their own.

12 Organic Dairy Farming Kickapoo Organic Resource Network.


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Butternut Fanns Cooperative: An Opportunity for Chenango Dairv Farmers Considering Conversion to Organic Dairy Operations

Butternut Farms Cooperative was fonnally incorporated June 1, 1998 and is an affiliate of Allied Federated Cooperatives. The cooperative has 40 organic dairy fanners in Otsego, Chenango and surrounding counties. Member fanns are certified by a mixture of certifying agencies: OCIA, Organic Forum, FOB, and NOFA-NY. They collectively market approximately 2 million pounds of organic milk per month. They currently want to expand their membership with additional organic dairy fanns. Eventually, they may choose to restrict the organic milk supply by restricting membership.

Following the example of CROPP Cooperative of Wisconsin, Butternut Fanns has made arrangements with Cabot Creamery in Vennont to produce organic cheddar cheese using about two thirds of their raw milk production. The cheese will be marketed by Butternut Fanns to the wholesale market and some Butternut Fanns branded cheese will be for sate in supennarket chains and local stores. The wholesale price is $3.79 per pound. They have set their prices in order to support a $18/cwt. price to their member fanners. Close to one third of their raw milk production is being sold to the Mountainside Fanns fluid plant in Roxbury, New York owned by Horizon Dairy. Allied Federated Cooperatives handles balancing their milk and finding outlets for surplus milk. At times their organic milk will be sold as conventional if no organic market can be found.

Member fanners have each purchased one membership stock for $100. The cooperative is in the process of establishing dues that will probably be $0.02/cwt. There is no capital equity plan for Butternut Fanns. Each member fanner signs a one-year contract by which they are obligated to sell 100% of their milk to Butternut Fanns. The cooperative is obligated to purchase 100% of the member's milk. The cooperative is operating with a credit line from Allied Federated Cooperatives with the cheese as collateral. Operational profit during the year will be placed in an interest-bearing bank account. The process of net earning distribution has not been fonnallyestablished. At the end of the year, the cooperative board may determine whether net earnings will be distributed through patronage refunds proportional to the number of hundred weights contributed by each member.

Bruce Bigelow, General Manager of Allied Federated Cooperatives, is acting as production and marketing coordinator for Butternut Fanns. He is not receiving any salary for these efforts. Allied Federated Cooperatives receives an assessment of $0.02 per cwt. of Butternut Fanns milk from the Federal Milk Marketing Order. Allied Federated Cooperatives also charges Butternut Fanns $0.075 per cwt. for field testing, lab work, market order regulatory paperwork and processing of the milk checks. Milk assembly and hauling to Cabot Creamery is provided by Allied Federated Cooperatives at a cost of$2.00 per cwt. When Butternut Fanns milk is sold to Mountainside Fanns, this firm is responsible for the assembly and hauling charges. All other "staff' of Butternut Fanns are volunteering their time.

Yellow Wood AssoCiates, Inc. 95 S. Main St. Albans, VT05478 (802)524-6141 20

There are a relatively small number of organic dairy farms in Chenango at the present time. Given the development of Butternut Farms Cooperative and the opportunity it offers to organic farmers, it makes little sense for a Chenango enterprise to focus on organic milk production. A value-adding strategy that would not require conversion by Chenango County farmers to organic production is likely to offer benefits to a larger number of farmers.

Resource Contacts

Tina Densmore, Organic Cow, 802-685-3123 Bunny Flint, Organic Cow, 802-685-3123 Nancy Hirshberg, Stonyfield Farms, 603-437-4040 Pat Kane, Northeast Organic Farming Association - New York, 607-724-9851 Northeast Organic Farming Association - Vermont, 802-434-4122 Linda Lutz, Organic Trade Association, 413-774-6432 Fred Person, University of Vennont, 802-863-6807 George Siemon, CROPP Cooperative, 608-625-2602 Gary Shenberger, Vennont Organic Grain, 802-234-5433 Gary Larson, Butternut Farms Cooperative, 607-783-2392 Sharad Mathur, Sunnydale Farms, 718-257-7600 Chris Hunt, Northeast Cooperatives, 800-334-9939 ext 314 Karen Raterman, Natural Food Merchandiser Magazine, 303-939-8440 Kelly Devaney, H.P. Hood/Organic Cow, 617-887-3000 Linda Lutz, Organic Trade Association, 413-774-7511 Michael Straus, Straus Creamery, 415-663-5464


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Opportunities for Outsourced Manufacturing of Dairy Products

When a group of farmers sends their milk to be manufactured into a product by another company, that arrangement is called "tolling." The farmer group maintains ownership of the raw milk and is responsible for the marketing and distribution of the final product. Tolling is different from private labeling because the manufactured product is made only from raw ingredients supplied by the farmer or farmers. Manufacturers are generally willing to enter into tolling agreements when they have excess manufacturing capacity.

Private labeling refers to placing a proprietary label such as a supennarket brand name on product that is, from a manufacturing standpoint, undifferentiated from other product produced by the manufacturer under their own label and using an arbitrary source of raw milk inputs. '

From the perspective of a start-up value-adding dairy enterprise, tolling has significant benefits. First, it allows the enterprise to forgo raising the capital required to build, move, and/or retrofit a manufacturing facility. Second, it gives the enterprise access to manufacturing and packaging expertise and enterprises that may be able to contribute to the success of product development and introduction efforts. Third, it allows the enterprise to focus on marketing and relationships with farmers rather than production. This is crucial since the marketing relationships established and market intelligence gained by the enterprise combined with the infonned support of farmers will be the difference between success and failure. Fourth, tolling allows for flexibility in volume and type of production. As new markets develop, it should be relatively easy to expand the volume of product available.

Should the enterprise outgrow the existing tolling capacity or discover market niches that cannot be met through tolling arrangements, or discover partners (domestic or foreign) interested in investing in manufacturing facilities, there is always the possibility of revisiting the question of building its own manufacturing facility. By then, however, the enterprise should be relatively secure in its marketing and farmer relationships and better able to focus on the intricacies of manufacturing. In the event that the Chenango County enterprise chooses to build its own plant, our research indicates it should be relatively easy to locate used equipment at reduced prices.

We have identified one company, United Dairy Machinery Corporation (UDMC), that specializes in system design, engineering, integration, fabrication, installation, start-up and sales of new and reconditioned equipment for dairy processors. They are willing to work with a Chenango enterprise to scope out a manufacturing facility if desired. The contact for this finn is:

Resource Contact Frank Cercone III, United Dairy Machinery Corporation (UDMC) 716-674-0610 ext. 514.


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Potential Tolling Arrangements for Conventional Dairy Products

The tables on the following two pages summarize the tolling arrangements which could be offered by a selection of manufacturing firms. This is a sampling of manufacturing firms from New York State. It is possible that additional tolling arrangements could be made with other manufacturers within and outside of the state.

Valio-McCadam Cheese Company Valerie Schneller 800-724-3374 ext. 31

Valio-McCadam would be interested in a tolling arrangement to produce a variety of hard cheeses. The firm would not be interested in trying to produce a new product different from' what they are currently tooled to do. Their fees would be $0.20Ilb. of cheese for processing; $0.50Ilb. of cheese for packaging; $0.01-0.0 151lb.lmonth for aging in refrigerated storage. ValioMcCadam would own any by-products of the production process.

Ultra-Dairy: owned by Tuscan Lehigh Leonard Ingando 607-746-2141

Ultra-Dairy would consider a tolling arrangement, but does not expect to have available capacity for the next year or two. If it were possible in the future, the firm could produce fluid and soft products.

Crowley Foods Randy Eranamus 607-779-3289

Crowley Foods could offer tolling services for fluid milk production under a minimum three-month contract. They would process and bottle raw milk one or two days per week. The plant would process straight from a tanker truck, first thing in the morning, and would segregate Chenango milk for the whole process.

Mountainside Farms Cyrus Schwartz 718-291-3333

This firm could offer a tolling arrangement at either of two plants, a fluid plant in Roxbury, New York, or a plant in Buffalo, New York that can process aseptic products which do not require refrigeration (aseptic fluid milk has 6 month shelf-life).



Firm Product(s) Minimum Volume Tolling Minimum Volume Number of Farms of raw milk Fee of End Product needed per production dayt3

Valio-McCadam cheddars, colby 50,000 Ibs. per $O.72/lb. 5,000 Ibs. of cheese 16 minimum

Ultra-Dairyt4

Monterrey jack, brick, pepper jack, munster, edam, gouda, havarti

u-h pasteurized milk ice cream mixes cream products

--------------------_.

Crowley Foods . fluid milk

production day

100,OOO,OOOlbs. maximum annually

86,000 Ibs. per production day only 1 day/wk

51,600 Ibs. per production day 430,000 Ibs. max per production day only 1 or 2 days/wk

of cheese per production day

10,000,000 Ibs. of cheese 611 maximum maximum annually

$0.30/gal. na 27 minimum of end product

na min 6,000 gallons 16 minimum

max 50,000 gallons 137 maximum

-------------------------------------------------------------------------------,-----------

Mountainside Farms fluid milk

aseptic fluid milk



na

na

6,465 gallons 18 minimum

19,395 gallons 53 minimum

\3 Based on assumption that a 70 head Chenango dairy farm will produce a minimum of 31.5 cwts. per day based on Fall/Winter production. This also assumes milk is picked up daily from each farm. The minimum number of farms is based on the volume required for one production day. It cannot be assumed that each outsourced option could by itself utilize the milk from the minimum number of farms each day of the week . . The maximum number of farms are those needed to utilize the total excess capacity assuming only one production day per week devoted to a Chenango enterprise.

14 Ultra Dairy does not currently have excess capacity. A tolling arrangement with a Chenango enterprise would only be possible one to two years from now.


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Firm Product(s)


Minimum Volume of raw milk

Tolling Fee

Minimum Volume of End Product

Number of Farms needed per production dais

Ciao Bella Gelato ice creams 16,357 Ibs. per Wk'6 65,428 Ibs. per wk max

na 1000 gal. of ice creamlwk 4000 gal.

. 5 minimum 21 maximum

Emkay Trading17 Corp.

HP Hood

Cheese Smokers

standard, gourmet Minimum not specified kosher cream cheese Maximum of

3,000,000 Ibs. per wk

cottage cheese cream cheese

smoked cheese18

12,000 Ibs. per wk one day/wk

na

$0.54I1b. of cheese

na

$0.30Ilb.

na

na

na

na

952 maximum ---------------------

4 minimum

na

15 Based on assumption that a 70 head Chenango dairy farm will produce a minimum of 31.5 cwts. per day based on Fall/Winter production. This also assumes milk is picked up daily from each farm. The minimum number of farms is based on the volume required for one production day. It cannot be assumed that each outsourced option could by itself utilize the milk from the minimum number of farms each day of the week. The maximum number of farms are those needed to utilize the total excess capacity assuming only one production day per week devoted to a Chenango enterprise.

16 The Chenango enterprise will need to provide the Ciao Bella Gelato Co. with processed ice cream mix. This is based on the volume of raw whole milk with 3.5% butter fat needed to produce 500 gallons of ice cream mix. The ice cream mix will also need the following ingredients: cane syrup, com oil, fructose, buttermilk powder and whey powder. A Chenango enterprise will need to find an outsourced processor to make the ice cream mix.

17 The Chenango enterprise would be responsible for finding an alternative use for the skim milk by-product of cream cheese.

18 The Chenango enterprise would have to produce a cheese product which this firm would then process into a smoked cheese specialty item.

Yellow Wood Associates, IIlC . 95 S. Main St. Albans, VT 05478 (802)524-6141

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Ciao Bella Gelato Co. Inc. Charles Apt 800-435-2863

Ciao Bella Gelato manufactures premiwn ice cream, 95% of which is marketed directly to the hotel/restaurant segment of the institutional food service sector. The firm sells either 3 gallon cartons of bulk ice cream for $13-$16 or 2 ~ gallon premiwn cartons for $25-$35. This market is highly competitive with high barriers to entry. The firm would be interested in purchasing high quality premiwn ice cream mix from a secure source of small family fanns in upstate New York for Ciao Bella Gelato ice creams. Or the firm would offer a tolling arrangement whereby the ice cream mix would be processed into ice cream marketed under a Chenango enterprise name. A 50 gallon batch of ice cream mix requires 24 gals. of 3.5% butterfat raw milk, 15 gals. of 40% butterfat cream, 6.1 gals. of cane syrup, 1.9 gals. of com oil, 1.4 gals. of fructose, 12 lbs. of

. buttermilk powder, and 9 lbs. of whey powder. The Chenango enterprise would have to find a way to produce ice cream mix. Ultra-Dairy owned by Tuscan-Lehigh might be able to produce ice cream mixes in the tolling arrangement described above.

Emkay Trading Corp. Howard Kravitz 914-592-9000

Emkay Trading Corp. produces standard and gourmet cream cheese, both kosher and non kosher, for the food service industry in their plant in Buffalo. The firm sells 5-30 Ibs. tubs direct to distributors who sell to the restaurant industry . The firm could produce smaller 8 oz. and 12 oz. retail size containers. The firm would offer a tolling arrangement for a Chenango enterprise as long as the enterprise took responsibility for disposal or alternate use of the skim milk (byproduct from making cream cheese). The firm would need a minimum one-year contract.

HP Hood/Organic Cow Phillip Campbell 315-829-2350

HP Hood has a cottage cheese and sour cream plant in Vernon, New York. The plant manager might be interested in a tolling arrangement with a Chenango enterprise. However, the firm is currently under exclusive contract with Dairylea to use only Dairylea milk as input to their production. This may change in the future. If the firm were to do a tolling arrangement, the plant would process Chenango milk only one day a week.


Potential Tolling Arrangements for Organic Dairy Products

There are only two manufacturing facilities in New York State which hold their own NOFA-NY certification for organic manufacturing: H.P. Hood/Organic Cow in Vernon, New York and Mountainside Farms. The organic manufacturing capacity of both of these facilities are fully committed. Sunnydale Farms' processing facilities are certified by another certifying agency, nonetheless, their capacity is also fully committed. There are a number of manufacturers in New York State which are processing certified-organic products for outside firms which hold the certification. For example, we know from other sources that CROPP Cooperative/Organic Valley is having certain organic fluid products processed by Ultra-Dairy in Fraser, New York. Unfortunately, NOFA-NY considers these arrangements to be proprietary information of the certified firm and will not share a list of these manufacturing facilities.

The table on the following page summarizes the tolling arrangements which could be offered by the two firms mentioned below.

Crowley Foods Randy Eranamus 607-779-3289

Crowley Foods could process organic fluid milk for a Chenango enterprise. Their plants are not currently certified for organic production. They would be willing to be certified if the Chenango enterprise covered the costs of certification. Crowley Foods would require a minimum three-month contract to process and bottle raw milk one or two days per week.

Emkay Trading Corp. Howard Kravitz 914-592-9000

Emkay Trading Corp.' s plant is certified for organic and kosher processing. They produce organic gourmet cream cheese, both kosher and non kosher, for the food service industry in a plant in Buffalo, New York. The firm sells 5-30 lbs. tubs direct to distributors who sell to the restaurant industry. The firm could produce smaller 8 oz. and 12 oz. retail size containers. The firm would offer a tolling arrangement for a Chenango enterprise as long as the enterprise took responsibility for disposal or alternate use of the skim milk (by product from making cream cheese). The firm would need a minimum one year contract.

