Dairymen, retool your milk market

“You are bigger than milk,” says Nestle dairy buyer Patty Stroup.

Stroup, raised on a dairy farm and a former dairy producer, is solidly grounded in the world of dairy production. Before joining Nestle last year, she worked in procurement for Hilmar Cheese in California.

Stroup was one of five speakers for the “Keeping Dairy Going and Growing” Symposium at the American Dairy Science Association meetings this year.

Central to her presentation on “Attracting dairies (processors) to your market” is the need for dairy producers to rethink what it is they produce and sell.

“I don’t buy milk,” Stroup explained. “Not in the sense of buying a gallon of fluid milk. My group buys over 300 dairy products. Dairy fats, proteins, sugars, minerals … I didn’t know there were 300 dairy ingredients before I started working for Nestle.”

Marketing evolution

Stroup was preceded by a summary of the economic factors that have pushed the industry from smaller to fewer, larger dairy farms. Changes in dairy production are mirrored in the processing industry.

While Stroup was speaking about some of the factors that influence their (Nestle’s) decisions, she encourages dairy producers to rethink how they market their milk now and in the future.

We aren’t just marketing milk (that goes in a glass on the table) and we shouldn’t want a processor that perceives their role as “getting rid of milk”.

Historically, butter and powder plants were built and managed to handle excess milk and convert it into a product with some shelf life. Today’s market is changing. Witness the whey protein market that has contributed to recent strong farm-level prices.

Local picture

Ohio and Pennsylvania are not top areas to attract new processors. Ohio, ranked 11th in milk production nationally, was not on her diagram of the 10 top states.

Stroup identified Pennsylvania and New York as the area that supplies the East Coast fluid market, with most of that milk continuing to flow there or to the Southeast.

However, her comments for dairy producers trying to attract processors to their geographic regions are valid for any dairy producer:

– Understand your customer (the processor, who in turn is consumer-focused).

– Be good at what you do.

– Make a conscious decision to be a supplier (you aren’t in it for the short-haul and neither are they).

– Invest in your business. Producing and processing businesses are clearly different, at least in appearance.

These points are nearly identical to the description Stroup shared of the processor’s business.

In control

From the producer’s perspective, we sell milk, by the hundredweight. We usually take the price set by the market, tweaked for quality and components. In the past decade or so we might use futures or option contracts to price some milk. Maybe we did a little forward contracting. Maybe we did nothing.

“Dairymen have to realize they can control marketing.” So stated the buyer of milk ingredients for a major food company.

How? This was a sharp lady. The processor is not going to lay out how the producer should control the marketing of their product.

We are selling milk. We are selling dairy ingredients. How can we do it better? Something to think about.

About the Author

(Dianne Shoemaker is an OSU Extension dairy specialist located at the extension center in Wooster, Ohio.) More Stories by Dianne Shoemaker

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