Trade, Farm Bill, co-op structure
challenges eyed at dairy conference

By Dan Campbell, Editor

ow important are the World Trade Organization talks for U.S. dairy cooperatives and their members? “Either we have a place at the table, or we’ll be on the menu,” is how Jerry Kozak, CEO of the National Milk Producers Federation (NMPF), put it in his address to the joint annual meeting of NMPF, the United Dairy Industry Association and National Dairy Promotion and Research Board in December.

NMPF lobbying efforts have been based on the stance that there can be no dairy trade deal if the European Union makes only incremental cuts in its subsidies and import tariffs, which are much higher than those in the United States, he stressed. Still, the industry’s very willingness to even discuss possible reductions in a 50-year-old support program — under which the U.S. government pays more than $4 billion annually to support the dairy industry — represents something of a shift toward greater flexibility on free trade.

And how much is at stake for producers as the 2007 Farm Bill takes shape? “Either we get our ducks in a row, or we’ll be sitting ducks,” Kozak warned, noting that agriculture is bracing for farm program reductions and that the dairy industry needs to be united and proactive to keep the budget ax from swinging its way.

Environmental issues — including potentially stricter air and water quality controls — will play a part in the Farm Bill debate, Kozak said. Food security and the war on terrorism, animal welfare and product standards and labeling will also be in the mix more so than in past Farm Bills.

Another fundamental challenge facing producers comes from “people outside the industry who would like to dismantle the cooperative business structure,” he said. This would have “extremely serious consequences for farmers and the industry,” Kozak continued. “Now is the time to rally around the cooperative structure and take advantage of the magic of cooperatives and the Capper-Volstead Act. We need to take advantage of cooperative unity for the benefit of all producers.”

CWT & market gains
As sobering as those thoughts were for the 1,100 or so producers and guests gathered at the meeting in San Francisco, there were also many achievements in 2005 to look back on and cheer. After three successful bidding rounds of the CWT (Cooperatives Working Together) program, 74 percent of the nation’s milk production is enrolled in this industry self-help effort to stabilize on-farm milk prices by better balancing supply and demand. In 2006, the CWT focus will likely shift from voluntary herd reductions to boosting the export-enhancement component of the program, Kozak noted.

NMPF Board Chairman Charles Beckendorf said the 5 cents per hundredweight producers contribute (on a voluntary basis) toward the CWT program is “the best nickel you could ever spend.” Last year, CWT removed 900 million pounds of excess milk from the market, he noted.

Dairy Management Inc. CEO Thomas Gallagher recounted gains in dairy research and promotion, many of which were achieved through investment of producers’ Dairy Checkoff dollars. Topping the good news on the nutrition front was the revised U.S. Dietary Guidelines, which keep dairy as its own food group and boosts the recommendation from twice-daily to thrice-daily consumption of dairy foods for adults and children.

Yogurt was the retail star for the industry in 2005, with sales that climbed 6 percent, to 2.87 million pounds, and is becoming “a ‘growth engine’ for the industry,” Gallagher said.

The big news for fluid milk consumption continues to be sales gains in schools and fast food outlets, achieved primarily by replacing cardboard milk cartons with flavored milk in single-serve, plastic bottles. Indeed, several times during the meeting, the image of the single-serve, cardboard milk carton was flashed onto video screens as a symbol of an industry that in the past was sometimes too slow to adapt to modern consumer food preferences, nearly costing the industry a generation of milk drinkers.

Halting slide of fluid sales
Gallagher said fluid milk sales have been in a 21-year downward slide. Why? “Decades of offering milk in cardboard boxes that kids needed a fork to open.” He disagreed strongly with those who say the best the industry can hope for is to halt or slow the slide, and he predicted that with the right products, fluid milk can once again become a “shining star” of market growth for dairy producers.

Need evidence? Dairy producer investments in foodservice and school partnerships have led to the introduction of milk in plastic bottles at McDonald’s and Wendy’s restaurants across the country, and milk in plastic bottles in 3,500 schools today, compared to just 400 schools during the 2003-04 school year. Based on incremental sales increases, if milk in plastic bottles were offered in all schools and major fast food chains nationwide, sales could increase by an additional 1 billion pounds — a 1-percent increase in per capita fluid milk consumption.