Cabot Creamery is currently producing organic aged cheddar cheese in a tolling agreement with Butternut Farms Cooperative. It is not known whether the firm would have additional capacity to provide this service to a Chenango enterprise.


Firm Product(s)

Potential Tolling Arrangements for Organic Dairy Products


Tolling Fee

Minimum Volume of End Product

Number of Farms needed per production day 19

Crowley Foods organic fluid milk 51,600 Ibs. per production day 430,000 Ibs. max per production day

na min 6,000 gallons 16 minimum

Emkay Trading20 Corp.

only 1 or 2 days/wk

organic, gourmet Minimum not specified kosher cream cheese Maximum of

3,000,000 Ibs. per wk

$0.54/Ib. of cheese

max 50,000 gallons 137 maximum

--------------------------------------na na

952 maximum .----------------------------

19 Based on assumption that an 70 head Chenango dairy farm will produce a minimum of31.5 cwts. per day based on Fall/Winter production. This also assumes milk is picked up daily from each farm . The minimum number of fanns is based on the volume required for one production day. It cannot be assumed that each outsourced option could by itself utilize the milk from the minimum number of farms each day of the week. The maximum number of farms are those needed to utilize the total excess capacity assuming only one production day per week devoted to a Chenango enterprise.

20 The Chenango enterprise would be responsible for finding an alternative use for the skim milk by-product of cream cheese.


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Milk Quality and Milk Volume Required for a Value-Adding Enterprise

Milk Quality

Dairy farmers in Chenango County produce only grade A milk which is suitable for either class I fluid milk or class II and III manufacturing. The average butterfat content of Chenango County farms in 1997 was 3.88% with an overall average minimum of2.9% and an overall average maximum of4.94%. Butterfat content increases between December and March. During these months, the maximum butterfat content ranges from 5.06% to 5.18%.

Based on discussions with the NYS Department of Agriculture and Markets, Division of Milk Control and industry experts, a Chenango dairy enterprise should seek the participation of farms which consistently produce milk that meet these characteristics:

Somatic cell count Bacteria count Protein content Butterfat content

< 250,000 < 25,000 > 3.3% total protein or 3.48% true protein > 3.5%

It will be important to maintain high quality standards for any value-added dairy product produced by a Chenango County enterprise. An enterprise will need to track the milk quality records of member farms . There are two possible arrangements for handling farm inspections, field testing and laboratory services for a Chenango enterprise. (1) If member farms were able to maintain a relationship with a cooperative or independent handler while participating in the enterprise, the cooperative or independent handler may continue to provide quality testing services for the farm and/or share the cost with the enterprise. (2) The enterprise will need to contract for quality testing services with an independent industry inspector and independent laboratories. The minimum monthly cost per farm is estimated to be $63.0021

Resource Contacts

Elwin Rivenburg, Assistant Director, NY Dept. Of Agriculture & Markets, Division of Milk Control, Albany, NY, 518-457-5363 Carol McClenahan, Compliance Specialist, NY Dept. Of Agriculture & Markets, Division of Milk Control, 1 Winners Circle, Albany New York 12235-0001, 518-457-2050(P), 518-485-8730(f), [email protected] Charles Huff, NY Dept. Of Agriculture & Markets, Division of Dairy Services & Produce Security, 1 Winners Circle, Albany, NY 12235,. 518-457-8859~ Joanne Lawton, Supervisor of Milk Dealer Licensing, NY Dept. Of Agriculture & Markets, Division of Dairy Industry Services and Produce Security, 1 Winners Circle, Albany, NY 12235,518 457-4142(P), 518-485-5816 (f) Joe Corby, Inspector, NY Dept. Of Agriculture & Markets, Division of Food Safety & Inspection, 518-457-4492 (P)

21 Based on contract services charged by Dairy Farmers of America. Bill Hill.

Yellow Wood Associates, Inc. 95 S. Main St. Albans. VT 05478 (802)524-6141

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Milk Assembly

Raw milk may be stored on farm for up to 48 hours after milking. Raw milk can then be stored in a central storage tank and/or tanker truck for an additional 72 hours before it must be pasteurized. Thus, raw milk must be received at a manufacturing plant within 5 days of when it was milked from the COW. 22

Tanker trailer sizes can vary. One tanker trailer holding 55,600 lbs. can economically pick up milk from farms within a 50 mile range of each other. In other words, to maximize efficiency and minimize cost, the total miles traveled to assemble a full load cannot be more than 50 miles. Cost savings per cwt. could be achieved by assembling a full load on a route shorter than 50 miles. Assuming a Fall-Winter per farm average of 31 .5 cwt. (based on a 70 cow farm), a minimum of 17 farms (8 if farms have 48 hour holding tank capacity) would need to be included in the 50 mile assembly route. During the SummerSpring, a single tanker trailer could handle only a maximum of 14 farms (6 with a 48 hour holding tank capacity) if we assume a 38.5 cwt. per farm (based on a 70 cow farm).

Most outsourced manufacturing options identified in this research would be able to process milk from a Chenango enterprise only on one day a week. Depending on the scale at which the Chenango enterprise wishes to start, there appear to be three options:

1) start small -- work with one or two manufacturers and utilize only a portion of the milk of participating farmers;

2) work with mUltiple manufacturers to utilize the milk of a relatively large number of farmers and/or store milk from a relatively small number of farmers and utilize virtually the entire supply of participants' milk for value-adding;

3) act as a milk handler by picking up and selling all the milk of participating farmers, sending some of it for manufacturing and selling the rest as fluid milk.

Under the first option, milk that cannot be utilized in manufacturing by the Chenango enterprise could be sold to an independent handler. Participating farmers may sell their milk to the Chenango enterprise on specific days of the week and to an independent handler the rest of the week. The opportunities for cooperative members are described below.

Scheduling pickups from farms and deliveries to processors will require ongoing attention to ensure maximum efficiency, minimum cost, and fulfillment of services to farmers and supply to manufacturers . No matter how the Chenango enterprise is structured, there will always be the issue of milk balancing. Arrangements will need to be made for surplus milk supply from participating farms and for the possibility of shortfalls in milk supply to manufacturers. The Chenango enterprise will have to maintain relationships with other milk handlers to meet milk balancing needs.

22 NYS Department of Agriculture and Markets, Division of Milk Control


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Farmer Opportunities with Cooperatives and Independent Handlers

Dairy Farmers of America and Allied Federated Cooperative have stated that they would not allow member farms to divert a portion of their production to a Chenango County enterprise that was independent of the cooperative structure. However, both cooperatives are open to collaboration in developing new value-added opportunities. It may be useful to engage each of the region's cooperatives in more detailed discussions in Phase III depending on how many of their members are interested in participating in the Chenango enterprise.

Independent handlers may be open to collecting only a portion of a farm's production, as long as the farmer bears or shares any additional costs associated with any transportation inefficiencies that result for the handler. This could come in the form of reduced prices to farmers for the milk purchased by the independent handler.

Opportunities for Outsourced Milk Assembly

The table on the following page identifies a number of firms which could offer outsourced milk assembly to a Chenango enterprise. This is not a comprehensive listing of all contract haulers, rather, a sampling to illustrate that the capacity exists. Those contract haulers interviewed stated that for cost efficiency, a full tanker load should be assembled within a maximum route of 50 miles. These contract haulers could only deliver full tanker loads to a manufacturing plant within 250 miles of Chenango County. Contracting for hauling raw milk over longer distances may be possible but was not researched for this report.

Most contract haulers will charge for a tanker trailer on a per mile basis, regardless of the volume being hauled. Therefore, less than full tanker loads will incur a higher per cwt. cost for the enterprise. Contractors would prefer to have a contract for daily or every-other-day pick-up over a specific period of time.

Resource Contacts

Al Sprouse, Cortland Bulk, 607-753-0322 Richard Obresa, Richard Obresa Trucking, 315-866-1560 Sharad Mathur, Sunnydale Farms, 718-257-7600 Bill Hill, Dairy Farmers of America, 315-463-0781 Bruce Bigelow, Allied Federated Cooperatives, 800-787-9326


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Firm Geographic Range

Opportunities for Outsourced Milk Assembly


Hauling Fee per Tanker

--------,

Number of Farms needed per production day22

Richard Obresa Trucking

Pick-up routes 20 miles east-west of Route 12 from Utica to Binghamton.

One 60,000 Ibs. tanker load every other day with one year contract

$1.20/mile assembly and hauling miles combined

19 minimum

250 mile limit for full load to plant maximum unknown

---------------------... - ........ ----------.. ----------------~~-- ... -------------------------------------------------------------

Cortland Bulk Full load must be assembled within 50 miles ~50 mile limit on hauling a full load to a plant

One 55,600 Ibs. tanker load

Maximum is limited to 4 tanker loads per day

$1 .00/mile assembly and hauling miles combined

18 minimum

70 maximum

-----------~~----------------. -----------------------------------------------------------------

SunNew Yorkdal~ Farms not defined One 50,000 Ibs. tanker load

maximum unknown

$0.50/cwt. for first 50 miles plus $1 .00 per tanker load for each additional mile over 50 miles.

16 minimum

_____________ 0#-_-... _________________________________ ... __________________________________________ _ ._-----------------Dairy Farmers of America and Allied Federated Cooperatives expressed interest in offering outsourced milk assembly but did not provide aNew York estimates. .

22 Based on assumption that a 70 head Chenango dairy farm will produce a minimum of 31.5 cwts. per day based on Fall/Winter production. This also assumes milk is picked up daily from each farm. The minimum number of farms is based on the volume required for one production day. It cannot be assumed that each outsourced option could by itself utilize the milk from the minimum number of farms each day of the week. The maximum number of farms are those needed to utilize the total excess capacity assuming only one production day per week devoted to a Chenango enterprise.

Yellow Wood Associates, J nco 95 S. Main St. Albans, VT 05478 (802)524-6141

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How a Value-Adding Enterprise Can Benefit Farmers

To evaluate how a Chenango Dairy Enterprise could improve the benefits of dairy fanning to individual farmers, one must understand the value-adding chain in the dairy industry. To provide net benefits to farmers per cwt. of raw milk which surpass current commodity milk checks, an enterprise must control and capture the net margin at one or more of the stages in the value-adding chain. There are at least six steps in the value-adding chain for dairy products:

Raw milk --> Assembly-->ManufacturelPkg.--> Broker--> Distributor-->Retailer-->Consumer

Currently, most dairy fanners release control over their milk at the time its is picked up from the farm. Capturing added value requires an organization that can maintain product control further down the value-adding chain. The following illustration gives an approximate distribution of value added at each link in the chain, first for cheese, and then for fluid (low fat) milk:

Raw milk -->Assembly --> ManufacturelPkg. --> Broker --> Distributor -->Retailer --> Consume~ 36% 5% 21% 2% 10% 26% 100%

Raw milk -->Assembly --> ManufacturelPkg.--> Broker --> Distributor --> Retailer--> Consumer4

56% 5% 17% 2% 11% 9% = 100%

Clearly, there is the potential to capture a higher percentage of value through cheese marketing and sales than through fluid milk marketing and sales, everything else being equal.

While there may be circumstances under which it would be advantageous to a Chenango County enterprise to outsource any of the services required in adding value, and, in particular, assembly and manufacturing and packaging, which entail significant capital investments, the more stages of marketing that can be internalized the greater the profit potential, everything else being equal. In other words, if a Chenango County enterprise can sell a packaged product directly to a retail outlet without engaging a broker and a distributor, the enterprise itself will earn the margins that would otherwise have been earned by the broker and distributor. If a Chenango County enterprise can retail its own product directly, through farmers' markets, mail order, or otherwise, it can capture an even larger share of value-added. Therefore, the most crucial capacity for financial success of a Chenango County value-adding dairy enterprise will be its marketing capacity.

23Based on YW A research.

24Based on research conducted by the Cornell Program on Dairy Markets and Policy.

YeIlow Wood Associates, Inc. 95 S. Main St. Albans, VT 05478 (802)524-6141

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The following hypothetical example of a cheese product illustrates the concept in detail. The figures are based on assumptions listed below.25 The distribution of gross costs at each stage into net costs and net margin has been artificially set to represent 10% net margin at each stage. This is for illustrative purposes only. The actual percent of net inargin at each stage currently captured by industry players is not known at this time. For clarity, all figures relate to a hundred weight of raw milk. The gross costs for manufacturing and packaging, broker, distributor, and retailer are based on ten pounds of cheese produced from one hundred weight of raw milk.

Raw Milk ---> Farmgate Price $ 12/cWt.

Milk Assembly ---> Manufacture Testing Costs & Packaging Administrative Costs

gross cost of stage $1.80/cwt. fee ---> net cost of stage $1.62/cwt. net margin $0 .18/cwt.

total value $13.80/cwt. after each stage

$7.20/cwt. $6.48/cwt. $O.72/cwt.

$21.00/cwt.

-> Broker

--> $0.70/cwt. $0.63/cwt. $0.07/cwt.

$21.70/cwt.

--> Distributor --> Retailer

--> $3.26/cwt. -> $8.74/cwt. $2 .93/cwt. $7.87Icwt. $0.33/cwt. SO. 87/cwt:.

$'24.96/cwt. $33.70/cwt.

Consumer Price = $3.37/lb.

25

Milk Assembly: The gross cost ofmilk assembly is estimated to be $0.004 per cwt. of raw milk per mile of distance traveled. Assume 50 miles for fann to farm assembly of a 55,600 Ibs . tanker load and 250 miles transport to a manufacturing plant: the per cwt gross cost of milk assembly is estimated to be $1.20.

Testing Costs: A charge of $0.1 0 per cwt is estimated to cover the field tests, lab testing, record keeping.

Administrative Costs: Total annual costs are estimated to be $100,000 annually in salary, physical equipment and direct office expenses. If the enterprise had a minimum of 17 average size Chenango farms that committed 100% of their milk to the enterprise, the total annual volume would be 204,000 cwts .. The administrative and marketing costs are thus estimated to be $0.50 per cwt.

Conversion Factor: Relates the number of units of final product produced by one cwt of raw milk. This cheese example assumes 10 Ibs. of cheese produced from I cwt of raw milk.

Manufacture and Packaging: The gross cost of this stage varies greatly depending on the type of product. Based on the potential tolling arrangement with Valio-McCadam, we estimate $0.72 per pound of cheese.

Broker: For dairy products, a broker's commission will range between $0.02 to $0.10 per pound of final product. We will assume a gross cost of brokerage to be $0 .07 per pound of final product.

Distributor: Our research indicates that a dairy product distributor will mark-up the manufacturer's price by 12%-20% for sale to a retail outlet. We will assume a 15% gross margin for the distributor stage:

Retailer: We assume a 35% mark-up by the retailer on the price paid to the distributor for the product. This is the gross margin for the retail stage and defines the consumer price for our illustration.


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If an enterprise were in control of each stage of the chain from farm to consumer sale, the total net margin earned in this hypothetical scenario would be $2.17 per cW!. A Chenango Dairy Enterprise needs to investigate at which stage(s) of the value-added chain it is feasible for the enterprise to capture the net margin. If a Chenango enterprise outsources the handling of each stage of the value-added enterprise, the net margin at each stage will be captured by the outsourced finn in the fees charged to the Chenango enterprise.

