Friday, March 27, 2020
CapitalPress.com
Dairy
Darigold’s new strategy means
big changes for some members
By SIERRA DAWN MCCLAIN
Capital Press
EUGENE, Ore. — On Feb. 29, the
owners of Konyn Dairy sold their 1,500
dairy cows and closed.
The sale closed the final chapter of
the dairy’s 44-year history.
“We had no plan of leaving dairy so
soon,” said Leticia Konyn Ficek, who
co-owned the dairy with her brothers,
David and James Konyn, and their par-
ents, Jack and Marian. “If you’d told us
Leticia Konyn Fecik/Konyn Dairy
December first we’d be selling, I’d say From left, James Konyn, Leticia Konyn Fecik, Jack Konyn, David
Konyn at Konyn Dairy near Eugene, Ore.
you’re crazy.”
The Konyns said recent changes
made by Northwest Dairy Association here. We didn’t think we’d stop dairy- er-members have produced twice as
prompted their decision. NDA — with ing for another 10 to 15 years, but we much milk as their base allows. To dis-
Darigold as its marketing and process- knew an opportunity like this might not courage overproduction, the source
ing arm — is a Seattle-based cooper- come again.”
said, Darigold recently raised its over-
ative with about 430 member farms
The Konyns said they no longer plan base charge, meaning farms that pro-
in Washington, Oregon, Idaho and to run a farm operation and will seek duce too much milk will be paid sig-
nificantly less per hundredweight for
Montana.
employment elsewhere.
The domestic dairy industry has
In January, Rod Tjoelker, a for- excess milk.
in recent years been limping along mer NDA member and dairy farmer in
“What Darigold is trying to do is
with falling demand for fluid milk and Whatcom County, Wash., also sold his match supply with profitable demand,”
depressed prices. To adapt, NDA has cows and closed RTJ Farm, founded said Gary Genske, a New Mexico dairy
been changing its game plan, impacting 1948.
farmer and accountant for the dairy
Like the Konyns, Tjoelker hadn’t industry. “Northwest Dairy is kind of
farmers across the Northwest.
In December, NDA announced to planned to quit dairying until he retired. fixing the oversupply problem. I’ve got
members the company would make big On Dec. 19, Tjoelker said, NDA to hand it to them for stepping up.”
changes in 2020, including reinvesting announced the upcoming changes. On
Every farmer Capital Press talked
a portion of farmer profits in new equip- Jan. 5, Tjoelker decided to sell, and on to said having a strong base system is
ment and products, raising the penalty Jan. 16 NDA approved the sale. By the important. But farmers appear to have
on overproduction and opening the end of the month, all of his 530 cows mixed opinions about the co-op’s other
option for farms to sell their “base” to were gone.
new strategies.
other farms.
“It felt very quick,” he said. “We
Darigold is seeking to expand its
Farmers have a base, or produc- were spinning. We sold the base before international market, where demand for
tion quota, of milk they’re permitted to we had the cow buyer lined up. It was a dairy is growing.
ship to Darigold so the company won’t gutsy move.”
According to McKinsey & Co., a
be oversupplied. Darigold declined to
Tjoelker said he plans to run a small global management consulting firm,
comment on specifics, but the base is herd of beef heifers and rent some of his U.S. dairies have a domestic milk sur-
plus and an international dairy deficit, so
calculated using various factors like the land to a potato grower.
overall market.
He said closing the dairy has created long-term opportunities are enormous.
The opportunity to sell base turned it ripples in the local economy, including
About 40% of Darigold’s milk goes
into a commodity. Steve Matzen, NDA equipment companies, his hay broker overseas, said Steve Matzen, NDA vice
senior vice president, said the company and others.
president, and the company continues
doesn’t officially recognize the value of
“It’s a real shame for our area,” he its international expansion.
base, but “members do business with said.