That trend could pick up steam as the nation’s two soft-drink giants — Coke and Pepsi — edge more into the dairy sector, with products such as Bravo Milk Slammer. To consider the potential impact on sales, Gallagher noted that Coke has a fleet of trucks second in number only to United Parcel Service that deliver products daily nationwide. They also maintain more than 2 million vending machines that can sell milk. The industry’s hope, of course, is that those types of products take market share from soft dinks, not from traditional milk products.

Dairy producers need to keep pursuing strategic partnerships with suppliers, manufacturers and the food service industry, Gallagher said. Retail cheese sales, which for many years have driven dairy industry market gains, were flat last year. This could be a prime area where producer/processor partnerships could help spread the risk for developing new products, such as snack cheeses and cheeses for the Hispanic market, he noted.

Looking at the dairy ingredients market, there is no bigger need than for a worldwide research and promotion effort to develop nutritional information for dairy whey that will help marketers better compete with soy-based food additives, he said.

Sending large volumes of milk to balancing plants to “turn into powder for the government to buy, then dump on the market is not growing the business,” Gallagher said.

Innovation and passion
critical for cheese gains

Lou Gentine, CEO and chairman of the family-owned Sargento Foods in Wisconsin, told how the small company his father started in 1953 to fill a market void for consumer-size packages of Italian cheeses grew into a company that today annually sells 3 billion pounds of cheese worth $550 million — 3 percent of the U.S. retail cheese market. To put it in farmer-friendly terms: it takes the milk from 160,000 cows each year to supply the raw product for Sargento cheeses, he said.

Sargento cheeses are produced at four plants in Wisconsin that employ 1,200 workers. One reason for the firm’s rapid growth was good timing: Sargento went into business just as the market for pizza and some other Italian foods began to soar. But its success is also due to the innovation and passion his family and its employees have for producing cheese, Gentine said. Among the elements of the company’s statement of values is to: “Hire good people and treat them like family.”

U.S. cheese sales have grown 300 percent since 1953, far out-shining stagnant or falling fluid milk sales during most of those years, he said. However, since is takes 10 pounds of milk to make one pound of cheese, that has not necessarily been a bad trend for dairy producers, Gentine said.

He sees cheese and yogurt as providing the biggest opportunities for dairy sales growth, and urged producers to “ride the winner,” saying their research dollars should be invested in developing new cheese products.

But innovation is not cheap, Gentine stressed. He described a process that involves consumer surveys, concept development and testing, product development and further testing, building or adapting plants and equipment and costly product launches (including advertising, promotion and slotting fees). Total costs can run from $10 million to $40 million to launch a new food product, “and there is no guarantee of success.”

Gentine said he thinks branded advertising does more for the industry than generic advertising, saying generic ads are based on convincing consumers that all cheddar cheese (for example) is the same, which means they compete only on price, and that tends to drive the market down.

He urged producers “to support innovation” and to consider increasing fees for the Dairy Checkoff program (no such proposal is currently being pursued by the industry). Asked if he would also support a Cheese Checkoff for processors to pay, Gentine said his company already spends 20 to 25 percent of its income on innovation and promotion. “When we build our own brand, we also build the dairy industry.”

Dairy knowledge in
short supply in Congress

U.S. Rep. Devin Nunes, who grew up on a Tulare, Calif., dairy farm, said he has his work cut out for him representing the dairy-intensive San Joaquin Valley in the Capitol, where it often seems that “there are only about three people who understand U.S. dairy policy.” That was brought home to him when, after just two weeks on the House Ways and Means Committee, he was named as its designated dairy expert.

“That’s kind of scary,” said Nunes, whose Fresno-based district is the nation’s largest agricultural district (based on farm income). “Few people in Washington understand agriculture, and fewer still understand dairy.”

There are “strong feelings in Washington to throw out” the existing dairy program, and “that sentiment seems to be growing,” he warned. It will take a strong coalition to defend the program, Nunes said, praising NMPF for its efforts to bring the dairy industry together on the legislative front and for its accomplishments with the CWT program.

Nunes said he is sponsoring a bill that would provide up to $300 million to help spur growth of the U.S. MPC (milk protein concentrates) industry, and is supporting another bill that would impose a tariff on imported MPCs until the U.S. MPC industry is better established.

The United States needs to look closely at what New Zealand did in building and subsidizing MPC plants — a strategy which Ireland and Holland have followed suite on, Nunes said. If the United States does not do something similar, it will put its dairy industry at a disadvantage, he warned.