There is a second method by which the Chenango enterprise, even if outsourcing, can gain valueadded benefits for member fanners. The scenario above assumes that the price set at each stage of the chain is no greater than the sum of gross costs from all previous stages. A Chenango enterprise has the

r' ability to set the price for its products at the highest point that the competitive market will bear. The ( following illustration will demonstrate.

The Chenango enterprise chooses to outsource milk assembly and manufacturing and packaging at the stated gross costs. However, the enterprise knows that the specific niche marketplace for its cheese product will support a plice of $3.80 per pound. Therefore, the enterprise sets the price to the brokers at $23.80/cW!. instead of $21.00/cwt. If the brokers, distributors, and retail'ers take their standard margins, this translates to the consumer price of $3 .80 per pound. This would generate an additional $2.80/cW!. net margin for the enterprise.

This example can be summarized in a mathematical formula which could be used to evaluate potential product ventures for a Chenango enterprise. To estimate the total cost of manufacturing and sales of a value-added product, nine variables must be taken into consideration. They are:

RM == cost per cW!. of raw milk. This is the price paid to farmers for their milk. AS == cost per cW!. of milk assembly. This price is based on a full tanker load of milk assembled

and delivered to a manufacturing facility. TG == cost of testing per cwt. This includes field tests, lab tests, and record-keeping. AD == administrative costs per cW!. This includes overall management of the enterprise. CF == conversion factor. This is the number of pounds of final product produced per cwt. of raw

milk. MIP == manufacturing and packaging cost per pound of cheese. BR == broker cost calculated on a per pound basis. DS == distributor markup. R T == retailer markup.

The equation is:

{ RM + AS + TG + AD

. Consumer cost = CF +MIP+BR} xDSxRT

Yellow Wood Associates, Inc, 95 S. Main St. Albans, VT 05478 (802)524-614 I

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For example, if a Chenango enterprise were to outsource all functions from assembly to retail sales, based on the previous assumptions, the equation would look something like this:

Consumer cost ~ {

$12.00 + l.20 + .10 + .50

10 +.72 + .07} x l.15 x l.35 = $3.37 per pound

$3.37 would be the minimum per pound price that the Chenango enterprise must receive to cover its costs of production, distribution, and sales. (Note: this does not include slotting fees or free product distribution for marketing purposes.) .

This equation can be used to provide rough approximations of the constraints under which a Chenango Dairy Enterprise would have to operate. By consciously setting the assumed values for some of the nine variables, the enterprise can estimate the value of a specific variable. This assumes that the volume of raw milk handled and value-added product produced is sufficient to provide necessary cash flow revenues. The following hypothetical scenarios illustrate the value of the equation. The equations

. shown below are algebraic simplifications of the fully described equation.

A) The enterprise wants to support a $15 per cwt. farmgate price and produce a specialty cheese that has a competitive consumer price of$3.25. If the previous assumptions are held constant, how much can the enterprise afford to spend on gross manufacturing and packaging costs per pound?

MP = {3.25/1.55} - 0.07 - (I5.00 + l.80)/10 = $0.35 per pound

The question then becomes, can this cheese be manufactured either in proprietary facilities or through outsourced manufacturing at or below this gross cost? Gross cost includes a profit margm.

B) The enterprise wants to support a $15 per cwt. farmgate price and knows that outsourced manufacturing and packaging of a specialty cheese will cost $1.35 per pound. How much will the consumer price have to be to support this arrangement?

CP = [(15.00 + 1.80)/10 + 1.35 + 0.07] x 1.55 = $4.81

The question then becomes, through which market channels and in what specific end consumer markets will this or a higher price be a competitive consumer price?

These equations are rough approximations. The assumptions underlying them must be validated for each particular scenario. The above examples have held constant the previous assumptions for milk assembly cost, testing costs, administrative costs and mark-up margin for broker, distributor, and retailer. It is very likely that the appropriate values for these variables will be different depending on distinct product types and marketing channels. Appropriately changing the fully described equation and then resimplifying, can account for these differences.

Yellow Wood Associates, Jnc. 95 S. Main St. Albans, VT 05478 (802)524-6141

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Organizational Models

Selecting the appropriate organizational model for a Chenango Dairy Enterprise depends on resolving specific questions about the desired purposes, products, and benefits of the business entity. The organizational model should be chosen which best meets the needs of the potential business owners in terms of: capital formation, liability exposure, number of owners/members, intended division of net earnings, and perpetuation of the business. YW A has reserached the following organizational models: traditional cooperatives, new generation cooperatives, corporations, and limited liability corporations. We discuss the advantages and disadvantages of each. We also present profiles of successful examples of farmer groups who have created value-adding dairy enterprises under the type of organizational structure.

YW A suggests that the ADC consider a two-tiered approach to organizational structure of a Chenango Dairy Enterprise. First, for purposes of conducting Phase III feasibility research and business plan development, we recommend forming an organization following the 21 st Century Alliance model discussed below. Second, once a business plan has been developed for a value-adding enterprise with specific markets, products, and manufacturing methods defined, a New Generation Cooperative should be formed to organize a select group of dairy farmers to participate in the enterprise.

Traditional Cooperative26

A cooperative is a business that, in structure, is owned and controlled by the members who use its services. A cooperative is characterized by four features: I) services are provided at cost to members, 2) benefits received are proportional to each member's use or participation in the cooperative, 3) decisionmaking is through a democratic process of one vote per member, and 4) members receive limited returns on their equity investments. Under the federal Capper-Volstead Act, returns on equity investments in the form of interest dividends are limited to 8% annually. Cooperatives are structured to share economic benefits back to members based on their "use" of the cooperative (often the volume of product marketed) rather than on the amount of equity investment. Cooperatives must incorporate under state laws. Members elect a board of directors which sets policy and hires management staff.

Most cooperatives require member financing of 40% to 50% of total equity, particularly when seeking additional financing from banks. Member equity is termed "risk capital" and financing is referred to as "debt capital." The amount of risk capital that each member must contribute can be based on total number of members or be proportional to the volume ofa member's product that is marketed by the cooperative. Member financing generally is collected through three methods 1) direct contribution through a membership fee or purchase of stock; 2) agreement to withhold a portion of members' share of net earnings - "retained net earnings"; and 3) assessments based on units of product sold through the cooperative - "per-unit retained capital".

26 How to Start a Cooperative. USDA Rural Business Cooperative Service. Cooperative Information Report #7. 1996.


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If a cooperative chooses to be structured as a stock cooperative, there are two forms of stock issued. Common Stock are shares that confer membership and voting rights. Common Stock is often divided into classes which denote different par values and voting privileges. Interest is not usually paid on Common Stock shares. Preferred Stock are non-voting shares sold to either members or non-members to raise additional capital investment. Preferred Stock is divided into classes which have different par values and conditions. The cooperative does usually pay interest on preferred stock.

If a cooperative chooses a non-stock structure., it will issue membership certificates and capital certificates. Membership certificates are issued upon payment of the membership fee and convey voting rights but are not interest bearing. Capital certificates do not convey voting rights but may be interest bearing and can be sold to non-members. A traditional cooperative allows for non-producer community investment through the purchase of preferred stock or capital certificates.

Drafting articles of incorporation and bylaws for a cooperative can be done prior to completing a feasibility study and business plan. A cooperative can be formed with very basic bylaws which can be refined as the business plan is developed. Prior incorporation is recommended if 1) the cooperative seeks to raise funds from potential members to cover the costs of a feasibility study and business plan; 2) the cooperative wants to seek grant or loan funds to aid implementation; 3) founding members are concerned about legal liability issues during the start-up phase.

Income generated by cooperative corporations, both traditional and new generation, is taxable only at the individual member level if income (profits) are passed down as "patronage refunds" based on volume of services used. The income of the cooperative enterprise is not taxed. Cooperative corporations also provide members with the benefit of limited liability, whereby the individual members are not liable for the debts of the cooperative entity. Investment of appreciable assets (e.g .. land, buildings, machinery, etc) by a member in the cooperative entity is discouraged because of capital gains tax penalties imposed if such appreciable assets are withdrawn from the cooperative at a future point in time.

Resource Contacts

Brian Henehan, Cornell Cooperative Extension, 607-255-8800 Charlie Ling ,USDA Cooperative Services - Diary Cooperative Specialist - 202-690-1410 E.G. Nadeau, University of Wisconsin-Madison - Cooperation Works new book gives pros/cons of different models - 608-258-4396 Robert Cropp, Univ. of Wisconsin-Madison - Agric. Econ. - research on farmer attitudes about cooperative vs corporate enterprises and contractual arrangements between dairy producers and dairy processors - 608-262-9489 or 9483 (direct)


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CROPP Cooperative:

CROPP Cooperative based in Wisconsin is a producerlbranded label marketer of organic dairy products marketed under the name Organic Valley. The cooperative began in 1988 with only seven farms and now includes over 100 farms across eight states. Member farmers set a price floor for their fluid milk, currently $17.10/cwt. plus premiums, and then the cooperative sets retail prices for its consumer-end products which will support this farmgate price. All of the production of Organic Valley products is currently being outsourced through tolling arrangements with manufacturers. This has allowed the cooperative to invest equitY in their marketing efforts.

Our Family Farms a/Western Massachusetts:

Last fall, seven dairy farms in Massachusetts fonned the Pioneer Valley Cooperative, a marketing co-op, to process, package, and market fluid milk under the name Our Family Farms of Western Massachusetts. The cooperative is affiliated with Agri-Mark. The group sells their milk to Agri-Mark . for the regular member price and the co-op assembles, transports, and sells the segregated milk to a small independent bottling plant. The seven producers then buy the milk back from the bottling plant and resell it to a distributor. The group is responsible for the marketing of their milk to retail outlets and provides in-store demonstrations and promotional activities. Through all these transactions, the producers claim they are turning a profit, but are now considering building a processing plant in order to increase their profit margin. By collaborating with Agri-Mark, they have a balancing option for when they have surplus milk which cannot be distributed under their brand name.

Select Milk Producers:

Select Milk Producers is a cooperative of 35 New Mexico and Texas dairy farms which collectively milk 60,000 cows. The goal of the cooperative is to market their milk to the Class I fluid market which accounts for 80% of their sales. However, the 20% of surplus milk was not finding an alternative use within their geographic area. Balancing the milk utilization was negatively impacting their situation. The cooperative collaborated with T.C. Jacoby and Co. and Membrane Systems Specialists to develop an on-farm ultrafiltration system which allows them to concentrate milk into a premium product with higher milk solids and less water. UF milk offers high quality, enhanced functionality, and less waste whey when used in cheese processing. This has allowed them to economically balance their surplus milk as UF milk shipped to Wisconsin cheese plants.27

Resource Contact

George Siemon, CROPP Cooperative, 608-625-2602

Sandra Facey, Our Family Farms of Western Massachusetts, Breezy Knoll Farm, 413-774-3757 Ted Jacoby, T.c. Jacoby Company, 800-325-9556 ex 101

27 "Ultrafiltration: Has the time finally come?" Jim Dickrel!. Dairy Today. October 1997.


New Generation Cooperative28

New generation cooperatives (NGC) differ from most traditional cooperatives in their focus on value-added processing of members' raw product. Most traditional cooperatives are involved in marketing a commodity product for their members. A NGC is market-driven, whereas a traditional cooperative is member driven. A NGC will structure the cooperative and, in particular, determine the number of members desired according to established marketing arrangements for a value-added end product. A NGC is, therefore, a cooperative of that select number of producers necessary to produce a specific volume of value-added product. The number of farmers included may change as new products and markets are developed. Tradable membership shares convey voting rights, delivery rights, and

I.. obligations to provide the cooperative enterprise with a specific volume of raw product. The agreement i . is two-way: the member is obligated to deliver a set quantity of product and the cooperative is obligated

to purchase the product.

A NGC will first conduct a feasibility study and develop a business plan for a value-added enterprise. The business plan will determine a minimum volume of raw product required to operate the enterprise. The total capitalization costs of the enterprise are divided by the total units ofraw product volume to calculate the price for one delivery right share. Usually, an NGC will pay member farmers going market price or perhaps just below market price for their raw product. In the case of dairy, the price paid to member farmers by a NGC would be affected by the federal milk marketing order blend price tithe NGC is participating in the FMMO pool. At the end of each year, the member farmers receive a share of earnings from the value-added enterprise for each delivery right share they possess.

Example: Assume ... the enterprise is processing a specialty cheese

farmgate price = $12.00Icwt.

processing/marketing/management costs = $ 7.00/cwt.

total costs = $19.00/cwt.

the cheese is sold to a market distributor at $2.00/lb. revenue

operating profit for the enterprise

year-end share of earnings distributed to farmer

= $20.00/cwt.

= $ 1.OO/cwt.

= $ I.OO/cwt.

2~ew Generation Co-Operatives: Rebuilding Rural Economies. Centre for the Study of Cooperatives. University of Saskatchewan. 1995.


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A member farmer earns benefits from the NGC in three ways, I) payment for product upon delivery to the cooperative, 2) year-end share of enterprise earnings for each unit of product delivered, 3) capital gain on the value of fanners' tradable delivery right shares if they sell their shares. The latter two benefits depend on the success of the NGC. Dakota Growers Pasta Company (a NGC of durum wheat growers), after only two years of operation, generated sufficient profit to pay a dividend equal to a 20% return on investment. A delivery right share was priced at $3.85 per share when the durum growers NGC formed in 1992; today a delivery right share is traded at close to $14.00 a share.29

Dakota Dairy Specialties:

When members of the Hebron Creamery Cooperative grew dissatisfied with their treatment by larger dairy cooperatives, they worked with a facilitator from the North Dakota Center for Cooperatives to learn about their alternatives. After a long and difficult process, the 60 fanners dismantled their existing cooperative and formed a New Generation Cooperative called Dakota Dairy Specialties Cooperative. Upon completion of an extensive feasibility study, the group built a specialty cheese production facility. The 60 fanners purchased delivery right shares which provides a stable market for their milk through their investment in the specialty cheese plant. The fanners are paid the going market price for their milk and share in year-end profit sharing from the specialty cheese venture.30

21 st Century Alliance

The 21 st Century Alliance of Kansas was established in 1995 by 35 fanners who invested $750 a piece to form an organization to investigate and create value-adding processing opportunities. The cooperative now has over 700 farmer-members. The vision is to develop and control alternative food delivery systems direct from producer to consumer. The mission is to build opportunities for fanners to become true shareholders in the profits associated with food processing and marketing. The equity investment of fanner-members (now equal to $525,000) is used to investigate and develop business plans for value-adding ventures. Only members of the 21 st Alliance have the opportunity to invest and participate in the value-adding ventures once established.

29 Personal communication with Liz Reinhiller, Dakota Growers Pasta Co.

30 New Generation Co-operatives: Rebuilding Rural Economies. Brenda Stefanson, Murray Fulton, and Andrea Harris Centre for the Study of Co-operatives. University of Saskatchewan.


