Marketing MilkProcessing Dairy Products

Unit 1

Introduction Dairy farmers produce milk to sell it for a

profit Management helps reduce costs of

production Management decisions are influenced by

Price, supply and demand trends for milk and dairy products

Markets available for milk Pricing structure and regulation of milk

marketing

Price of Milk Long term trends

See fig. 46-1, 46-2, 46-3 p. 834-35 Modern Livestock and Poultry Production

Seasonal Variation Amount of milk produces varies month to month Variation is less now than it used to be National average production is highest in May and

lowest in November Fluid milk consumption is lowest in June

WHY?? Price also varies

Lowest in May, June Highest in Oct, Nov, Dec

Demand for Dairy Products

Products Made from Milk Four major uses

Fluid, cheese, butter, frozen Use about 96% of the milk processed in the US

Fluid Milk Whole, low-fat, skim milks, coffee cream,

whipping cream, half and half, sour cream Make up about 36% of the milk produced

in the US that is used for fluid milk products

Cheese 30% of milk produced 67% of the cheese made is American-type,

mainly cheddar and Colby Italian type cheese makes up 25% Swiss cheese makes up about 6% Other cheese types make up the rest

Butter About 20% of milk produced Only uses the SNF parts of the milk, the

rest is used to produce non-fat dry milk and condensed skim milk

More butter and nonfat dry milk products are produced when milk production is highest—surplus milk is used to make these products

Frozen Dairy Products 10% Ice cream, ice milk, sherbet are the major

products produced

Other Evaporated and condensed milk and

buttermilk, dry buttermilk, dry whole milk, dry skim milk, dry cream, dry whey, lactose, yogurt

Use about 4% of the milk produced

Trends in the Consumption of Dairy Products Fig. 46-4 Continued research and development of old and

new dairy products Projections of demand for dairy products show an

expected increase in the use of fluid low-fat milk, fresh cream, cheese, ice cream and butter WHY???

Demand is affected by population, price, purchasing power of consumers, promotion

Advertising Dairy Products Prior to 1983

Generic and off-brand product promotion was funded by voluntary contributions from producers through local and state organizations

1983 Congress establishes a mechanism for a dairy check-off

program with the passage of the Dairy and Tobacco Adjustment Act of 1983

This established the National Dairy Promotion and Research Board

They are in charge of developing and administering promotion, research and nutrition programs for the dairy industry

Advertising Dairy Products Dairy farmers approved the continuation

of the Dairy Check Off Program in 1993 1995-Dairy Management Inc (DMI) was

organized to coordinate local and national dairy promotion programs Established the US Dairy Export Council to help

promote and market US Dairy Products in international markets

Check-Off Money Promotion of fluid milk and cheese

receives highest priority Estimated that 200 billion more pounds of

milk has been sold than was projected by USDA since check-off began in 1984

Markets for Milk

Markets for Milk More than $21 billion worth of milk is

produced each year on dairy farms in the US 86% of this is sold through farmer milk

marketing co-ops Rest is sold to private firms, used on the farm,

sold directly to consumers Looking to the future….

Dairy co-ops are expected to decline However co-ops will become larger and provide more

services

Services Provides by Farmer Cooperatives Provide more services Major services

Checking weights and tests Guaranteeing daily markets for milk Providing marketing and outlook information Providing field services such as assisting with production

problems Collecting and insuring payment from buyers Assisting with inspection problems Providing insurance programs Negotiating hauling rates Selling milking supplies and equipment

Market Wide Services Provided by Cooperatives Maintaining quality control and related lab

services Direct farm-to-market movement of milk Handling milk in excess of Class I use Participating in federal order hearings Paying milk haulers Negotiating Class I prices and service charges Maintain a full supply of milk Balancing milk supplies among processors to

reduce reserve requirements Making out-of-market raw milk sales

Hauling Milk To Market Most is hauled fro the farm to the plant by

bulk trucks Milk is being hauled farther

Due to: fewer dairy farms, larger herds, fewer dairy plants

Costs Increased due to increase in fuel and labor

costs, larger bulk trucks

Milk Grades 1924- US Public Health Service developed

Standards Milk Ordinance These were to help states and local governments

prevent diseases that spread through milk Adoption is voluntary but widely used as the model for

regulating the production and processing of Grade A fluid milk

Ordinance has been revised and is now called Grade “A” Pasteurized Milk Ordinance This is recognized by public health agencies and the milk

industry as the national standard for milk sanitation

Ordinance Standards Cleanliness of facilities Temperature for storing milk Bacterial count Somatic cell count Chemical residues Other factors relating to the production

and processing of milk for human consumption

Grade “A” Raw Milk Must be cooled to 45 degrees F or less within 2 hours of

milking Blend temperature after the first and subsequent milking

cannot exceed 50 degrees F Each farmers milk cannot exceed 100,000 bacterial count

per milliliter before it is mixed with other producers Bacteria count from several producers cannot exceed

300,000 bacterial count/ mL before it is pasteurized Each producers milk cannot exceed 750,000 somatic cells

per milliliter Can be no detectable antibiotics Inspections on the farm are made regularly and the permit

to sell Grade A milk can be suspended if violations are found and not corrected.

Grade B Milk Produced under standards that allow it to

be used for manufacturing of dairy products but not for fluid milk

Standards are not as strict as for Grade A milk

Complete standards may be found atwww.ams.usda.gov/dairy/index.htm Grade B standards address the same

things as Grade A standards

Federal Milk Marketing Order Program Read p. 840-842 in Modern Livestock and

Poultry Production Text

Dairy Imports and Exports Relatively low for a number of years Imports

Generally less than 2% of total production Dried milk, butter, several types of cheese are

protected by import quotas Exports

Below 1% of total production Limited due to higher US prices

Summary Price of milk rose from 1967-

1998 Prices and production vary

seasonally with the highest production and lowest prices in May and June

96% of the milk processed in the US is used for fluid milk, cheese, butter or frozen dairy products

Per capita consumption of cheese, dry whole milk and non-fat dry milk has increased in recent years

Demand for other dairy products had decreased

86% of the milk produced in the US is marketed through Co-ops

Co-ops provide many services to the producers as well as the market

Milks is hauled to market in bulk trucks and the cost of hauling as increased in recent years

Milk is divided into classes for pricing, Class I is the highest priced

Federal milk marketing orders are established in many areas, and the minimum prices for Grade A milk are set there

Actual price paid is often higher than the one set by the order

Dairy imports and exports have been at a low level for many years.

Assignment Complete discussion question #’s

3, 5, 7, 12, 13, 15 p. 843-844 Complete Review Questions p. 844