Nunes also spoke of the energy crisis facing the nation, noting that renewable energy — even growing as rapidly as it is — can do only so much to relieve the need for oil. He expressed the fear that without more action, “someday we may be back to milking cows by hand.”

He recounted a trip to Alaska to tour a region where new oil fields could be tapped — a proposal that has sparked a bitter fight with wilderness advocates. Nunes described flying for two hours over the region without ever seeing a single animal or person. Out of this vast region, Nunes said drilling would occur on just 2,000 acres, but would produce enough oil to fill the Alaska pipeline for 30 more years and meet 5 percent of the nation’s annual petroleum needs.

Nunes agreed with one questioner that the lack of new U.S. oil refineries is part of the problem, but he said this mostly contributes to short-term oil price spikes. The main long-term cause, he said, is still over-reliance on Middle Eastern oil.

Pacific Rim seen as
world economy hot spot

Jeff Thredgold, noted economist with Thredgold Economic Associates in Utah, provided a lively, wide-ranging outlook on the national and global economies. He disputed those who say the U.S. economic recovery has been a “jobless one.” Small business creates most new jobs, and was largely responsible for 2.2 million new jobs created last year, he said. U.S. worker productivity was up an average of 3.7 percent the past three years, the highest growth rate in 50 years. Further, he continued, the nation has enjoyed 10 consecutive quarters of economic growth exceeding a 3 percent annual rate, after inflation.

Just 12-14 years ago, the U.S. economy was “a bloated dinosaur — the Germans and Japanese were kicking our tails,” Thredgold said. “Today, we have a re-charged, flexible, dynamic economy.

The Internet has been a tremendous boon to business, he said, helping to reduce the cost of doing business globally by $1.25 trillion during the past 3 years.

The economy is increasingly rewarding those who attain higher education, Thredgold said, noting that in 1980, college graduates averaged 25 percent more income than those with only a high school education. By 2005, college graduates made 85 percent more, on average.

Thredgold said the world economy is doing well, having grown 4 percent, after inflation, last year, and is poised for similar growth in the coming year. Two-thirds of world economic growth in the next 20 years will likely occur in the Pacific Rim nations of Asia, he predicted.

Japan still accounts for 60 percent of that region’s economic output, and it was clearly the economic victor of the 1980s, Thredgold said. However, he called Japan the “economic basket case of the 1990s.” Japan has lately been making some progress in restoring its economy (thanks mainly to increased exports to China), but Japanese banks are still saddled with $500 billion in bad loans. The Japanese national debt is 150 percent the size of its economy, vs. 63 percent in the United States. He called that the worst debt level in the history of the world. Japan’s salvation has been its people’s $13 trillion in savings, he noted.

China’s economy has grown an average of 9 percent, after inflation, during the past 25 years, the largest sustained gains in history, although that growth occurred from a very low starting baseline, Thredgold said. China’s economy is so hot that one in four major building cranes in the world have been working in Shanghai, which he said has been described as “New York on steroids.”

Virtually all of that growth, however, has been along China’s east coast. The interior of the nation is still home to about 850 million struggling farmers, and 115 million Chinese people are constantly on the move looking for jobs, Thredgold said.

India (while still saddled with massive poverty) now has the largest middle class in the world and has more IT graduates annually than any other nation, Thredgold said.

Europe is struggling along with “pathetic” 1 percent annual economic growth, he said.

A Grip on Success

Gardner recalls odyssey from ‘failure’ to gold medal victor

By Dan Campbell, Editor

When Jason VanderKooy left his dairy farm near Mount Vernon, Wash., in late November and headed to San Francisco for the joint annual meeting of three major dairy organizations, he went expecting to learn more about the state of the industry and what is being done to strengthen it. But one thing VanderKooy never expected was to wind up in the hammerlock of Olympic gold medal Greco-Roman wrestling champion Rulon Gardner.

Yet there he was, up on stage in front of 1,100 producer delegates, nose-to-nose with Gardner as the champ demonstrated the techniques he used to defeat Russia’s supposedly invincible Aleksandr Karelin. It’s been called “the miracle on the mat,” and some sportswriters consider Gardner’s victory the greatest upset in Olympic history.