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The 21 st Century Alliance has developed three New Generation Cooperative value-adding enterprises: a grain processing cooperative which raised $2.5 million from over 360 producer-investors who deliver 950 bushels of wheat for each $5,000 delivery right stock they purchased; the 21 st Century Dairies/Washington Co. will operate a 1500 cow dairy as a value-adding enterprise for feed grain producers; and a bean processing cooperative is also being formed with $1 million equity investment from producers who collectively will deliver 260,000 cwt. of dry edible beans, annually.

Resource Contacts

Gerome Messer, Dakota Dairy Specialties, 701-264-1535 or 974-3973 Lynn Rundle, 21st Century Alliance, 913-587-0007 Bill Patrie, North Dakota Center for Cooperatives, 701-663-6501 Mark Warman, USDA Rural Business-Cooperative Service, 202-690-1431 . Randy Torgenson, Mark Warman, USDA Rural Business-Cooperative Service, 202-720-7558 Liz Reinhiller, Dakota Growers Pasta Co., 701-652-2855 Kevin Johnson, Doherty, Rumble and Butler Law Finn, 612-291-9398 Brad Mitness, Ag. Evolutions, Inc., 507-828-1322

Corporation

The principal advantage and disadvantage of a corporate business structure relates to taxes and liability. A corporation is able to deduct employees fringe-benefits from taxable income. However, if the corporation is a C-corporation, the income generated is taxed at the corporate level and again when income is distributed to individual owner-shareholders. An S-corporation is not subject to doubletaxation. Corporations also protect individual stock owners from liability for the debts of the corporation. Corporations can issue stock to investors.

Hilmar Cheese CompaNew York:

Founded in Hilmar, CA in 1985 by 12 local Jersey dairy producers, Hilmar Cheese Company has become the largest single-site producer of cheddar and Monterrey jack cheese in the world. The cheese company is an S-corporation owned by the original 12 dairy farmers. These 12 dairy farmers contribute 10% of the raw milk used by their cheese plant. -The remaining 90% of the raw milk is purchased from dairy cooperatives and independent dairy farmers encompassing 160 dairy farms. There is no ownership or control of the cheese company by the larger group of dairy farmers, who simply sell their milk to the -plant. The cheese plant processes up to 5.6 million pounds of milk daily. Hilmar has also been progressive in developing joint ventures with other industry firms to create markets for cheese production waste products. A whey processing plant was built in 1989 and a lactose processing facility in 1994. Both were collaborations with American Protein, Inc., which purchases 100% of the whey proteins and lactose for use in animal feed supplements.31

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Resource Contact

Hilmar Cheese Company, 209-667-6076

31 California Dairy Research Foundation web-site: http://www.cdfr.org


Limited Liability Corporation

A limited liability corporation (LLC), like an S-corporation, merges two important advantages of a sole proprietorship or partnership and a corporation. The LLC avoids double taxation, whereby the income earned by the enterprise is only taxed at the level of individual owners and not at the corporate level. Plus, the LLC provides limited liability to each owner of the enterprise. A member's liability is limited to hislher investment in the LLC and any unpaid taxes.

The LLC fonn of business structure is relatively new, and certain aspects of legality and applicable tax codes are still being detennined. One concern is the degree to which banks are

. comfortable lending to an LLC business enterprise.

Decision-making within a LLC structure can be set up either as "member-managed" or "managermanaged". Member managed requires each member to be actively involved in day-to-day and long-tenn decision-making of the enterprise. Each member has voting rights proportional to their investment in the LLC. Under a member-managed structure, the LLC has "free transferability of interests" and "continuity of life". If the LCC chooses a manager-managed structure, the enterprise does not have "free transferability of interests" and "continuity of life"; such that, remaining members of the LLC would have to approve, often unanimously, (1) transfer of ownership from one party to another and (2) that the LLC enterprise will continue to function after a change in ownership.

An LLC has the advantage of allowing a member to invest appreciable assets into the enterprise and withdraw them at a future date without being subject to capital gains taxes. In addition, a LLC can adjust the basis of its appreciable assets for the purposes of calculating depreciation and gain or loss when assets are sold. The other business structures, except partnerships, do not have these two advantages.

Resource Contact

Don Frederick - USDA Rural Business and Cooperative Services - 202-690-1411


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Comparable Equity Investment in a Traditional Cooperative

As of 1994, 112 of Chenango County's dairy farmers were members of a cooperative. Each cooperative requires an equity investment on the part of its farmers, although tenns and conditions may vary from one to another. We will explain the capitalization plan used by Dairy Farmers of America (DF A) for purposes of illustration. This illustration begins to lay the basis for comparing farmer investment requirements and returns from existing cooperative structures with investment requirements and returns from a new Chenango County enterprise . .

Farmers who are members ofDFA must make an equity investment equal to $1.75 per cwt. marketed through DF A. The total payment is based on the average annual volume marketed through DF A in the first two years of membership. Payments are made as follows: $0.1 O/cwt. for the first ten months of membership, and $0.75/cWt. contributed through year~end patronage refunds retained by the cooperative each year until the full equity investment is made and the farmer becomes vested in the program.

For a Chenango County farmer with a 70 cow herd producing an average of 16,000 lbs. of milk per cow annually, shipping 11,200 cwt. annually to DF A, their equity investment would be $1.75 x 11,200 = $19,600. Of this amount, $11,200 would be paid in during the first year of membership, with the remaining $8,400 accrued over time as retained patronage refunds. The farmer's equity investment in DF A does not earn interest. Instead, once the farmer is fully vested, he or she receives patronage refunds equal to a share of year-end net earnings for each Cwt' marketed through DF A. This amount may vary from year to year. The farmer's full principal investment is refunded to the farmer over a nine-year period with zero interest if and when he or she leaves the cooperative. If the farmer is over 70 years of age or deceased, the principal investment can be refunded in one lump sum, again with zero interest.


The Effects of the Federal Milk Marketing Order on a Chenango Enterprise

The Federal Milk Marketing Order (FMMO) system may influence the choice of organizational structure for a Chenango Dairy Enterprise. The FMMO affects handlers who receive milk from producers and dispose of it within a marketing area defined in a given order. Most Chenango County fanners deal with milk handlers who sell within Federal Milk Order 2, which covers the New YorklNew Jersey milk marketing area. The FMMO establishes base prices for Class I, Class II, and Class III milk uses. A handler is required to pay individual fanners and/or cooperatives a minimum blend price based on the total milk utilization in the market pool. If a handler sells or processes milk for a Class I use, the handler contributes the difference between the blend and Class I prices into the pool. If a handler sells or processes milk for a Class II or III use, the handler is reimbursed the difference between the Class II or III price and the blend price from the pool.

If the Chenango County enterprise markets a fluid milk product it must participate in the FMMO. If it only markets Class II or III products, it has the option of participating. However, if the enterprise does not participate in the FMMO, any surplus raw milk not used for the enterprise's manufacturing could only be sold for Class III uses. As a participant in the FMMO, surplus milk could be sold at a higher price for Class I uses.

If Chenango County were to develop its own cheese processing plant, the plant would have the option of participating in the FMMO. A participating cheese plant must pay the blend price for raw milk. However, they may recoup the difference between the blend price and the Class III price from the pool. If Chenango County were to develop its own fluid milk processing plant, it would only be obligated to pay fanners the blend price, but the difference between the blend price and the Class I price would have to be / paid into the pool. A Chenango enterprise which chose to participate in the FMMO would be considered a handler even if the enterprise outsources the manufacturing of the final product.

Under the FMMO system, cooperatives are not considered handlers unless they sell milk to other handlers. Therefore cooperatives not participating in the FMMO are not required to pay the regulated price to their producers. However, if a cooperative wants to receive the benefits of participation in the FMMO, then the cooperative must pay into the pool as appropriate and will be considered a handler.

Cooperatives that participate in the FMMO can allocate members' milk to whatever class usage it deems most advantageous. However, from September and November at least 10%, and from December and January at least 5% of milk received from members must be sold for Class I usage, if the cooperative is participating in the FMMO. The cooperative would pay into the pool based on the difference between the Class I price and the blend price.


45

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If the Chenango County enterprise chooses a corporate, non-cooperative structure and participates in the FMMO, it must allocate to Class I usage a portion of the milk received from producers that is equal to or greater than the percentage of Class I usage of all milk in the milk marketing order. Over the past five years, FMMO #2 has allocated 37-42% of all milk to Class I usage. To meet its obligation, a corporate Chenango County enterprise would be required to develop a fluid milk product and/or sell raw milk to a fluid milk processing plant.

Regulatory Reform

The 1996 Farm Bill mandated USDA to refonn the Federal Milk Market Order program, specifically to provide for fewer orders. Refonns must be implemented by April 1999. Proposed rules were issued for comment in January 1998. The proposed rules recommend:

e_ consolidating FMMO #2 into a Northeast order including the New England and Mid-Atlantic and Western New York orders, contiguous unregulated areas of New Hampshire, northern New York, and Vennont, and non-federally regulated portions of Massachusetts;

e replacing the formula price with mUltiple-component pricing by detennining a value for milk based on the values of protein, butterfat, and other nonfat solids used in manufacturing products;

• Class I fluid milk prices that are more market-driven.

The proposed refonn would override a number of unique provisions in FMMO #2, one being the detennination of price at the farm, rather than at the receiving plant. If the rules change, it will make it more difficult for farmers to predict the price they will receive for their milk.

Resource Contacts

Will Francis, Market Economist, Federal Milk Marketing Order No.2, One Columbia Circle, Albany, New York 12203-6379, 518-452-4410 Rich McKenna, Chief of Pooling, Federal Milk Marketing Order No.2, pricing rules-for interpool sales, 518-452-4410. John Poole, Assistant Market Administrator, Federal Milk Marketing Order No.2, buying and selling milk outside the Order. 518-452-4410.


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New York State & Local Regulations Pertaining to Dairy Processing

Production, sale, processing, and distribution of milk and milk products comes under the jurisdiction of the New York Department of Agriculture and Markets via the authority of the New York Agriculture & Markets Law. Two Divisions of the Department have regulatory and licensing authority. The Milk Control Divisjon issues permits to produce and sell raw milk according to sanitary guidelines based upon federal standards for Class I milk. The Division of DaiJY Industry Services and Producer Security issues licenses to milk dealers and provides for security funds and bonding of dealers in order to protect producers.

Dairy products can cross state lines without regulation. Out of state sales of fluid milk will probably require licensing for handlers in each state involved.

Requirements for the Production, Processing & Distribution of Milk and Milk Products (Circular 958) Administration: Division of Milk Control Application: Production and processing of milk, lowfat milk, skim milk, goat milk, and sheep milk, and the manufacture of milk products, goat milk products, sheep milk products, and frozen desserts. Ensures that all milk meets standards for Class 1, Grade A fluid use.

Requires Permits: to sell raw milk to ship milk into the state to produce milk to commercially construct, reconstruct, or extensively renovate a milkhouse, milking barn, stable or parlor, transfer station, receiving station or milk plant; or to commercially install or modify milk handling equipment on dairy farms or in milk plants, tr~sfer stations or receiving stations

Other requirements related to permitting: labeling/identification of products and vehicles carrying milk inspection of all farms from which prepaste~zed milk is received certification of milk inspectors and processing plant supe6ntendents

Standards: Sanitation Requirements for Dairy Farms Temperature, bacterial limits, sediment, drugs, abnormalities, somatic cells; Milking barn, stable, or parlor construction and maintenance; Milking barn, stable or parlor cleanliness; Milk house or room construction and facilities; Milk house or room cleanliness; toilets; Utensils and equipment construction, cleaning, sanitation, storage, handling; Milking Personnel - hand washing facilities and cleanliness; Cooling; Vehicles; Insect and rodent control

Sanitation Requirements Applicable to the Processing and Manufacturing of Milk and Milk Products Floors - construction; Walls and ceilings - construction; doors and windows; lighting and ventilation; separate rooms; toilet-sewage disposal facilities; water supply; hand washing facilities; milk plant

cleanliness; sanitary piping; construction and repair of containers and equipment; cleaning and sanitizing of containers and equipment; storage of cleaned containers and equipment; protection from contamination; pasteurization - times and temperatures - batch pasteurization; HTST continuous-flow pasteurization; pasteurizers employing regenerative heating;; temperature recording charts, equipment tests, and examinations; cooling of milk; bottling and packaging: All milk and milk products, including concentrated milk and milk products, are bottled and packaged at the plant where final pasteurization is performed capping; personnel; vehicles; surroundings; receiving station requirements; transfer station requirements; tank truck cleaning and sanitizing facilities requirements; animal health; animal health requirements for raw milk sales; transferring; delivery containers; cooling: no hauler, producer, or distributor can transfer milk or milk products from one container or milk tank truck to another anywhere except a milk plant, receiving station, transfer station, or milk house especially used for that purpose.

Labeling & Product Standards Administration: Division of Milk Control, Carol McClenahan 518-457-2050, Labeling & Product Standards Description: Based upon federal labeling standards, there are requirements for label information for every individual product. Call the department for specifics. We have in the files basic label information sheets for milk, cheese, flavored goat's cheese, and natural flavored ice cream. Federal standards of identity set forth items which can be used as ingredients in individual products. There are no state-specific requirements for using terms like "locally grown/produced" or "native New York" other than that "false and misleading" advertising is prohibited. Also, the federal standards of identity require certain names for common food items: "You can't get too fanciful with naming. The product name has to represent what the product really IS."

Interstate Milk Shippers Rating Administration: Division of Milk Control; inspectors are authorized by FDA Fee: none Description: Cow milk shipped across state lines for fluid use (including cream), yogurt, cottage cheese, or sour cream requires an interstate milk shippers rating. Whey shipped across state lines to a Grade A plant for use in a fluid product requires a rating as well. Sheep and goat milk do not need one.

The rating is based upon the same regulations used to license milk producers and handlers. Inspectors use a 100-point system to inspect plants and a sample of farms, both of which must receive at least 90 points. The ratings are published and reviewed every 2 years. Enforcement is provided by the quarterly inspections routinely conducted by the Milk Control Division.

New York State Import Permit Administration: Division of Milk control Fee: none Description: A New York State Import Pennit is required to bring milk products into the state. The pennit is renewed by application yearly. There is probably a similar process in other states.

New York State Milk Dealers License Administration: Division of Dairy Industry Services & Produce Security Exemptions: dealers who purchase or handle fluid milk in total quantity not exceeding 3,000 lbs/mo, and/or dealers selling fluid milk in any quantity in markets of 1,000 popUlation or less; stores who meet certain criteria; fanners selling not more than 100 quarts daily average, or any amount pasteurized on the fann where produced, to customers coming there for it. Fee: $100 for first daily average total of 4,000 lbs. And $40 for each additional 4,000 lbs up to a maximum of $7,500.

Description: Monitoring of sales and receipts of fluid milk and protection of producers who sell milk to dealers. Anyone who deals in fluid milk must be licensed. Licensing carries reporting requirements including production, milk receipts, how milk is used, distribution and route sales, monthly sales reports. If a dealer is taking in milk from other producers, he must contribute to a security fund to ensure payment and file a mandatory minimum surety bond with the commissioner. Authorizes producer and dealer bargaining agencies to negotiate and enter into contracts with each other and to petition the commissioner for regulation of milk price throughout the state, or any part of the state, thereby creating a state-level marketing order. Authorizes the commissioner to join with legally constituted authorities or other states and of the U.S. To issue joint orders or supplementary orders (like the NE Dairy Compact). Authorizes the creation of dairy promotion orders for research, public education, and marketing.

