In an era where industries must continuously evolve to meet modern challenges, the dairy sector exemplifies the pivotal role of collaboration between processors and producers.
At the heart of this evolution is a relationship that transcends mere business transactions, forming a partnership that significantly influences the industry’s trajectory.
Recently, this crucial dynamic was the focal point of discussions at the 2024 Milk Business Conference held in Las Vegas. Trevor Fleege, senior director of milk procurement and commodity management at Agropur; Jacob Brey, co-owner of Brey Cycle Farm LLC in Sturgeon Bay, Wis.; and Jacob Larson, co-owner of Larson Dairy Inc. in Okeechobee, Fla., all shared insightful perspectives on the growing interdependence within the dairy industry.
The Need for Increased Integration and Communication
Larson points out that processors are increasingly keen on understanding more about the farms producing milk for them. This sentiment is echoed by Fleege, who highlights that greater integration within supply chains necessitates forging stronger partnerships between processors and producers.
Although, Brey reflected on the pre-COVID-19 era, noting a lack of substantial communication between these entities.
The Importance of Transparency
Transparency emerged as a recurring theme during the discussion, including the subject matter of sustainability. Larson stressed the importance of fairness while also underscoring profitability as a critical component of sustainability.
“Without profitability, dairy farmers cannot be sustainable,” he says. “We have to remember that we have the safest, most affordable, most abundant food supply in the world, and we’re the envy of a lot of other countries.”
Fleege emphasized that the responsibility largely falls on processors to ensure clear communication. He emphasized the importance of providing context and insights so producers can better understand the environment in which they operate. Encouraging producers to ask challenging questions, Fleege noted, is how processors can enhance their efficiency and stay ahead of competitors. “There’s a codependency that exists between producers and processors,” he says. “The last thing either one of us wants is a message to get distorted.”
Brey added that producers are cautious about the horror stories of processors sending notes saying they are not going to pick up the patron’s milk anymore.
“Dairy farmers don’t like surprises,” he says. “We milk cows every day. But we also don’t know what’s going to come next.”
Establishing Trust
Open communication is fundamental to trust-building, according to Brey, who advocates for regular dialogue between farmers and processors. He suggests producers maintain an open line of communication with field representatives regarding their future plans, as well as the processors willingness to take on more milk.
“I think just having open dialog and open communication, talking to your field man, sending them a text and give them a call and just kind of say, ‘Hey, what’s up,’ is a good thing,” Brey says.
Larson further elaborated on the cyclical nature of production and supply in the dairy industry.
“If we [producers] do something that works, we want to replicate it and do it again and again and again. And so, supply and demand are a pretty basic economic model. And right now, what we’ve seen in this past year is replacement cows have been tight. Milk supply has been tight. And so that kind of supply has demand being higher which has helped all of our prices to increase,” he says, questioning if we need to reimagine future products plants might produce.
“Having that relationship like we’ve been talking about is really important, but at the same time, we also need to know when to pull the lever and constrict, and maybe we need to diversify, whether it’s a processor or a farmer. Instead of milking more cows and making more milk and making the price cheaper, maybe we ought to do something different.”
A Shared Future for the Dairy Industry
Looking forward, Larson warned of the potential detriment to the industry if a processor were to go out of business.
“We’ve seen bankruptcies in the last 5-7 years that have been a very detrimental part of that consolidation,” he says. He pointed out the hope that there would be substantial investment back into the infrastructure to prevent such issues down the road.
As the dairy industry navigates evolving challenges, the bond between processors and producers is more significant than ever. By fostering transparent communication and a unified approach, the industry can continue to thrive and set benchmarks for sustainability and innovation worldwide.