Karelin had easily defeated Gardner in a prior match in 1997, throwing Gardner to the mat three times — including a head-first landing which caused a spinal crack (diagnosed years later). Gardner said it seemed everyone in Sydney, Australia, wanted to see the legendary Russian win again — the crowd, the sponsors and even the officials. But as he has on so many other occasions in life, Gardner fooled the odds makers, who had made him as much as a 2,000-1 underdog. He did so by drawing on the qualities that got him into the Olympics: perseverance, dedication, determination and heart. Gardner said he also used some of the techniques dairy farmers must master “to make cows do what you want them to do, not what they want to do.”

So was VanderKooy scared up there in the vice-like grip of the champ?

“Nah, Rulon is really just a big teddy bear,” said VanderKooy, safely back home on the 1,000-cow dairy farm he operates with his brother and father. After all, when you make your living herding 1,200-pound Holsteins around your farm, doing mock battle with a 265-pound wrestling champ seems almost tame!

VanderKooy, 30 and a member of the Northwest Dairy Association cooperative, says his wife, Shelby, volunteered him for the “match” by grabbing his arm and hoisting it in the air when Gardner asked for someone to help him demonstrate how he achieved his impossible dream. VanderKooy says Gardner’s message — about never giving up even when the odds are stacked against you — resonates with producers who know that feeling all too well.

“We’re facing more pressure all the time on our farm from environmental regulations, urban growth and rising energy prices and costs in general that just keep going up,” says VanderKooy, who farms 1,000 acres of corn, alfalfa and grass in addition to milking his herd three times daily. “We just have to keep looking for ways to get better.”

“One of us”
Many farm conferences include an inspirational speaker on their agenda, and Gardner filled that role at the joint meeting of the National Milk Producers Federation, United Dairy Industry Association and the National Dairy Promotion and Research Board. As a farm boy who grew up on a Wyoming dairy, Gardner knows well the daily battles farmers face, and the strength they draw from rural values and work ethic.

Building hay stacks and shoveling manure taught him hard work and discipline, he said, recalling how he worked until midnight during sweltering summers and milked cows in frigid winter temperatures after the family’s barn burned down. His upbringing also taught him the value of family and neighborliness, such as when his family’s neighbors all pitched in to harvest the Gardners’ barley crop so that they could watch him wrestle in the Olympics.

“He’s one of us,” one delegate was heard to remark.

Despite being somewhat hoarse from shouting a day before at a wrestling event where he had coached, Gardner recounted what it was like growing up with learning disabilities that put him in special education courses where it sometimes seemed as if he was expected to fail. “I’d get pulled out of class every day and fall further behind. My family helped me deal with the frustration — they showed me that I could be successful if I gave 100 percent.” When school counselors said he could never go to college, his mother responded: “how dare you limit my son’s potential” and refused to take their advice, he recalled.

Other kids would make fun of Gardner for being a poor reader and slow to learn in other subjects. After he won the gold medal, many of them who had treated him so cruelly said they were sorry. “Why did you do it? You could have destroyed me,” Gardner said. But he instead used those jeers to motivate himself to success.

Gardner says his wrestling skills were developed with a large measure of help from the Sunkist Kids Wrestling Club, founded by Arizona citrus grower Art Mortori, who named the club after the Sunkist Growers citrus co-op, of which he is a member. Sunkist Growers has been a regular contributor to the youth program, which has produced more than 150 wrestlers who have earned spots on U.S. World and Olympic wrestling teams since 1976.

Against all odds
Gardner made it to a small college, majoring in dairy management, and later transferred to the University of Nebraska, where he earned a teaching degree in physical education. He had been told he didn’t have the stuff needed to get an education degree from a major university, especially one like U.N. where the academic requirements for teaching majors are rigorous. But he worked with tutors daily and continued to wrestle, winning his biggest match of all: for his college degree.

He was also told he’d never land a spot on the Olympic team, and would certainly never earn a medal. But the naysayers learned just how wrong they were when the big farm kid so few had believed in was standing up on the block, the gold medal gleaming around his neck as the Star Spangled Banner boomed across the public address system.

Gardner’s time to bask in the glory was almost cut tragically short, when he was lost and nearly died in a blizzard while back home on the farm. He followed a frozen river and sheltered between two boulders, where he survived 18 hours at 25 degrees below zero. His body temperature dropped so low that the emergency medical technicians who treated him said there was no way he should have lived through the ordeal. Gardner lost the middle toe of his right foot to frostbite, but managed to come back again to compete in the 2004 Olympics in Athens, where he took home the bronze medal.

Gardner offered these tips for success from his own life experience that he believes can help most people, regardless of their specific circumstances:

January/February Table of Contents