Out of state sales ofjluid milk will probably require a license in each state.

Retail Food Stores - Article 17 Agriculture & Markets Law, Circular 962 Ensures food safety . Section 271-2.2 ,Special Requirements: Fluid milk and fluid milk products used or offered for sale shall comply with Grade A standards and shall be maintained at a temperature of 45 degrees or less. Dry milk and milk products shall be made from pasteurized milk and milk products. All cheese must be made from pasteurized milk or aged for not less than 60 days at a temperature not less than 35 degrees F in accord with Article 4, Section 67-b of the Agriculture and Markets Law.

Food Protection; Emergency Occurrences; food storage-general; refrigerated/frozen storage; hot storage; food preparation-general; raw fruits & veges; cooking potentially hazardous foods; bakery product fillings; reheating; food productthennometers; thawing potentially hazardous foods; food display -potentially hazardous foods; frozen foods; food display - general; dispensing utensils; food sample demonstrations and food promotions; food transportation by retail food stores - general

Milk Price Gouging Law - Establishes threshold retail price for fluid milk at 2x the Class I price, W1less the overage can be justified by extraordinary circumstance. Administered by Division of Dairy Industry Services

Institutional Purchases In accordance with Section 103 of New York General Municipal Law, all municipal or institutional purchases involving an expenditure of more than $3,000 are obligated to award contracts to the lowest responsible bidder following advertisement for sealed bids. Most food procurement is handled through statewide contract negotiated and administered by the New York State Office of General Services, Dept. of Standards and Purchase. There are some exceptions to support New York state agriculture, but these are mostly directed toward the purchase of. seasonal local produce. .

The General Municipal Law allows a board of education acting on behalf of its school district to separately purchase eggs, livestock dairy products (excluding milk), and vegetables directly from producers or growers, or from associations of producers or growers, exempt from the bidding provisions of the Municipal Law. Such purchases are governed by Commissioner's Regulations Section 114.3. A producer of dairy products is defined as " ... the person who processes the dairy products, excluding milk, from animals he or she owns ... " An association of producers is defined as "an unincorporated organized group of 1 0 or fewer producers who own and operate their farms and who have combined to sell products to a board of education." Direct sale requires that there be no intermediary between the school board and the producer(s). Exempt purchases by a school district from any single producer or association are limited to an annual maximum of $50,000. Prices paid cannot exceed the wholesale prices in effect on the date of purchase. Public notice of intent to purchase is required.

Section 114.4 provides a bidding exemption for the direct purchase of fluid milk from a licensed milk processor - " ... a processor of milk who is licensed by the New York State Dept. of Agriculture and Markets at the time the milk is supplied to the school district and who employs less than 40 people at that time." The rules provide that prices paid cannot exceed the wholesale prices for dairy products in effect on the date of purchase. In the case of fluid milk, prices cannot exceed those paid for milk by adjacent school districts. Public notice and equal opportunity for processors is provided.

New York State Dept. Of Corrections allows its prisons to buy produce locally as long as delivery and use will occur within one week. However, fluid milk and dairy products are purchased through the statewide contract system.

Other Miscellaneous New York State Regulations New York State has requirements for 1100 different licenses. There are 37 agencies with regulatory authority. To find out what agencies have jurisdiction over a particular project or activity, an applicant must submit a 7-page Master Application which thoroughly describes the project including a project location map; project plot plan; and a thorough project description with elements of construction and operation, employee services, steps to project completion, and timing of project phases. Applicants are encouraged to also submit a business plan. Upon receipt of this application, the Governor's Office of Regulatory Reform circulates it to all appropriate state regulating agencies. The agencies are required to respond within 15 days as to whether they have a regulatory interest. The information is then consolidated and forwarded, with a complete permit application package, to the applicant.

Local Regu lations:

According to Section 305(2) of New York Agriculture and Markets Law: "No local government shall exercise any of its powers to enact local laws or ordinances within an agricultural district in a manner which would unreasonably restrict or regulate farm structures or farming practices in contravention of the purposes of the Act unless such restrictions or regulations bear a direct relationship to the public health or safety."

Decisions made by the Commissioner on case by case basis; retail operations may nQ1 be covered.

When development occurs on property within an agricultural district containing a farm -operation, an Agricultural Data Statement (ADS) must be filed with local government. The local reviewing board will ascertain present and future farming conditions to ensure the proposed land use does not conflict with

1: current or future farming activities.

Contacts:

John Badger, Nutritional Services, New York State Dept. Of Corrections, Albany, New York, 315-339-6880, ex 1574 Joe Corby, Inspector, New York Dept. Of Agriculture & Markets, Division of Food Safety & Inspection, 518-457-4492 (P) Kathy Davidson, New York Governor's Office of Regulatory Reform, 518-473-9330. Will Francis, Federal Milk Marketing Order #2, One Columbia Circle, Albany, New York 12203-6379, 518-452-4410 Charles Huff, New York Dept. Of Agriculture & Markets, Division of Dairy Services & Produce Securityd,1 Winners Circle, Albany, New York 12235~ 518-457-8859:. Joanne Lawton, Supervisor of Milk Dealer Licensing, New York Dept. Of Agriculture & Markets, Division of Dairy Industry Services and Produce Security, 1 Winners Circle, Albany, New York 12235, 518 457-4142(P), 518-485-5816 (f) James McCardell, Acting Director, New York Dept. Of Agriculture & Markets, Division of Soil and Water, 518-457-3738(P) Carol McClenahan, Compliance Specialist, New York Dept. Of Agriculture & Markets, Division of Milk Control, 1 Winners Circle, Albany, New York 12235-0001, 518-457-2050(P), 518-485-8730(f), [email protected] Frances N. O'Donnell, Corrdinator, New York State Education Department, Office of-Regional School and Community Services, Child Nutrition Program Administration, Room 362 Education Building Annex, Albany, New York 12234, 518-473-8781(P) 518-473-0018(f). Elwin Rivenburg, Assistant Director, New York Dept. Of Agriculture & Markets, Division of Milk Control, Albany, New York, 518-457-5363

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Resources for Future Contact:

Steve Crossen, Senior milklfann Inspector for Chenango and Broom Counties, 607-699-3068 Richard Fleming, Market Administrator, New MexicolWest Texas Milk Marketing Order. 972-245-6060. Only order which deals with RO and ultra filtered milk pricing.

Peter Fredericks, Federal Milk Market Order No.2, 518-452-4410, co-op expert .• Rich McKenna, Chief of Pooling, Federal Milk Marketing Order Number 2,518-452-4410, pricing rules for interpool sales . . New York Dept. or Environmental Conservation, Division of Environmental Pennits~ 518-457-7424 John Poole, Assistant Market Administrator, Federal Milk Marketing Order Number 2, Albany,New York, 518-452-4410 regarding buying and selling milk outside the Order

The Use of Membrane & Thermal Technologies to Add Value to Fluid Milk

Vocabulary Thermalization (T) is a heat treatment process similar to pasteurization, but at lower temperature. By thermalizing milk, a farmer can store milk longer while maintaining bacteriological quality standards. This would permit less frequent milk pickup and, therefore, lower assembly costs. Dr. Robert Zall, who tested UF rr systems on California farms as part of a Cornell University study, found some evidence that thermalization immediately after milking could increase cheese yields. .

Ultrafiltration QJF) is one of a group of membrane filtration methods used for separating and concentrating molecules in a solution according to their molecular weight. In dairy applications, UF was originally used in cheese plants to fractionate whey byproducts. When used on whole milk, the process produces approximately equal volumes of two concentrated solutions: retentate, containing milk fat and all proteins with 'l'2 the water and lactose of the original fluid milk, and permeate, which contains the other 'l'2 of the original fluid milk's water and lactose. The permeate caJ? be used as animal feed. The retentate can be used to produce dairy products.

Reverse Osmosis eRO) is a filtration technology which employs membranes having pore sizes so small that only water passes through. RO is used primarily to concentrate product for more efficient handling.

Concentration Factor (CF) The use ofUF product in cheesemaking is determined by the concentration factor which in tum is determined by the size of the membrane pores. For example if the concentration factor (CF) is 2, half the original milk's water, lactose, minerals, vitamins, and nonprotein nitrogen are left in the retentate. The way this affects cheese processing is a follows:

Low CF (2x or less) requires little change in cheese making procedures and equipment

Medium CF (3-6x) necessitates some moderate change in procedure & equipment

High CF (up to lOx) results in a retentate physically similar to cheese, and cheese making becomes a continuous process requiring equipment and procedures very different from conventional batch cheese making.

Chenango County farmers might consider using thermal and/or membrane technologies as a way of adding value to fluid milk at the single or multi-farm level, or as a way to enhance the quality, yield, and costs of production at the plant level.

1

UF On the Farm

Initial studies in France, and subsequent studies in the U.S. show that it is feasible to apply UF or UFrr technology on farm. One source suggested an initial cost for an off-the-shelf unit at $50,000 for a 100 cow dairy. Economic analyses of the costslbenefits of onfarm UF range from not especially encouraging to very encouraging. (Novakovic and Alexander, 198-, p.vi)

Novakovic and Alexander's research was focused on Wisconsin farms. Their analysis showed that net farm returns on investing in UFff are negative when off-farm benefits are excluded: there are not enough benefits to decreased cooling costs and the use of penneate for feed to justify investment in the technology. They also found that net returns from hauling savings turn positive only well out of the range ofnonnal farm sizes in Wisconsin (@50 cows) and/or at hauling rates higher than those paid by WI farmers. (In Wisconsin hauling rates for remote farms are subsidized.)

To estimate potential premiums which cheese plants might pay to farmers for UF product, the researchers reviewed studies which examined how production costs were affected by using retentate in a cheddar cheese plant. Results indicated that average cheddar cheese manufacturing costs are reduced by about 17 cents per cwt of retentate, with cost reductions ranging from 11 cents to 21 cents per cwt as plant size decreases from 2.4 million pounds of milk per day to .72 million pounds per day.

Assuming hauling savings at 13.5 cents/cwt, plant premium at 20 cents/cwt, and net farm returns based upon size of farm, Novakovic and Alexander conclude that total net returns turn positive somewhere around the 250-cow herd size. While these results are not particularly encouraging for small farms, they note that additional economic research should target specific geographic area and farms, and plants, as well as the use of retentate in different types of cheeses.

A 1985 study by Mortara, Pratt, and Novakovic considered the potential economic impacts of on-farm UF and Thennalization for New York farms and concluded the following:

1) clear gains of scale from on-farm UF and T favoring larger scale (400-500 cow) operations;

2) Combined UFrr systems seem to be not only technically more efficient, but also economically more favorable, if in fact, retentates of thennalized milk can be stored longer at the farm;

3) Small farms would be likely to adopt UFff only if they are isolated and have very high hauling charges; . -

4) Large farms would adopt either UF or T in the context of pooled costs for hauling or if individual charges are high due to high transportation costs in the region;

2

5) The level of plant gains and the way they are shared with farms has a large impact on adoption incentives; and

6) Ifhauling charges are high enough, hauling savings can tip the scale for any size farm. But if hauling rates don't reflect actual costs, as with pooled charges, the incentive to save is changed.

Factors affecting value of UF/membrane treatment of milk on the farm

Farm variables: Location in relation to other farms and product destination, size, productivity, ability to use/dispose of penneate, cost of technology operation & maintenance, quality of milk, hauling cost detennination including whether hauling rates are pooled or subsidized. The extent to which total hauling charges for a network of farms would change depends on the rate structure, adoption rates, changes in hauling costs, and intangible factors such as how the excess trucking capacity is handled. Also UF may require a separate assembly system depending upon the CF of the retentate.

Plant variables: location in relation to farms, size, technology in use (ability to handle higher output, different CF raw product), type of products being produced, use/disposal of whey, production schedules.

Issues Impacting On-Farm Adoption of UFff

• Difficulty and costs associated with farmers operating membrane systems effectively and efficiently

• Number of farms of reasonable size to adopt UF /T successfully in a given area • Willingness of cheese pJants to pay premiums even if quality is adequate and yield is increased • System for calculating and stabilizing the payment of premiums from processing plants • System for routine testing of retentate as to concentration factor and bacteria counts* • Identification of specific market for retentate: Different membrane/thermal systems must be

custom designed to serve specific end uses of retentate.

*Current producers of ultra filtered milk are only using milk with very low cell counts. How low? They have done extensive research to document the level which ensures safety to the USFDA. However, the USFDA cannot release that information: It is a trade secret. Anyone wishing to sell raw UF milk must do the research themselves - equivalent to validating a new pasteurization process 1.5 years, many trials, estimated at hundreds of thousands of dollars.

3

Ultrafiltration & Cheese Processing

The advantages to a cheese maker using ultrafiltered milk include the ability to manufacture more cheese in existing equipment, the need for less rennet, the disposal ofless whey, and the potential for greater cheese yield.

Commercial application of ultrafiltration to cheese making began in Europe in the mid 70s and is now widespread, but has been slow to develop in the US. This may be due in part to the greater popularity in Europe of soft cheeses which are better suited to production from UF retentates than the hard cheeses which are more popular here in the U.S. There is also a concern about the ability of American and other cheeses made from UF retentate under large scale plant conditions to meet the quality standards of customers and the product standards of the FDA.

The French did much of the pioneering research on the ultrafiltration of milk and the use of UF retentate for making cheese. Their patented MMV process (named for researchers Maubois, Mocquot, and Vassal) ultrafilters milk to a high solids concentration level in the plant and results in continuous cheese making, as opposed to the traditional batch vat process. Cheeses made from this process include feta, brie, and camembert.

A number of studies suggest that it is possible to make good quality cheeses, and excellent quality yogurt and ice creams using retentate. The evidence on yield benefits is inconclusive and suggests different yield implications for different cheeses.

Issues in Adoption of UF for Cheese Processing

• Impacts of retentate with various concentration factors upon cheese yield and quality • Quality: one research report suggests that quality (such as that expected from specialty cheese) is

associated with the way the cheese is produced. There is at least a perception that processes which yield a low volume tend to produce a higher value, higher quality product; conversely, high yield processes are perceived to produce a more generic, commodity-type product.

• Marketing: identification of the product by consumers as natural, fresh, farm produce vs. high tech, mass produced

• Product Identity: An additional issue for USFDA is the identity of a product which undergoes UF treatment. The retentate from ultrafiltration is highly variable and has no standard identity. lbis creates a problem when it is used in a manufactured product: The end product has a name which implies certain ingredients. Cheese may not be cheese anymore if made with UF retentate, and the label needs to be truthful in describing the constituent ingredients.

4

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•

UF Conclusions

The presence of a number of dairy processing plants in the Chenango region makes ultrafiltration for handling efficiency alone not economical.

• There is no evidence of demand among cheesemakers in the Northeastern U.S. for UF fluid product such that a premium might be paid which would offset the capital cost of the technology. Any added value created by the process would be partially offset by assembly costs if the process were conducted at a centralized facility rather than on-farm.

• Ultrafiltration offers potential for the development of various fractionated products. However, the regional markets for these products is unknown.

