WCMA Notes: Milk Price Innovation is Inevitable

A Monthly Column offered by WCMA Executive Director John Umhoefer

The future of the dairy industry shone clearly beside a gravel road outside Muscoda, Wisconsin last week. There, under a blue July sky, Larry Harris described use after use he’d discovered for nanobubble technology in every stage of the diverse wastewater treatment system at Meister Cheese. 

“We’re looking at so many applications for this tech, I wish I was 20 years younger,” Harris, Technical Director at Meister Cheese, told attendees at a technology field day Meister hosted for WCMA members.  

Innovation, discovery, development, and implementation – this is the future of the dairy industry. 

Nanobubbles, invisibly small air bubbles blown into the anaerobic treatment ponds at Meister Cheese, destroy surfactants in wastewater, vastly improving the functionality of the microbes in the system, producing more captured methane gas, eliminating the need for buffering chemicals and allowing the system to treat a higher volume of wastewater flow.  

Innovation is alive and well at the Center for Dairy Research in Madison, Wisconsin, where Director John Lucey, PhD, sees a bright future for dairy’s lowest value byproducts – manure of the farm side and whey permeate on the processing side.   

“Our vision is to use these by-products as feedstocks for microbial biotransformation into chemicals and chemical precursors that are needed by society. Success in this endeavor will provide additional revenue to farmers and local communities while generating new products or low-carbon substitutes for fossil fuel derived materials,” Lucey wrote in a funding petition to the National Science Foundation.” The outputs of bio-fermentation can include renewable, and biodegradable bioplastics, sustainable fuels, and green chemicals.  

Mullins Cheese in Knowlton, Wisconsin, is innovating and implementing – cooling its natural block cheeses in their plastic liner only, eliminating all cardboard packaging.  It’s a savings for the factory, for the environment, and for the end users who have less packaging to remove and manage. 

Panhandle Cheese is innovating, operating its new cheese factory near Dumas, Texas, by procuring the vast majority of its fresh farm milk solely via pipeline from modern dairy farms surrounding the facility.  In addition to the highly marketable “green” manufacturing this provides, any dairy plant with this innovation would realize nearly $2 million in estimated annual savings for each one million pounds of milk per day processed, by removing hundreds of semi tanker load trips from the cost equation.  

These are just a few examples of sustainable, competitive, groundbreaking innovations that are breathing life into the future of the dairy industry. Only one impediment holds dairy back; only one key element seems to defy innovation: government-set milk pricing. 

This sentiment may only apply to dairy manufacturing west of the Ohio River, but federal milk pricing and pooling cannot innovate, discover, develop and implement nimble adaptations to the growing role of dairy products exported overseas, the explosion in dairy farm size and rise of single-farm-business processing, the new era of mega-volume cheese and milk powder operations, the long-distance transportability of fresh milk, the challenge of finding carriers for the long-distance transportability of fresh milk, the utter differentiation of cheddar barrel and block markets, the dominance of whey protein concentrates, the consolidation of dairy buyers and subsequent volatility of cash markets at the Chicago Mercantile Exchange, volatility in energy and labors costs, the decline in fluid milk consumption and accordant decline in Class 1 pool dollars, the cross-talk from FDA green lighting any nut or seed slurry as “milk,” the economic sensitivity of the sit-down dining industry, the structural disconnect between milk pricing and risk management tools, or even friction between the international desire for unbleached whey and the dairy pricing infatuation with colored cheddar.  

In the next several months, the dairy industry will spend countless hours and dollars putting new tires on the old Model T that is government-set milk pricing formulas. Yes, we have to change the tires, because this old system is still driving the dairy economy.  

But the dairy industry can apply innovation even to milk pricing to meet every change and marketplace challenge described above. And west of the Ohio, innovation in milk pricing is already taking root. The future of milk pricing is cost-based pricing or cheese yield pricing, backed with hedging and tweaked for oscillations in supply and demand. And like Larry Harris, we may all wish we were 20 years younger, so we could see free market innovation, rather than a government program, price milk across the U.S.