But farmers and financial experts
one another.” Some farmers realized
NDA is also upping the penalty on say dairy cooperatives must be strate-
they might be better off selling their production over the base, cooperative gic when selling on the global market,
or they may inadvertently reduce rather
base than staying in the industry.
members said.
That’s why Konyn Dairy sold its
Dairy economists say overproduc- than lift producer profits.
tion of milk means lower farm-gate
base and cows, Ficek said.
According to McKinsey & Co.’s
“We just saw an opportunity and prices.
2019 dairy report, prices can suf-
took it,” said Ficek. “It made good busi-
According to a source who received fer if companies don’t systematically
ness sense, but it’s bittersweet. We’ve Darigold’s letter to members and did “identify risk by developing insights
done this all our lives, raised our kids not wish to be identified, some farm- on supply, demand, policy and politi-
cal factors, and trends.”
Genske, the dairy industry accoun-
tant, said dairy classes III and IV —
including cheese, butter and powder —
are “sold at yard sale prices around the
world.”
Sarah Taydas, Darigold spokesper-
son, said the company mainly exports
classes III and IV: whey proteins, milk
proteins such as skim milk powder and
milk protein concentrate, cheese and
butter.
Darigold’s international custom-
ers, said Taydas, are food manufactur-
ers that make products such as infant
formula, confections and nutritional
products.
“I’m not at all opposed to global
marketing,” said Genske. “You just
have to be so strategic about it, other-
wise that powder is just thrown onto the
world market, and it does nothing more
than suppress the producer’s pay price.”
NDA is also making changes in the
U.S.
Taydas said the company is invest-
ing $67 million in its Boise, Idaho, plant
to add capacity for a new fluid-milk
product and a modern aseptic, or con-
tamination-free, bottling line.
One Darigold farmer who did not
wish to be identified said although he
supported the long-term investment
strategy, he questioned the timing.
“They’re doing a major reinvest-
ment,” he said. “To do that, they need
a bunch of equity from the farmers,
meaning paycheck cuts. You’ll get that
back someday, but, oh boy, it might be
a while. It seems to me they should’ve
been modernizing plants gradually
instead of suddenly.”
Darigold talked in generalities, but
declined to comment on the specific
equity amount.
Despite criticisms regarding equity,
farmers told the Capital Press they were
pleased with Darigold’s strategy for a
new fluid milk product.
The innovative product, called Dari-
gold FIT, is lactose-free, has 75% more
protein, 40% less sugar and a fresh
packaging design. Its sales have more
than doubled in six months.
Farmers say they’re excited because,
according to the International Dairy
Foods Association, fluid milk pays
farmers the highest farm-gate price.
Danish neighbors partner to survive
By CHRIS MCCULLOUGH
For Agri-View
ESBJERG,
Denmark
—
Dairy-farming neighbors in Denmark
have been milking cows in a partner-
ship for more than 20 years. They say
the business model works well for
them.
Kjartan Poulsen is chairman of the
Danish milk-producers association. He
farms on the west coast of the Scandi-
navian country about 18 miles north
of Esbjerg. He first started his farm-
ing career in 1989; he bought that farm
just three years later. With 45 cows in
his herd, by 1998 he had decided to
join forces with his neighbor in a busi-
ness partnership. His neighbor had 200
cows.
Farming partnerships are more
common within families where farms
have been handed down through the
generations. But for Poulsen and his
neighbor the business arrangement has
proven successful; expansion has been
rapid.
“His son joined us in 2013,”
Chris McCullough/TownNews.com
Content Exchange
Kjartan Poulsen milks 900 cows
in partnership with his neighbor.
Poulsen said. “In total we currently
have 900 cows and farm 1,500 hectares
(about 3,707 acres), 1,000 of which are
rented. Both our farms practice organic
production; that’s how I started back in
1989.”
Denmark produces 5.5 billion liters
of milk per year; organic production
accounts for about 14% of that total.
Arla Foods is by far the biggest dairy
company in the country. But there are
about 30 other smaller dairy compa-
nies with more than 60 production
plants in total.
