Reaching the world through innovation

Editor’s Note: This article is part two of a two-part series covering the Global Dairy Summit that took place at this year’s World Dairy Expo.

MADISON, Wis. — A historic investment in milk processing is taking place in the U.S. to the tune of over $7 billion. This investment was the focus of discussion during the Global Dairy Summit Oct. 4 at World Dairy Expo in Madison.

At the summit hosted by the Wisconsin Department of Agriculture, Trade and Consumer Protection, four industry leaders spoke about the global dairy industry following Wisconsin’s Secretary of Agriculture Randy Romanski’s welcome address.

Speakers included Krysta Harden, president and CEO of the U.S. Dairy Export Council; Heather Anfang, president of Dairy Foods and executive vice president of Land O’ Lakes Inc.; Mike McCully, president and owner of McCully Consulting; and Dave Lenzmeier, CEO of Milk Specialties Global.

Harden kicked off by talking about U.S. exports, which she said are on an incline, though there are dips. Exports are the future of U.S. dairy, Harden said, with 17% of U.S. milk production currently exported. Nearly one-fourth of U.S. cheese is exported.

“Demand is rising in many destinations,” she said.

Harden noted there is a tight milk supply currently, partly because of demands on the system as well as the heifer shortage.

U.S. exports will likely remain mixed this year, Harden said, partly due to tight supply around the world, particularly in the European Union — one of the U.S.’s biggest competitors. However, Harden said restrictions in New Zealand and the EU prevent growth and expansion comparable to what the U.S. can do.

“The U.S. is the No. 3 exporter right now,” Harden said. “I want to be No. 1. I think we can be and will be.”

McCully focused on investments in milk processing. Plants are going up across the country in Idaho, Iowa, Kansas, Texas, Wisconsin and New York. Much of the investment is in cheese as well as whey and extended shelf-life beverages.

“There’s a wave of investment like I’ve never seen,” he said. “It’s a great thing, but it does present some challenges. New plants are going into areas that had cheap surplus milk, and that’s going to be gone now.”

Plants are chasing milk, which is the opposite of what was seen in the past McCully said. He said a tighter milk supply, higher premiums and higher milk prices are probable.

“We’re going to see milk shifting around from plant to plant,” he said. “We already see that today, but we’re going to see more. … There will be plants that don’t have milk or not as much as they think they might get.”

The addition of new plants will trigger the closing of other plants. McCully said four cheese plants have closed this year and there will be more. Consolidation is likely to increase for farms and plants.

Over the last decade, U.S. milk production grew by 10%. The key growth areas occurred in Idaho, the panhandle of Texas, western Kansas, South Dakota, western Minnesota, eastern Wisconsin, Michigan, northwest Indiana and western New York.

The milk production growth forecast is limited over the next several years, affected by high beef prices, McCully said. However, milk solids production is growing. Domestic demand trends look positive. There are solid growth prospects for butter, cheese and whole milk, McCully said, with exports of cheese and whey products looking to have the highest growth potential.

“Companies are very bullish about the future of dairy,” McCully said.

He said most investment is from private companies, and in some cases, groups of large farms. Dairy cooperatives are making investments as well, such as Darigold, California Dairies Inc., Upstate Niagara Cooperative Inc. and Bongards.

McCully said the addition of new plants will create 50-60 million pounds of milk per day of new demand.

“Before the shovel went into the ground on these new facilities or expansions, they already had milk locked up,” McCully said. “The more relevant question is, who is not going to get the milk?”

McCully believes it will largely be milk powder plants that will lose out, particularly in the Northeast and Southwest. He said there will also be shifting of cream and fat with potential loss of butter production in a few areas.

Anfang spoke about the consumer side and opportunities that exist in innovation and telling dairy’s story.

“We have a terrific story to tell in dairy and have to continue to tell that story,” Anfang said. “Consumers are open to it, and they want to hear it. We work hard at Land O’ Lakes to try to connect our products to our farmers.”

Anfang said the demand for butter remains strong as consumers continue to eat more butter. Butter balls are a recent innovation at Land O’Lakes. Each ball is a one-half tablespoon of butter.

“The balls are fun and interesting,” Anfang said. “Finding simple ways to meet what the consumer is looking for and bring dairy further into their repertoire are really easy, simple opportunities for us.”

The natural cheese category continues to grow, with lots of innovation, forms and formats helping support that growth, Anfang said.

Lenzmeier shared the ways in which Milk Specialties Global is filling demand in the U.S. and abroad with its innovative use of dairy ingredients. Milk Specialties Global manufactures whey and milk proteins, caseins and caseinates, specialty proteins like lactoferrin, calf milk replacer, rumen bypass fats, rumen protected methionine and amino acid supplements. Their legacy business is animal nutrition, and in 2008, the company launched a human nutrition line.

They have experienced a lot of growth in human nutrition, which now covers 13 plants and about 1,400 employees. Milk Specialties Global is a top supplier to the sports nutrition market. Headquartered in Minneapolis, the company’s original manufacturing plants for its calf milk replacer business are located in Wisconsin.

“We invest where the supply chain or milk production is,” Lenzmeier said. “For example, we recently opened a manufacturing plant in Idaho, and we also have a plant in Tulare County, California.”

Milk Specialties Global touches about 11% of the U.S. milk supply through whey and milk purchases and processes more than 1,100 truckloads of whey and milk per week.

“Everything we do is here in North America,” Lenzmeier said. “We have a global salesforce and export product to 42 countries. We’ve opened a lot of markets with the evolution of our human nutrition side that I don’t think anyone else would be reaching. About 30% of our total protein pounds leave the continent.”

Two years ago, Milk Specialties Global began production of casein and caseinates — a product often imported into North America — in their Nebraska facility, making calcium and sodium caseinate. Last year, they opened a plant in Jerome, Idaho, making acid and rennin casein.

“I take a look at protecting our home market and keeping our dairy solids here while keeping external dairy solids out,” Lenzmeier said.

Milk Specialties Global is focused on high-protein fortified products. Beyond protein, Lenzmeier said there is a great story in areas such as bioactives.

“We’re going to see more growth and value creation come along in that area,” he said.

Milk Specialties Global ventured into lactoferrin production several years ago, which has immune-supporting antimicrobial properties. They are also focusing on Alpha-Lactalbumin for natural sleep support and milk fat globule membrane supplementation to promote brain health in aging populations.

Lenzmeier said he is excited about the snack category and expects to see significant growth in that category.

“I’m excited about overall general protein demand,” he said. “We’re going to need a lot more skim milk in our case specifically, which is probably one of the categories we don’t talk about a lot. We need better homes for skim milk solids. We believe those opportunities exist in high-protein areas.”

Whether considering domestic dairy demand or global dairy demand, the future looks bright, McCully said.

“For companies that can’t or won’t invest, there are going to be challenges,” he said. “Overall, it’s a good story — one of growth, which is good for the industry.”