• The cheese manufacturers in the region are not currently using UF to standardize their fluid input. Researchers say that this is because they haven't discovered the potential production benefits, or been convinced that the benefits justify the costs of retooling to use fluid of high concentrations. There are potentially substantial costs involved in dealing with USDA over product standards.

• There does seem to be some potential for Chenango County farmers to adopt UF technology in combination with a small scale, continuous process cheese plant specially designed to use high CF retentate. In addition to the production benefits, a new, European-style product line would be developed. A plant in Wisconsin is reportedly using 3X retentate shipped from New Mexico farms, and has successfully made the plant adaptations and met USDA requirements. Contact Wisconsin Dairy Research Center for further information about this plant and the potential for use of high CF retentate.

UF Contacts

Craig Alexander, Program on Dairy Markets & Policy, Cornell University, 315 Warren Hall, Ithaca, New York 14853-7801 Dr. Vikram Mistry, MN/SD Dairy Food Research Center, South Dakota State University, 605-688-4116 Steve Murphy, Extension Services, Cornell University, 607-255-2893 (worked with Dr. Bob Zall) Bud Schwart, Extension Economist, Texas A&M University, 409-845-5284 Steve Sims, U.S. Food & Drug Administration, Washington, D.C., 202-205-9180, regulatory issues Dr. Robert Zan, retired Cornell, 607-272-6036

For Future Reference: Dr. David Barbano, Cornell University, 607-255-2899 - research on membrane systems and dairy production Don Berg, VP, Land 0' Lakes, Arden Hills, MN - application ofUF in processing plant and market for retentate as a value-added product. Membrane Systems 715-421-2333 - sells on-farm membrane systems

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Relevant Food Industry Trade Shows

International Dairy Foods Assoc. Dairy Forum Scottsdale Princess, Scottsdale, AZ

National Frozen Dessert & Fast Food Association Conference Clarion Plaza Hotel, Orlando, FL

American Butter Institute Winter Meeting Scottsdale Princess, Scottsdale, AZ

Food Marketing Institute Midwinter Executive Conference Boca Raton, FL

Nat'!. Ice Cream Mix Association Annual Convention Lago Mar Resort & Club Fort Lauderdale, FL

202-737-4332 (Fax) 202-331-7820

800-535-7748 (Fax) 717-765-0582

202-737-4332 (Fax) 202-331-7820

202-452-8444 (Fax) 202-429-4519

301-369-3050 (Fax) 301-953-1848

National Retail Federation 301-698-2510 87th Annual Convention & Expo (Fax) 301-694-5124 Jacob Javits Convention Ctr., New York, NY

Northwest Food Processors Assoc. Annual Convention and Exposition Convention Center, Portland, OR

U.S. Dairy Export Council Reverse Mozzarella Cheese Mission From Korea to the United States ' .

National Food Distributors Assoc. Winter Trade Show Palm Springs, CA

503-639-7676

703-528-3705 (Fax) 703-528-3705

312-644-6610 (Fax) 312-321-6869

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Jan. 11-14, 1998

Jan. 14-17, 1998

Jan. 17-19, 1998

Jan. 18-21, 1998

Jan. 18-21, 1998

Jan. 18-21, 1998

Jan. 18-21, 1998

Jan. 25-31, 1998

Jan. 30 - Feb 2, 1998

National Grocers Association 703-437-2306 Feb. 10-13, 1998 America's Supennarket Showcase '98 (Fax) 703-437-7768 Las Vegas Convention Ctr, Las Vegas, NY

American Wholesale Marketers Assoc. 202-463-2124 Feb 19-21, 1998 39th National Winter Convention & (Fax) 202-467-0559

Candy Expo { - George R. Brown Convention Center I

I Houston, TX

Nat'l. Assoc. Of Wholesaler-Distributors 202-872-0885 Feb. 2-4, 1998 Annual Meeting (Fax) 202-785-0586 Capital Hilton Hotel, Washington, DC

I I I

Food Marketing Institute 202-452-8444 . Feb. 22-24, 1998 Marketechnics (Fax) 202-429-4519 Los Angeles Convention Ctr

Nat'l. Assoc. For The Specialty Trade 212-482-6440 Feb. 22-24, 1998 Internat'l. Fancy Food & Confection Show (Fax) 212-482-6459 Moscone Center, San Francisco, CA

American Frozen Food Institute 415-697-6835 Feb. 22-25, 1998 Western Frozen Food Convention (Fax) 415-697-6646 Hyatt Regency, Monterey, CA

International Dairy Foods Assoc. 202-737-4332 Feb. 22-25, 1998 Internat'l. Sweetener Colloquium (Fax) 202-331-7820 Boca Raton Resort & Club, Boca Raton, FL

Internat'l. Foodservice Manufacturers 312-540-4400 Feb.22-25, 1998 . Association

Coex Foodservice Show Fountainebleau Hilton, Miami Beach, FL

Eastern & Tri StatelDairy Deli Bakery Assn. 201-288-5454 Feb. 24, 1998 Home Meal Replacement Seminar (Fax) 201-288-5422 New Jersey Convention Ctr, Edison, NJ

International Dairy Foods Assoc. 202-737-4332 Feb. 25-Mar. 1, 1998 Ice Cream Technology Conference (Fax) 202-331-7820 Red Lion's La Posada Resort, Scottsdale, AZ

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I All Star Dairy Association Convention 606-255-3644 Feb. 25-Mar. 1, 1998

I P.G.A. Nat'l Resort (Fax) 606-255-3647 Palm Beach Gardens, FL

j-Food Distributors Intemat'l., IFDA 703-532-9400 Feb. 28-Mar. 3, 1998 IFDA Annual Business Conference (Fax) 703-538-4673

( - & Partners Program Marriott Orlando World Ctr., Orlando, FL

j Intemat'l. Foodservice Dist. Assoc. 703-532-9400 Feb. 28-Mar. 4, 1998 , Annual Meeting

Marriott World Ctr., Orlando, FL

1 Pizza Expo 812-949-0909 ' Mar. 17-19,1998 Las Vegas Convention Ctr., Las Vegas, NV

Intemat'1. Dairy Foods Association 202-737-4332 Mar. 10-11, 1998 Senior Executives' Roundtable (Fax) 202-331-7820 Westin Tabor Ctr., Denver, CO

U.S . Dairy Export Council 703-528-3049 Mar. 10-13, 1998 Foodex Japan '98 (Fax) 703-528-3705 Nippon Convention Center Makuhari Messe, Japan

U.S. Dairy Export Council 703-528-3049 Mar. 13-16,1998 Antad '98 (Fax) 703-528-3705 Guadalajara, Mexico

U.S. Dairy Export Council 703-528-3049 Mar. 17-19, 1998 Great American Food Show Korea (Fax) 703-528-3705 Seoul, Korea

Univ. of Michigan Business School 313-763-1006 Mar. 2-6, 1998 New Products Management Ann Arbor, Michigan

Intemat'l. Dairy Foods Association 202-737-4332 Mar. 24-26, 1998 Smartmarketing (Fax) 202-331-7820 Fairmont Hotel at Grand Park, Chicago, IL

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Foodservice Director, Restaurant Business 703-318-0300 Mar. 24-26, 1998 Branding America Conf. & Expo (Fax) 703-318-7568 America's Ctr. Downtown St. Louis, MO

j" Internat'1. Dairy Foods Association 202-737-4332 . Mar. 3-4, 1998 Cost Accounting Workshops (Fax) 202-331-7820 Hotel Sofitel, Chicago, IL

J

Nat'1. Frozen Food Association 717-657-8601 April 18-21, 1998 Meeting (Fax) 717-657-9862 Marietta Conference Ctr., Marietta, GA

Wisc. Cheese Makers Assn.lWisc. Ctr 608-255-2027 . April 21-23, 1998 F or Dairy Res. (Fax) 608-255-4434

Internat'l. Cheese Technology Expo Dane Cty. Expo Ctr., Madison, \VI

American Dairy Products Institute 502-695-0253 April 24-29, 1998 Annual Mtg. & Technical Conference (Fax) 502-695-0253 Swissotel, Boston, MA

New England Dairy-Deli-Bakery Assoc. 781-963-9726 April 28-29, 1998 New Horizons Conference & Exposition (Fax) 781-963-9728 World Trade Center, Boston, MA

U.S. Dairy Export Council 703-528-3049 April 30-May 2, 1998 Thailand Food Fair (Fax) 703-528-3705 Bangkok, Thailand

Internat'l Assoc. Of Food Industry 703-761-2600 May 10-15, 1998 Suppliers (Fax) 703-761-4334

3-A Sanitary Standards Committees Grand Milwaukee.Hotel, Milwaukee, WI

Internat'l Dairy Foods Association 202-737-4332 May 19-20, 1998 Mild Procurement Workshop (Fax) 202-331-7820 Hotel Sofitel Chicago, Rosemont, IL

4

Food Marketing Institute 202-452-8444 May 3-6, 1998 Supennarket Industry Convention & (Fax) 202-429-4519

Educational Expo McConnick Place, Chicago, IL

Penn. Assoc. Of Milk DealerslNew York State 717-238-1738 May 31-June 3, ~ . " 1998 ! Dairy Foods

Meeting Mountain Laurel Resort, White Haven, P A

Intemat'!' Dairy-Deli-Bakery.Assoc. 608-238-7908 June 14-16, 1998 Dairy-Deli-Bake '98 (Fax) 608-238-7908 Pennsylvania Convention Center,

Philadelphia, PA

Intemat'!. Dairy Foods Association 202-737-4332 June 17-18, 1998 Washington Conference (Fax) 202-331-7820 Washington Court Hotel, Washington, DC

Nat'!. Assoc. For the Specialty Trade 212-482-6440 June 28-July 1, 1998 Intemat'l. Fancy Food & Confection (Fax) 212-482-6459

Summer Show lavits Center, New York, New York

. Nat'!. Nutritional Foods Association 800-966-6632 July 14-17, 1998 Market Place '98 (Fax) 714-622-6266 Henry B. Gonzales Convention Ctr.,

San Antonio, TX

American Wholesale Marketers Assoc. 202-463-2124 July 16-18, 1998 53rd Nat'!. Summer Convention & Candy (Fax) 202-467-0559

Expo Pennsylvania Convention Center,

Philadelphia, P A

Midwest Dairy Foods Association, Inc. 614-486-6000 Aug. 9-10, 1998 Annual Convention (Fax) 614-486-471) Cleveland, OH

5

American Frozen Food Inst.INat'l. 703-821-0770 Sept. 18-21, 1998 Frozen Food Association (Fax) 703-821-1350

Meeting Orlando, FL

Food Industry Suppliers Association 910-274-6311 Sept. 19-22, 1998 Annual Conference (Fax) 910-691-1538 Niagara on the Lake, Canada

Natl. Ice Cream & Yogurt Retailers Assn. 614-486-1444 Sept. 22-25, 1998 Annual Convention (Fax) 614-486-4711

Menger Hotel, San Antonio, TX

Eastern Dairy-Deli-Bakery Association 201-288-5454 Sept. 7-8, 1998 Meeting (Fax) 201-288-5422 New Jersey Convention Center, Edison, NJ

Nat'l. Assoc. Of Convenience Stores 703-684-3600 Oct. 1-4, 1998 Annual Meeting & Exposition (Fax) 703-836-4564 Georgia World Congress Ctr., Atlanta, GA

Food Marketing Institute 202-452-8444 Oct. 4-6, 1998 Mealsolutions (Fax) 202-429-4519 Tampa, FL

Internat'l. Dairy Foods Association 202-737-4332 Oct. 4:-7, 1998 Dairy Foods Industry Convention Fax) 202-331-7820 Westin Harbor Castle, Toronto, Ontario

Assoc. Of Sales & Marketing Companies 703-758-7790 Oct. 9-12, 1998 Foundation (Fax) 703-758-7787

Annual Convention & Marketplace Expo (NFBA)

Hyatt Regency, New Orleans, LA

National Frozen Food Assoc. 717-657-8601 Oct. 9-12, 1998 Convention (Fax) 717-657-9862 Sheraton Dolphin, Orlando, FL

6

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1 I

Intemat'l. Assoc. Oflce Cream Vendors Meeting TBA

USDA, Trade Show Office Americas Food & Beverage Trade Show

& Conference Miami, FL

415-564-3484 Nov. 12-15, 1998 (Fax) 215-936-9785

202-720-3623 Dec. 2-4, 1998 (Fax) 202-690-4374

7

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j.' I .

Resources

Beverages Sandra & Warren Facey, Breezy Knoll Farm, 106 North County Road, Leyden, MA 01337 413-774-3757 Charlie Van Wie, Meadowbrook Farms, Clarksville, New York 518-768-2451 Ranjit Kadan, Southern Regional Dairy Research Center 504-286-4332 Massachusetts Department of Agriculture 617-727-3000 John Rooney, Monument Fanns, Middlebury, VT 802-545-2119 John Vanderbush, T.L. Green Processing Equipment 800-572-0054

Biodegradable Coatim~s and Packa~in~ Chris Hanson, University of Minnesota, 612-625-5747 Stephen McCarthy, Biodegradable Polymer Research Center, University of Massachusetts, Lowell, 978-934-3417

Buffalo Milk David Ligda DVM, International Livestock Project Development, Inc. Dj [email protected]

Cheese Catherine Boor, Extension Specialist, NE Dairy Food Center, Cornell University 607-255-5482 Brian Gould, Resource Economist, WI Dairy Research Center 608-263-3212 [email protected] Laura Jacobs-WeJcb, American Cheese Society, Darien WI, 414-728-4458(P) 414-728-1658(f) Mark Johnson, Wisconsin Dairy Research Center 608-262-0275 James Path, Cheese Outreach Specialist, University of Wisconsin Center for Diary Research, 608-262-2253 Ed Pecolar, Operations Director, McCadarn Cheese Company, Heuvelton, New York, 315-344-2441, x32 Mark Stephenson, Cornell Dairy Marketing Group 607-255-0324 Tim Orner, Dan Carter, Inc. 920-387-5740 Bill Wendorff, Dairy Manufacturing Specialist University of WI Dairy Research Center 608-263-2015

Colostrum Richard Cockrum, Immuno Dynamics, Inc., 515-676-2700 Green Better Living Company, 612":786-6228 Tushar Manek, Devina International, Inc., 513-398-7276 Stan Solomon, Future Foods, 415-388-8737

I I

Cosmetics AVEDA natural cosmetics, 800-252-8332 Cosmetics, Toiletries, & Fragrance Association (CTFA), 202-331-1770 Cosmetochem, Clifton, NJ 973-471-8301 Dennis Frost, Mona Industries, 201-345-8220 James Kinney, San Mar, 914-592-:3130 ext 740 or fax at 914-592-2586 May Brook Company Lawrence, MA, 978-682-1853 Jim Morgan, Director of Marketing, Norman, Fox & Co., 1-800-632-1777 Tommy Takayama, Ikeda Corporation, Long Island, New Yorlc, 516-431-9017 Rich Torde, R&D chemist, Autumn Harp, 802-453-4807 ex 479

