Dairy farmers aren’t known for being price-setters. Approximately 60 percent of the U.S. milk supply is controlled through the Federal Milk Marketing Orders. Most states operate under Federal regulations, although some states operate their own regulatory programs, and there is overlap in some geographic areas. Because milk – a highly perishable product – is produced every day no matter the demand and must be consumed or processed within a relatively short time period, these regulations were enacted to establish a minimum market price formula designed to lend stability to the dairy sector.
The Federal Milk Marketing Orders “stabilize market conditions, benefit producers and consumers by establishing and maintaining orderly marketing conditions, and assure consumers of adequate supplies of pure and wholesome milk at all times,” as per the Agricultural Marketing Services (AMS) (http://goo.gl/eV59fk.)
Limited ways for dairy farmers to increase the price paid for their milk, even under this regulatory environment, do exist. Increasing milk components such as protein and fat, meeting quality production premiums or receiving seasonal incentive are ways to generate more income per hundredweight. Farmers can also enter the growing organic or 100 percent grass-fed markets. Dairy pricing volatility, however, remains a concern. Bypassing the commodity market, and entering into direct-market sales, can be one way to add value and keep the profit on the farm.
Wholesale Fluid Milk
“I haven’t shipped milk in about 13 years,” John Kokoski, fourth-generation dairyman at Mapleline Farm in Hadley, Massachusetts, said.
Kokoski began working with a small bottling plant in 1995, and operated “a little store, which was in an old milk room on the farm.” Selling some of his milk this way – directly to the customer, and in glass bottles – added value to a commodity product and helped to keep the dairy viable. He never anticipated the demand.
In 2004, Kokoski purchased the bottling plant, and moved it to the farm. The bottling plant is licensed for in-state sales only, and he “does not see a need” to pursue licensing for out of state sales. His registered Jersey herd – with award-winning genetics – has grown, and will require an expansion of the free stall barn. He’s now milking 125 head, and selling the milk locally.
After a local chef discovered the farm’s creamy Jersey milk, high in protein and nutrients, the demand grew rapidly without any advertising. Blessed with the perfect location for sales to restaurants, coffee shops and universities, Mapleline Farm milk found its way to the local food service sector.
The milk is not ultra-pasteurized, which is a big selling point for chefs. Because the milk goes from cow to bottle to customer within days, the extra-long shelf life gained with ultra-pasteurization isn’t needed or wanted.
“It takes the goodness and properties chefs want to see out,” Kokoski said of ultra-pasteurization.
That little farm store selling milk in glass bottles to local customers now distributes wholesale, in plastic, to the local food service industry. Five universities within 20 miles of the farm, in addition to a plethora of coffee shops and upscale eateries, as well as other farm markets and local grocers, carry Mapleline Farm milk. The farm processes 60,000 pounds of milk each week, and delivers it to their wholesale customers. During the school year, they purchase a small amount of supplemental milk from a neighboring farm.
With four full-time employees to milk, care for the cows and grow crops, and eight part-time employees primarily for bottling, the farm remains a small family operation. The farm sells milk and cream and well as cultured buttermilk. They do sell to retail customers via a home delivery service, originally owned and operated by son Paul Kokoski, who does all of the milk processing. Chad Dizek, married to daughter Jessica, performs equipment maintenance and crop production.
Upscale Value-Added Production
In Vermont, Diane St. Clair sells her dairy products to restaurant customers, too. She isn’t bottling her own milk, and she only milks 10 cows. St. Clair is an artisanal butter – and more recently, buttermilk – producer. Like Kokoski, she is milking Jersey cows, whose higher butterfat content helps to produce her high-end products.
Animal Farm Dairy, in Orwell, Vermont, is one of the few dairies producing farmstead butter. St. Clair’s butter is hand-separated, hand-washed, churned in small batches, and pasteurized at low temperatures. She began 10 years ago, when the interest in local, farm-direct food was barely gaining momentum.
“I realized fairly quickly that I wasn’t going to be able to make any money, unless I had a very high-end, niche market,” such as exclusive, upscale, chef-owned restaurants, she said. “Paying me $19/lb for my butter is not a big deal,” but it is a “very limited, specialty market.”
St. Clair was able to use her industry connections to meet with acclaimed chef Thomas Keller, owner of the French Laundry, in California, and Per Se, in Manhattan. He purchased all of the butter that she could make from the four milking cows she had at the time. As she added more accounts, she increased her herd as needed.
Originally limited by a lack of small-scale processing equipment, St. Clair was able to meet Vermont Department of Agriculture standards with a handcrafted pasteurization machine. Since then, technology has improved and more small processing equipment is marketed commercially. The availability of small-scale bottling equipment led her to expand into buttermilk production about five years ago. While Animal Farm butter is limited to her few selected wholesale accounts, the buttermilk is sold retail, year-round.
“This is something that’s been a real hard sell,” she said. Her cookbook, The Animal Farm Buttermilk Cookbook, helped to spur sales, and was “a huge step in marketing my product. Now I’m selling everything I produce.” She averages about 350 quarts of buttermilk per week during the peak summer season. Animal Farm was a seasonal dairy, with cows drying off in June. St. Clair now milks year-round, a necessity in order to provide this perishable, retail product.