Dairy exports from Denmark
account for more than 20% of all
Danish agricultural exports, making
exports an important sector for the
industry. Dairy exports bring in about
2 billion euros to Denmark’s econ-
omy each year – about $2.17 billion.
Imported cheese accounts for 25%
while imported yogurt accounts for
20% of the country’s total domestic
consumption.
As with almost every other coun-
try, the number of dairy farms in Den-
mark has decreased. In 2005 there
were 6,300 dairy farms but by 2018 the
number had decreased to 3,000 farms
with a total of 570,000 dairy cows.
Poulsen and his neighbor have split
the cows on the two farms into differ-
ent milking groups. The herd is all Hol-
stein Friesian. The cows average 9,000
liters per cow per year — about 19,800
pounds per year.
“We are milking on two farms; the
first one has all the first-time-calv-
ing cows in two teams,” Poulsen said.
“The second farm keeps all the older
cows, also in two teams. Team one
includes cows from calving to around
100 days, and the second team is with
bulls. We do not use (artificial insemi-
nation) very often in Denmark.
“Both the cows and the young
stock graze outside from around April
20 normally, but this (past) year it was
very early on April 1.”
The cows usually stay outside until
about Oct. 1. The dairy milks twice per
day on both farms.
“One site has a rotary-40-unit par-
lor and the other has a 40-side-by-side
fast-exit parlor,” he said. “Our milk
quality is quite good at 4.2% butter-
fat and 3.4% protein. During the sum-
mer our butterfat is 3.7% and 4.4% in
the winter time. All of our milk goes
to Arla; we receive around 43.5 euro
cents ($0.48) per liter, which has been a
stable price for the past eight months.”
DAIRY
MARKETS
Lee
Mielke
February
milk
production
‘leaps’
By LEE MIELKE
For the Capital Press
F
ebruary milk output
shot higher, thanks
to an increased herd
size and favorable weather.
The Agriculture Depart-
ment’s preliminary data in
its Milk Production report
shows output at 17.87 bil-
lion pounds, up 5.3% from
February 2019.
However, the data is
skewed in that February had
an extra “leap day” of pro-
duction than 2019. Adjust-
ing for the extra day, output
was up 1.7%.
February output in the
top 24 states totaled 17.0
billion pounds, up 5.6%, but
after adjusting, it was up
2.0%. Revisions added 40
million pounds to the orig-
inal 50-state January total,
now put at 18.8 billion, up
1.1% from January 2019.
Cow numbers in the 50
states in February totaled
9.37 million head, up 9,000
from January and 18,000
above a year ago. The
24-state count totaled 8.84
million head, up 8,000 from
January and 39,000 more
than February 2019. Revi-
sions added 13,000 cows to
the January count, now put
at 9.36 million, 7,000 above
a year ago.
Output per cow in the
50 states averaged 1,841
pounds, after adjusting, up
27 pounds from a year ago
or 1.5%.
Adjusting for the Leap
Day, California was up 84
million pounds or 2.6%
from a year ago. Cow num-
bers were down 3,000 but
output per cow was up 52
pounds.
Wisconsin was down
0.8% on 10,000 fewer cows
and 1 pound less per cow.
Texas was up 74 mil-
lion pounds or 7.0%,
thanks to 32,000 more
cows and a 21-pound gain
per cow.
Idaho was up 5.5%, on
27,000 more cows and a
22-pound gain per cow.
New York was up 1.9%,
thanks to a 38-pound gain
per cow. Cow numbers were
down 1,000.
Michigan was up 1.1%
on 3,000 more cows and a
6-pound gain per cow.
New Mexico was up
2.7%, on 11,000 more cows
offsetting a 15-pound drop
per cow.
Oregon was up 2.0%,
thanks to 3,000 more cows.
Output per cow was down 7
pounds.
Washington state was up
4.0%, on 4,000 more cows
and a 48-pound per cow
increase.
S180115-1
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