Cultured ProductsfY o~urt George Economy, Helios Nutrition 612-298-9442 John Kidney, Hawthorne Valley Farm, Ghent, New York 518-672-4465 Manfred Kroeger, Dairy Scientist, Penn State University 814-863-2958 Jack Lazor, Butterworks Farm, Westfield, VT 802-744-6855 Charles White, Southern Dairy Research Center, University of Miss. , 601-325-3200

Dairy Cooperative Contacts

Bruce Bigelow, Allied Federated Cooperatives, 800-787-9326 John Siglow, Dairy Farmers of America, 800-926-~667

Diary Production Facilities Design and Construction

Frank Cercone III, United Dairy Machinery Corporation, 716-674-0610, x 514 or 800-828-7821

Distributors and Retail Buyers

Herbert Jacobs, Circle Food Marketing Co., 516-536-1010 Ira Ginsberg, Ginsberg Institutional Foods, 518-828-4004 Dino Paptarus, Dairyland USA the Chefs' Warehouse, 718-842-8700 Rob Prusac, Gourmet Garage, 212-966-2887 Mike Spano, Todaro Brothers, 212-532-0633 Jim Wright, Deli Boy, 315-488-0037

2

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i

Farmers Markets and Direct Sales Resources

Brendon Corr, New York City Green Markets, 212-477-3220 Kurt Edwards, Model Dairy Farm, 518-661-6214 Ann Elrod, Ithaca Farmers Market, 607-539-3297 Rosemarie Henkle, Binghamton Farmers Market, 607-772-8860 Francis Hogan, Hogan's Dairy, 518-747-4981 Charles McFadden, Downtown Syracuse Farmers Market, 315-422-8284 Mrs. Ronny Ososky, Ronny Brook Farm, 800-772-6455 Chris Togias, Central New York Regional Market Authority - Syracuse, 315-422-8647 J-onathan Thomson, Albany Farmers Markets, 518-457-4383 Kurt Vincent, Albany Capitol Building Complex Farmers Market, 518-474-5986 Arnie Weiss, Meredith Mountain Farms, 607-746-3857

Food Brokers

Frank Carmichael, Sommer Associates, Inc. , 518-452-1834 Doug Demarchey, Bratt-Foster, Inc., 315-488-3480 Ed Evers, McDermott Food Brokers, 518-783-8844 Edward Gasparini, Gasparini Sales, Inc., 315-471-1438 Michael Kalman, Advantage Food Marketing, 516-625-2600 Frank Pensabene, Jr., Feenix Brokerage, 518-456-7664 Bob Pignato, National Food Brokers Association, 703-758-7790 Charles Stu be, Stube Co., 315-682-6479

General Bruce Abbe, New Uses Council, Jamestown, RI 401-423-0862 Alternative Agricultural Research & Commercialization (AARC) Corporation, Washington, D.C., 202-690-1633(P) 202-690-1655(f) Appropriate Technology Transfer for Rural Areas (A TTRA), Fayetteville, AR, 800-346-9140 Alyce Birchenough, Sweet Home Farm, Elberta, AL, 334-986-5663 Dave Brown, Dairy Product Specialist, Cornell University 607-255-4536 Mike Cassady, National Agricultural Library Rural Information Center, 301-504-5719 S.usan Callahan, Northeast Dairy Research Center, Cornell University and University of Vermont, 802-656-0132 Charles Cleland, Director, Small Business Innovation Research Program (SBIR), Cooperative State Research, Education, and Extension Service (CREES), 202-401-4002 Paul Christ, Marketing Economist, Land '0 Lakes 612-481-2521 Warren Clark, American Dairy Products Institute, Chicago, IL 60606-1720, 312-782-4888(P), 312-782-5299(f) Elisa Clancy, Vermont Dept. Of Agriculture, 802-828-3835

3

)

General

Jeff Conrad, Director, National Research Initiative, Cooperative State Research, Education, and Extension Service (CREES), 202-401-6188 Stan Czesak, United Dairy Machinery Corp., 800-828-7821 ex 1 06 Jerry Dryer, dairy industry consultant, IL 312-621-8900 Donna Gorski, Senior Editor, Dairy Foods, 847-390-2428 Bill Haines, American Dairy Association, Dairy Management, Inc. National Dairy Council, D. S. Dairy Export Council, Rosemont, IL 847-802-2000-248 Ed Hanvood, Agricultural and Food System Sustainability Program, Cornell Cooperative Extension - 607-255-3131 Hawthorne Valley Farm, Ghent, New York, 518-672-4465 International Dairy Foods Association, 202-737-4332 Paul Kindstedt, University of Vermont, 802-656-2935 Susan Kjelquist, International Dairy Foods Association 202-737-4332 Bruce Michel, Girton Manufacturing Company, Millville, PA 717-458-5521 John Miller, Seiberling Associates, Doublin, OH 614-764-2817 Anne Noppe-Noyce, Wisconsin Milk Marketing Board, 800-373-9662 Andy Novakovich, Cornell, University, 607-255-2191 Claudia O'Donnell, Prepared Foods, 847-635-8800 Mike Pariza, Director, Food Research Institute, Univ. Of Wisconsin, Center for Dairy Research, 608-263-7777 Amy Skovsende, American Dairy Association, Dairy Management, Inc., National Dairy Council, U.S. Dairy Export Council, Rosemont, IL, 847-803-2000-248 Allan Sorflaten, retired Canadian professor, 902-895-8523 Bill Stoll, Dairy Food Product Specialist, Ag Utilization Research Institute of MN 612-624-4975 Tom Tomkins, W.A. Tomkins, Hawthorne, MA 978-774-4106(P) 978-774-8858(f) Ann Wells, dairy animal research, A TTRA, 800-346-9140 Bill Zajac, Zajac Equipment Supply, Portland, ME 207-797-9500

Goat Milk

Nelson Escobar, Extension Agent, Kika de la Garza Institute for Goat Research, Langston University, OK, 504-466-3836 Anne Fanatico, Technical Specialist, A TTRA, fax: 501-442-9842 International Dairy Goat Research Center, Prairie View College of Texas A&M University, Prairie View, TX 409-857-3311

Ice Cream

Sid Barnard, retired Extension Specialist, Penn State University 814-238-1485 Manfred Kroeger, Dairy Scientist, Penn State University 814-863-2958 Darrell Morris, The Ice Cream Bar, MN 612-339-9442 Frank Smith, Girton Systems, Millville, PA 717-458-5551

4

Independent Milk Handlers and Milk Assembly Contacts

Joe Emmerson, Queens Fanns, 607-656-8833 Bill HilI, Dairy Fanners of America, 315-463-0781 Sharad Mathur, Sunnydale Fanns, 718-257-7600 Richard Obresa, Richard Obresa Trucking, 315-866-1560 AI Sprouse, Cortland Bulk, 607-753-0322

Market Research Sources .

Bill Kimball, New York Specialty Food Association, New York State Department of Ag. & Markets, 518-457-7076 Alec Rome, Infonnational Resources, Inc., 203-845-6629

Milk Quality and Quality Testin~

Dave Chilton, New York State Dept. of Agriculture and Markets, Division of Milk Control, 518-457-5363 Bill Hill, Dairy Fanners of America, 315-463-0781 Will Francis, Federal Milk Marketing Order #2, One Columbia Circle, Albany, New York 12203-6379, 518-452-4410

Milkfat Fractions Kerry Kaylegian, Milkfat Fractionation Consortium Coordinator, Wisconsin Center for Dairy Research, 608-265-3086 Matt Mathison, Wisconsin Milk Marketing Board, 608-836-8820 Syed Rizvi, Food Science Department, Cornell University, 607-235-7913 Fractionnement Tirtiaux S. A., teclmology manufacturer, 011-32-71-813787 (P) 011-32-71-817024 (f) Mark Welch, Agri-Trading Corp., 612-942-9394 Trevor Wuethrich, Grassland Dairy Products, 715-267-6182


Don Frederick, USDA Rural Business and .Cooperative Services, 202-690-1411 Lisa Gjersvik, Agricultural Utilization Research Institute, 507-835-8990 Milford Hanna, Industrial Agricultural Products Center, 402-472-1634 Brian Henehan, Cornell Cooperative Extension, 607-255-8800 Dan Lemke, Agricultural Utilization Research Institute, 507-835-8990 Kevin Johnson, Doherty, Rumble and Butler Law Finn, 612~291-9398 Brad Mitteness, Ag Evolutions, Inc., 320-235-1082 Robert Morris, Biologos, Inc., 630-961-2440 Bill Patrie, North Dakota Center for Cooperatives, 701-663-6501

5

! .


Liz Reinhhiller, Dakota Growers Pasta Co., 701-652-2855 Lynn Rundle, 21st Century Alliance, 913-587-0007 Howard Thompson, involved in start-up of Clear Creek Furniture Company, an example of a community stock ownership company. Prophetstown, IL, 815-537-2416 Randy Torgenson, USDA Rural Business-Cooperative Service, 202-720-7558 Mark Warman, USDA Rural Business-Cooperative Service, 202-690-1431

Nutriceuticals

Josh Bazoni, Research & Development, Experimental & Applied Sciences (EAS) Colorado; 303-384-0080 " · Matt Deshler, Marketing Century Foods International, Sparta, WI, .608-269-1900(p) 608-269-1910(f) John Hardiman, University of Wisconsin Alumni Research Foundation (WARF), 608-265-4209 .. JeffPolowski, Manager, VIVA AMERICA, Orange County, CA 714-645-6100; Benoit Tu rpin, Besnier-Scenna USA, 714-443-2187

Organic Milk

Tina Densmore, Organic Cow, 802-685-3123 Bunny Flint, Organic Cow, 802-685-3123 Nancy Hirshberg, Stonyfield Farms, 603-437-4040 Pat Kane, Northeast Organic Farming Association - New York, 607-724-9851 Northeast Organic Farming Association - Vennont, 802-434-4122 Linda Lutz, Organic Trade Association, 413-774-6432 Fred Person, University ofVennont, 802-863-6807 George Siemon, CROPP Cooperative, 608-625-2602 Gary Shenberger, Vennont Organic Grain, 802-234-5433 Gary Larson, Butternut Farms Cooperative, 607-783-2392 Sharad Mathur, Sunnydale Fanns, 718-257-7600 Chris Hunt, Northeast Cooperatives, 800-334-9939 ext 314 Karen Raterman, Natural Food Merchandiser Magazine, 303-939-8440 Kelly Devaney, H.P. Hood/Organic Cow, 617-887-3000 Linda Lutz, Organic Trade Association, 413-774-7511 Michael Straus, Straus Creamery, 415-663-5464

6

I I..

Marketing. Distribution

Resources Not Contacted which may be useful for Phase III

Kim Blot, market specialist, New York Dept. Of Agriculture & Markets, Division of Agriculture Protection & Development, 518-457-7076 (from Joe Corby, Div. Of Food Safety & Inspection) Bob Lewis, New York Dept. of Agriculture, New York City, 718-722-2830 is a resource person who has assisted farmers in getting products to market, specifically Green Markets (from Carol McClenahan at Division of Milk Control in Albany) Amanda Hewitt, Cornell Cooperative Extension of Oneida County, 121 Second Street, OriskaNew York, New York 13424,315-736-3394. New York State Small Scale Processors Association David BandJer, New York State Cheese-Makers Associa!ion, 607-255-3027. Gary Raiti, Owner of a cut/wrap cheese facility, 315-298-2141.

Organizational Models Charlie Ling ,USDA Cooperative Services - Diary Cooperative Specialist - 202-690-1410 Gerome Messer, Dakota Dairy Specialties - 80 farmer new generation coop that purchased a specialty cheese plant - 701-264-1535 or 974-3973 E.G. Nadeau, University of Wisconsin-Madison - Cooperation Works new book gives pros/cons of different models - 608-258-4396 Frayne Olson, ask about David Cobia's in-depth book on new generation cooperatives, 701-231-7688 Robert Cropp, Univ. of Wisconsin-Madison - Agric. Econ. - research on farmer attitudes about cooperative vs corporate enterprises and contractual arrangements btw dairy producers and dairy processors - 608-262-9489 or 9483 (direct)

Regulation Steve Crossen, Senior milk/farm Inspector for Chenango and Broom Counties, 607-699-3068(from Carol McClenahan, Division of Milk Control) . Richard Fleming, Market Administrator, New Mexico/West Texas Milk Marketing Order. 972-245-6060. Only order which deals with RO and ultra filtered milk pricing. Rich McKenna, Chief of Pooling, Federal Milk Marketing Order Number 2, pricing rules for interpool sales, 518-452-4410. New York Dept. Of Environmental Conservation, Division of Environmental Permits, 518-457-7424 John Poole, Assistant Market Administrator, Federal Milk Marketing Order Number 2, buying and selling milk outside the Order. 518-452-4410.

Ultrafiltration Dr. David Barbano, Cornell University, 607-255-2899 Dr. Vikram Mistry, 605-688-4116 knowledge in cheese manufacture using ultrafiltered milk Membrane Systems 715-421-2333 - selling on-farm systems?

9

I r I, .

Pu blications

"Agricultural Alternatives: Dairy Goat Production". College of Agricultural Sciences, Cooperative Extension, Pennsylvania State University, 1994.

Benson, L., and Robert Zirkel. On~anic Dairy Fanning. Kickapoo Organic Resource Network. 1996.

Bowman, Greg. "Organic Dairies Market Real Values," The New Fanu, Oct.IDec. 1994, p. 40.

"Cheese Facts." 1997 Edition. International Dairy Food Association.

Cirspell, Diane. "New Niches for Milk Marketers," American Demo~aphics, March 1991.

Dairy Industry: Information on Marketing Channels and Prices for Fluid Milk. United States General Accounting Office. GAOIRCED-98-70. 1998.

Dairv Speaks ' 97, International Dairy Foods Association presentation at the Worldwide Food Exposition, San Francisco, CA.

Dickrell, Jim. "Ultrafiltration: Has Its Time Finally Come?" Dairy Today, October 1997, pp. 12-13.

Erba, E., Pratt, J., Aplin, R. and Stephenson, M. "Productivity of 35 Fluid Milk Plants" Cornell Program on Dairy Markets and Policy. Department of Agricultural, Resource, and Managerial Economics, Cornell University. 1995.

Fathy E. El-Gazzar & Elmer H. Marth. "Ultrafiltration and Reverse Osmosis in Dairy Technology: A Review," Journal of Food Protection. Vol 54, No.lO, October 1991, pps. 801-809.

"The Federal Milk Marketing Order Program." Marketing Bulletin Number 27. USDA Agricultural Marketing Service. Updated January 1989.

"From Cows to Consumers, MSS On-Farm Ultrafiltration Process Creates New Market Opportunities." Filterings (publication of Membrane System Specialists, Inc.), Spring/Summer 1997, p. 1.

Gillham, Earl., "Specialty Milks: Alternative Ways to Market Milk," Adapt 100, 1986, pp. 48-41 .

"Goats: A Small-Scale Agriculture Alternative." USDA Cooperative State Research Service, Office for Small-Scale Agriculture.

Hilchey, Duncan. "Profiles of Diary Producer-Handlers in New York," Farming Alternatives For Sustainable Agriculture in New York State, Vol. 3; No. 2, Winter 199411995, p. 3. .

Hurst, S., Alpin, R. and Barbano, D. "Whey Powder and Whey Concentrate Production Technology, Costs and Profitability". Cornell Program on Dairy Markets and Policy. Department of Agricultural Resources, Cornell University. Res. 90-4. April 1990.