Although she’s grown the dairy a bit since its inception, she has no further plans to expand. She’d again have to rescale her equipment, and invest in more infrastructure. At some point, she’d have to hire employees. Currently she has “very part-time employees,” and fully maintains her handcrafted approach, which has been her signature since the beginning.
“Basically the way I do things is the same,” she said. “Part of my story is that I’m not big.”
Small and Raw
Raw milk sales can offer many dairy producers a ready-made, direct-to-consumer market requiring little infrastructure. Not every state allows the sale of unpasteurized fluid milk, and those that do vary widely in regulations and oversight. The Federal Pasteurized Milk Ordinance (PMO) governs the processing and sale of Grade “A” milk and milk products, and does not permit pudding, ice cream or yogurt from unpasteurized milk. Butter and cheese are not regulated, but fall under a state’s dairy manufacturing laws. Aged raw milk cheese is legal in all states, but requirements for licensing vary. Not all states have adopted the PMO, and even those that have often have modifications in place.
New Hampshire’s raw milk laws are permissible, exempting small producers from state oversight. The law pertains only to direct farmer-to-consumer sales within the state. Since 2012, producers can sell up to 20 gallons of raw milk per day, and or processes the milk and sells the resulting raw milk products, including butter, raw aged cheeses and yogurt, without requiring a license or inspected facilities. Fresh cheese products are prohibited.
At Wotton Farm, in Ossipee, New Hampshire, raw milk from the nine Guernsey/Jersey crosses is sold directly to farm customers. The Wottons bottle their own raw milk, and make a variety of raw milk dairy products. In peak season, they sell 50 gallons of raw milk each week, plus 30 pounds of butter, 30 quarts of yogurt and some cream. Cheeses are made in 10-gallon batches each week if enough milk is available, and aged for three to six months, depending on type.
“We are not required by law to pasteurize our milk; however, there is a statement required by New Hampshire law that must be on all of our raw milk and milk products,” Kathey Wotton said. “I take great pride in my product, and have been making and selling cream, yogurt, butter and cheese for three years now.”
Wotton uses a tabletop cream separator, which enables her to sell skim milk and make skim milk yogurt, as well as to sell cream. While this process isn’t time-consuming, making butter is. Using a 2.5-gallon butter churn, Wotton spends about four hours from start to finish on butter-making day. The most time-consuming aspect is washing the butter. This process removes all of the buttermilk. If it is not done thoroughly, the butter will sour. Yogurt is made via heating milk, but not long enough to consider it pasteurized, and allowing it to cool. Starter (yeast and bacteria) and flavorings are added and the milk is held at a consistent temperature for four to six hours. After overnight chilling, the yogurt is ready for sale.
Wotton realizes that larger raw milk producers, those that do need to be licensed and inspected, are often opposed to allowing smaller producers more leniencies. But Wotton sees the logic in the exemption, as small producers can more readily have hands-on oversight.
“We don’t want to milk more than 20 gallons of milk per day. With our small size, we are able to keep close tabs on the quality of our milk,” she said. “My husband and I are the ones who milk the cows and bottle the milk and wash and sterilize the milking equipment. We are the food testers. We take care to keep everything as clean as possible. We don’t want to get sick, and we certainly don’t want to make anyone else sick.”
Klein Farms Dairy and Creamery, in Easton, Pennsylvania, also sells raw milk, plus a variety of its own dairy products. With a milking herd of 62 Holsteins, recognized for their long milking lives and selected for their capacity for making milk from forages, their cows produce 25,000 pounds of milk, per cow, each year.
The on-farm store is loaded with their raw milk, aged raw cheeses, pasteurized yogurt and yogurt drinks, and a variety of fresh cheeses, all made in their small on-farm creamery. Also licensed for food production, they make their own baked goods. They raise their dairy steers for beef.
Every gallon of raw milk they sell themselves means more profit than shipping that milk to the processor. They use about 75 percent of the milk themselves in the summer, and 50 percent in the winter. They sell their raw milk on-farm, and wholesale it to local grocery stores and other retail farm markets.
To help increase direct sales, they’ve acquired a business partner for a new business venture, Happy Holsteins Ice Cream, LLC. A new, larger farm store, located up by the roadway, rather than back by the barn, will open in June 2015. Ice cream, made exclusively with their milk, will be the big attraction.
Milk will be shipped out to a small nearby dairy processor, Longacres Modern Dairy, where it will be pasteurized and homogenized, and cream will be added to increase the butterfat content. The resulting ice cream mix will be returned to the farm, and put into the ice cream batch maker with added flavorings.
Klein Farms has been making dairy products and selling their own milk for 12 years, since a farm accident caused the family to sell their original milking herd. They thought they’d revamp the dairy and focus exclusively on making cheese. It didn’t work out that way.
“Raw milk has really become the main income,” Layne Klein said. “Even though we have a lot of expenses and workers… at least we know we’ll have a steadier income,” than relying on commodity milk pricing.
Dairy farmers are finding that they do have viable options outside of the traditional commodity milk market, and that directly utilizing their own milk supply makes financial sense. Whether milking a hundred or more cows, or only 10, finding a direct-market niche for milk or milk products helps to keep the profit on the farm.
Cover Photo courtesty of Klein Farms.