Littman, Margaret. "Separating Fat from Fiction," Prepared Foods, January 1998, pp. 29-32.

Manchester, Alden, Mark Weimar, and Richard Fallert. "The U.S. Dairy Pricing System." Agnculture Information Bulletin Number 695. USDA Economic Research Service, April 1994.

Manchester, Alden c., and Don P. Blayney. The Structure of Dain' Markets: Past. Present. Future. AER-757, USDA Economic Research Service. 1997

Martin, Barbano, & Aplin. "Diversification of The Cheddar Cheese Industry Through Specialty Cheese Production: An Economic Assessment." Dept. Of Agricultural Economics, Department of Food Science, Cornell University Agricultural Experiment Station. July, 1989.

Mesa-Dishington, Barbano, and Aplin. "Cheddar Cheese Manufacturing Costs, Economies of Size, and Effects of Different Current Technologies." Department of Agricultural Economics, Cornell University Agricultural Experiment Station. January, 1987.

Mesa-Dishington, Aplin, & Barbano. "Economic Performance of 11 Cheddar Cheese Manufacturing Plants in Northeast and North Central Regions." Dept. Of Agricultural Economics, Cornell University Agricultural Experiment Station. January, 1987.

"Milk Facts." 1997 Edition. International Dairy Foods Association.Mouillesseaux-Dunzman, Heidi. "Too Much Government?" Farming Alternatives For Sustainable Agriculture in New York State, Vol. 3, No. 2, Winter 199411995.

Organic Farm and HandlerlProcessing Certification Standards and Administrative Procedures. Northeast Organic Farming Association of New York. 1998.

Pelsue, Jr. , N.H. Milk Processing and Distribution Costs and Returns 1988-1990. RR 65 Vermont Agriculture Experiment Station, University of Vermont. 1992.

"Questions and Answers on Federal Milk Marketing Orders". AMS-559. USDA Agricultural Marketing Service, Dairy Division, P.O. Box 96456 Washington, D.C. 20090-6456. Revised March 1996.

Reiter, Jeff. "Independent Thinkers: Small Regional Dairy Marketers Use their Versatility to Compete Effectively," Dairy Foods, April 1990, pp. 25-27.

Ryder, D.N. "Economic Considerations of Whey Processing." Journal of the Society of Dairy Technology. Vol. 33, No.2, April 1980.

Stephanson, Brenda and Murray Fulton. New Generation Co-operatives: Opportunities in Agricultural Processing. Centre for the Study of Co-operatives. University of Saskatchewan. 1997.

i'

The Water Buffalo. An Underutilized Species. National Research Council. National Academy Press, 1981.

The Water Buffalo. Food and Agriculture Organization (FAO) of the United Nations, Animal Production and Health Series, 1977.

Tyler, William W. ASton' of Milk. Prepared under the dirrection of the Office of the New York-New Jersey Milk Market Administrator, 205 East 42nd Street, New York, New York 10017.

Wendorff, W.L. "Considerations·for Potential Farmstead Cheesemakers." Department of Food Science, University of Wisconsin-Madison, January 9, 1998.

Zall, Robert R. "Membrane Processing of Milk on the Dairy Farm." Food Technolo~, 38(12), December, 1984, pp. 88-91.

I

Zall, Robert R. "On-Farm Ultrafiltration of Milk: The California Experience." Milkwissensehalt 12(1), 1987, pp 3-7.

USEFUL WEBSITES

COSMETICS

Cosmetics, Toiletries, and Fragrance Assn. Http://www.ctfa.org

Happi (Cosmetics Industry Trade Publication) http://www.happi.com

Kasandra's Natural Soaps (milk baths) http://www.sunshine.netiwwwI700/sn0722J

Korea Product Reports http://www.kita.or.krlktplliI2.htrn#Cosmetics

Neutrogena Corporation http://www.vtopia.com/inndirectiyp/neutrogena.html

Norman, Fox & Co. (Chemicals used in soaps, cosmetics, and personal care products) http://www.norfoxx.com

NZ Cosmetic Laboratories, Ltd. Auckland, New Zealand http://nztc.co.nzJnztc/nzc1.htm

RevloD Home Page http://www.revlon.com

DAIRY FOOD ASSOCIATIONS

American Cheese Society http://www . cheesesociety .org

International Dairy Foods Association http://www .idfa. org/

International Dairy-Deli-Bakery Association http://www.iddanet.org

MARKETING

Marketing Services (Alternative Uses of Agricultural and Marine ProductslFractionated Milk Components in Pharmaceuticals and Nutraceuticals) http://webl.nsac.ns.calnsdam/news/1995/voI6_4/mark.htm

Middle Atlantic Milk Marketing Association http://www.thatmilkthing.com!

Milk Marketing Inc. http://www.mmilkmkt.com!

Mintel International Group Limited - Marketing Intelligence http://www.mintel-iis.com

NUTRJ CEUTI CALS

Arizona Health Sciences Library Nutrition Page hnp:/ /www.medlib.arizona.edufeduc/nutrit

Cosmetics, Toiletries, Frangrance Association http://www.ctfa.org/

The Fooddudes' Food Links hnp:llwww.fooddude.comllinks

Norman Fox & Co. (Specialty Chemicals and Raw Materials)

Future Foods (Milk Biologics) http://www.futurefood.coml

Garuda International, Inc. (Calcium from milk) http://www.garudaint.com!

Green Better Living (Colustrum-IX) http://www.users.nac.netijpark!ehomepag.htm

Immuno Dynamics, Inc. (Colostrum) http://www.colostrum.com!

Canadian Dairy Information Center http://www.dairyinfo.agr.caldairywww.html#canadian

Canadian Dairy Research Network http://res.agr.calPUB/CDRN/engmain.html

Center for Dairy Research, University of Wisconsin http://www.cdr.wisc.edu

Center for Nutrutional Research http://bovinecolostrIDn.com!infolallabout.htm

Cooperative State Research, Education, and Extension Service http://www.reeusda.gov/

Dairy Foods (Innovative Ideas and Technologies for Dairy Processors. Top new dairy products monthly and yearly. http://www.dairyfoods.com

Dairy Management Inc. (Umbrella group that oversees all of the university-based regional dairy dairy research centers.) • http://www.dairyingo.com!

Dairy Product Production Figures http://mann77.mannlib.comell.edul ... dp-bbI1998/dairy-'products

Foreign Ag Service http://www. fas. usda. gov I

Industrial Agriculture - USA http://www.ia-usa.org

Lituanian Food Institute http://wwwl.imnitel.netizulLFIWorks.html

Minnesota-South Dakota Dairy Foods Research Center http://www.fsci.umn.eduIDairyCenter/mission.htm

New Product Reviews http://www.dairyfoods.com

New Uses Council http://ag.arizona.eduiOALSINU CINUCHome.html

r i

•

Canadian Dairy Information Center http ://www.dairyinfo.agr.caldairywww.html#canadian

Canadian Dairy Research Network http://res.agr.calPUB/CDRN/engmain.html

Center for Dairy Research, University of Wisconsin http://www.cdr.wisc.edu

Center for Nutrutional Research http://bovinecolostrum.comlinfo/allabout.htm

Cooperative State Research, Education, and Extension Service http://www.reeusda.gov/

Dairy Foods (Innovative Ideas and Technologies for Dairy Processors. Top new dairy products monthly and yearly. http ://www.dairyfoods.com

Dairy Management Inc. (Umbrella group that oversees all of the university-based regional dairy dairy research centers.) • http ://www.dairyingo.coml

Dairy Product Production Figures http://mann77 .mannlib .comell.edul ... dp-bb/1998/dairyyroducts

Foreign Ag Service http://www.fas.usda.gov/

Industrial Agriculture - USA http://www.ia-usa.org

Lituanian Food Institute http://wwwl.irnnitel.netlzulLFIWorks.html

Minnesota-South Dakota Dairy Foods Research Center http://www.fsci.umn.eduIDairyCenter/mission.htm

New Product Reviews http ://www.dairyfoods.com

New Uses Council http://ag.arizona.edulOALSINUCINUCHome.html

MARKETING

Marketing Services (Alternative Uses of Agricultural and Marine ProductslFractionated Milk Components in Phannaceuticals and Nutraceuticals) http://webl.nsac.ns.ca/nsdam/news/1995/voI6 _ 4/mark.htrn

Middle Atlantic Milk Marketing Association http://www.thatrnilkthing.com!

Milk Marketing Inc. http://www.mmilkmkt.com!

Mintel International Group Limited - Marketing Intelligence http://www.mintel-iis.com

NUTRICEUTICALS

Arizona Health Sciences Library Nutrition Page http://www.medlib.arizona.eduleduc/nutrit

Cosmetics, Toiletries, Frangrance Association http://www.ctfa.org/

The Fooddudes' Food Links http://www.fooddude.comllinks

Norman Fox & Co. (Specialty Chemicals and Raw Materials)

Future Foods (Milk Biologics) http://www.futurefood.coml

Garuda International, Inc. (Calcium from milk) http://www.garudaint.com!

Green Better Living (Colustrum-IX) http://www.users.nac.netijparkiehomepag.htm

Immuno Dynamics, Inc. (Colostrum) http://www.colostrum.com!

SPECIFIC DAIRY PRODUCTS

APV Company, microfultration technology http://www.apv.com

Calcium and Related Nutrients http://www.solgar.com!nutrition_library/articlesicalcium.html

Canada N ewswire (Calcium-Enriched Milk Beverage) http://ww2.newswire.calreleasesllanuary 1997/08/c0760.html

The Cheese Reporter http://www.cheesereporter.com

Dairy Management Column (Metsovo, Greecerrourism!Cheese) http://bluehen.ags.udel.eduJdeces/dairycoVdc8-96.htm

Food Spectrum (Dairy and Cereal Premixes) http://www.foodspec.com.auJdep.htm

Hilmar Cheese Company http://www.hilmarcheese.com

Hi-Tech Detergents Ltd. (Latte Milk) http://www .hi techdeterg.co .nzJindex2 .html

Horizon Organic Dairy http://www.horizonorganic.com!

Kroger Company (Hispanic Cheese Promotion) http://www.magnainc.comlhispan l.html

Lifeway Foods Inc. http://kefir.com!

Mintel International Group Limited (Y ogurts and Chilled Desserts) http://www.mintel-iis.com!demoinpr/23c2.htrnl

Prestige Protein http://www.casein.com!

SPECIFIC DAIRY PRODUCTS

APV Company, microfultration technology http://www.apv.com

Calcium and Related Nutrients http://www.solgar.com!nutrition _Ii brary / articles/ calci um.html

Canada Newswire (Calcium-Enriched Milk Beverage) http://ww2.newswire.ca/releaseslJanuary 1997/08/c0760.html

The Cheese Reporter http://www.cheesereporter.com

Dairy Management Column (Metsovo, Greeceff ourism!Cheese) http://bluehen.ags.udel.edu/deces/dairycoVdc8-96.htm

Food Spectrum (Dairy and Cereal Premixes) http://www.foodspec.com.au/dep.htm

Hilmar Cheese Company http://www.hilmarcheese.com

Hi-Tech Detergents Ltd. (Latte Milk) http://www.hitechdeterg.co.nziindex2.html

Horizon Organic Dairy http://www.horizonorganic.com!

Kroger Company (Hispanic Cheese Promotion) http://www.magnainc.com/hispan 1.html

Lifeway Foods Inc. http://kefir.com!

Mintel International Group Limited (Yogurts and Chilled Desserts) http://www.mintel-iis.com!demoinpr/23c2.html

Prestige Protein http://www.casein.com!

Irish Dairy Board http://www.idbusa.coml2.htrnl

National Milk Producers Federation http:www.nmpf.org/web.sites.htm

New Zealand Dairy Group (Rennet Casein) http://www.nzdairy.co.nzI

Organic Growers and Buyers Association http://www.misa.urnn.edulogba.html

DAIRY RESEARCH

Agriweb http://www.ruralnet.com.aulAgriWeb/

Atlantic Agri-Products Competitiveness Initiative Projects http://emporiurn. turnpike.net! AI Alieni AAPC/aap25 .html

Austrailian Dairy Research and Development Corporation http://www.cirdc.com.aulresearch!

Australian Dairy Research http://www.dairy.com.aulresearch!index.html

Australian Utilization Research Institute http://www.auri.org

Biodegradable Polymer Research Center at the University of Massachusetts at Lowell http://www.eng. urn 1. eduIDeptIB PRCI

Biotechnology and HumanWell-Being: Designer Foods, Frankenfoods, and Pharmafoods http://www.nutritionsciencenews.co ... _backslDec_95_NSN/cover_story.html

California Dairy Foods Research Center (Concentrated & Dried Milk and Whey Products) http://www.cdrf.org/

Appendix Table C-l: Total Milk Production, U.S. and by Region (Top 25 Dairy States), 1972-1990.

Corn Southern Upper Appalachian Appalachian Other Year U.S. Belt Northeast Pac Hi c Plains Midwest {~re-1986l {~ost-1985l Southeast 25 States

- - - - - - - - billion pounds - - - - - - - - -

1972 120.0 12.7 23.9 16.0 3.7 35.4 11.1 8.0 3.1 17.2

1973 115.5 12.2 22.7 16.1 3.6 33.9 10.6 7.6 3.0 16.4

1974 115.6 11.8 23.0 16.3 3.7 34.0 10.6 7.5 3.1 16.2

1975 115.4 11. 3 23.4 16 .6 3.6 33.9 10.8 7.6 3.2 15.8

1976 120.2 11.6 24.2 17.5 3.7 35.9 11.2 7.9 3.3 16.1

1977 122.7 11.7 24.6 18.1 3.8 37.0 11.4 8.1 3.3 16.1

1978 121.5 11.3 24.7 18.1 3.9 36.7 11. 1 7.8 3.3 15.7

1979 123.4 11. 1 25.2 19.1 3.9 37.3 11.1 7.8 3.3 15.7

1980 128.4 11.6 26.1 20.6 4.2 38.6 11.5 8.1 3.4 15 .8

1981 132.8 11.8 26.7 21.8 4.3 40.0 11.8 8.3 3.5 16.4

1982 135.5 11.9 27.3 22.5 4.6 40.6 11.9 8.4 3.5 16.7

1983 139.6 12.2 28.4 23.1 4.9 42.0 11.9 8.4 3.5 17 .1

1984 135 .4 11.4 27.8 22.2 4.9 40.8 11.1 7.9 3. 2 17.2

1985 143.0 12.0 29.0 25.7 5.0 42.8 11.6 8.3 3.3 16.6

1986 143.1 11.9 29.3 26.2 5.1 42.2 11.8 8.4 3.4 16.6

1987 142 .7 11.9 28.9 27.0 5.3 42.2 11.5 8.1 3.4 15.9

1988 145.2 12.1 28.8 28 . 2 6.0 42.4 11.7 8.1 3.6 16.0

1989 144.3 12.3 27.9 29.2 6.4 41.0 11.8 8.0 3.8 15 . 7

. 1990 148.3 12.5 27.9 31.6 7. 1 41.3 12.0 8.0 4.0 15.9

Source: ERS, USDA. /\)

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