It always happens so quickly. The end of another year is almost upon us.
Once again, it was a fascinating year for the dairy industry. Annually, Dairy Foods asks experts to answer some of the biggest hot-button questions in the industry today. This year, we posed six questions. Responding this time around is Tim Omer, president and managing director, Fitchburg, Wis.-based Emmi Roth; Dennis Rodenbaugh, president and CEO, Kansa City, Kan.-based Dairy Farmers of America (DFA); Heather Anfang, senior vice president for U.S. Dairy Foods at Arden Hills, Minn.-based Land O’Lakes; Joe Diglio, president and CEO of Novi, Mich.-based Michigan Milk Producers Association; Matt McClelland, CEO and executive vice president, Prairie Farms Dairy Inc., Edwardsville, Ill.; and Paul Snyder, executive vice president, Stewardship, Tillamook County Creamery Association (TCCA).
What do you view as the biggest challenges in the dairy industry and how are you overcoming those challenges?
Tim Omer: The dairy industry is filled with successes and challenges. We are fortunate that we get to make quality products that are loved by consumers, and that our company continues to thrive. As the popularity of specialty cheese continues to grow, companies must manage the impact of this growth, including achieving more sustainable operations and finding innovative ways to better serve our customers and protect the environment. Additionally, like many industries, finding and retaining top talent continues to be a challenge.
Dennis Rodenbaugh: One of the greatest challenges faced by U.S. dairy farmers is volatility in milk pricing. It creates an immediate financial impact, challenges their ability to plan for the future, and harms the opportunity to sustain their business through the next generation.
We’ve helped through advocacy efforts to form and maintain programs like Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP), which are governmental risk management programs that help many farmers through these volatile cycles. Had these programs not been in place through the pandemic crisis, and even through this painful 2023 milk price cycle, I believe the rate of dairy farm closures would have been exponentially greater and the risks to milk supply availability in certain regions would be exacerbated.
I believe DFA has developed the most expansive array of risk management tools in the industry. We offer our farmer-owners these tools to mitigate or manage through milk pricing volatility. I’m proud and grateful for our risk management and member service teams that are committed to educating and communicating about these tools and encouraging our members to utilize programs like DMC and DRP.
Another challenge for the dairy industry is how sustainability is viewed and managed by disparate entities. We increasingly see continents, countries, and even states that institute forms of sustainability regulations or initiatives as though they are an individual planet. To some extent, what is happening is simply pushing emissions from one geography to another and sometimes driving production to regions of lower efficiency models, which exacerbates emissions. If we’re to truly have a serious and net beneficial impact on the environment, it must be in the context of all stakeholders around the globe working within a comprehensive model.
One of the first things I did when transitioning into the CEO role was to begin talking with industry partners about the need to build not only a U.S. coalition, but also a global dairy coalition to help address challenges within the greenhouse gas protocols. The current accounting methodology fails to credit dairy for the tremendous positive impact and solutions it continues to deliver in the arena of sustainability.
Heather Anfang: More consumers want to know where their food comes from, and they want to feel good about the food they eat. American farmers represent fewer than 1% of the population but are being asked to continue to feed a rapidly growing world population in an increasingly sustainable and efficient manner. As a cooperative, Land O’Lakes has taken a leadership position in supporting on-farm sustainability by helping customers achieve their environmental goals while keeping farmer profitability at the forefront. We are committed to investing in programs, tools, and support to drive voluntary practice changes that not only contribute to the health of the planet, but also position farmers and the agriculture sector for success in a challenging operating environment.
Joe Diglio: The biggest challenge is aligning our industry’s supply and demand. We have plenty of ability to produce high quality dairy products, but we have challenges meeting the needs of those who desire the nutrition that dairy provides globally. This isn’t a new challenge, but it’s a continued concern. As an industry, we focus on producing products effectively and efficiently within the domestic market, yet the demand for these products goes beyond U.S. borders, and servicing other countries in the global economy is critical for our success.
Considering the problem domestically, we often produce our products in rural communities distant from population centers. Even in our own states, we have to get dairy products from where they’re produced to a marketplace in need. The challenge is how do we move that even further from an export perspective for countries who can’t produce any of the products we have, whether it’s because of their lack of resources or environmental challenges that don’t allow them to meet their nutritional needs?
Overcoming these challenges relies on policy and innovation and leaves more questions than answers. How do we unite to develop policies that are more equitable, achievable and desirable? How do we use the innovation of new products and other innovations in ways to achieve supply chain efficiencies? How do we create a sustainable economic position so that producers are able to produce the products where they aren’t jeopardized or concerned about longevity in the industry? The best place to start is collaborating with each other to continue the conversation and keep humanity at the forefront of discussions.
Matt McClelland: Prairie Farms is in the midst of celebrating its 85th anniversary, and due to the general dynamic nature of the dairy industry, we’ve navigated challenges since our founding in 1938. Each year brings a new set of challenges, and we overcome them by leaning on learnings from prior years to implement solutions. Quite often, the solutions uncover new growth opportunities.
Paul Snyder: Farmers and the dairy industry aren’t strangers to struggle. From razor-thin margins and fluctuating market prices to unpredictable weather conditions, there isn’t a challenge our dairy farmers can’t overcome, but the challenges are constant. The dairy industry has an opportunity and responsibility to demonstrate how farmers and processors need to be part of the conversation and solution to protect the future of farming.
To successfully face and handle these challenges, we need to come together as a collective to learn from and work with one another. Farmers can’t solve these challenges alone and it will take action from all of us, but dairy farmers and producers deserve a seat at the table to help drive positive change.
On a related topic, labor availability has been a challenge for many dairy processors recently. How have you worked to alleviate this problem?
McClelland: We’re seeing some easing of post-COVID labor challenges. However, Prairie Farms is always looking to recruit new employees through partnerships with local colleges, attending job fairs, offering internships and sharing opportunities on social media. In general, manufacturing jobs are being overlooked among younger generations, and we believe our comprehensive management training program sets new recruits up for a long and successful career with Prairie Farms.
Omer: The labor market in the areas we operate continues to be competitive. We continue to improve our benefits package, including adding competitive benefits such as paid parental leave. We offer on-demand pay, sign-on bonuses, have kept a hybrid work model for certain roles, and we continue to enhance our culture and opportunities for career advancement.
Anfang: American dairy farms, including our co-op farmer-owners, have faced significant supply chain challenges the past few years. Everything from truck driver shortages to global shipping disruptions have resulted in significantly higher shipping and inventory costs. Land O’Lakes is always focused on being an employer of choice and we know that employees want flexibility in the workplace.
In our manufacturing plants, we recently created and are rolling out a flexible work program and are recruiting for both full and part-time positions that allows for flexibility in hours worked.
This has been especially popular with parents and caregivers, millions of whom left the workforce during the pandemic due to schools transitioning to distance learning, among other disruptions.
As of this past summer, more than 50 Land O’Lakes manufacturing sites are using the flex labor program, with more than 150 total flex employees. The goal is to roll out the flex labor program at all 140 Land O’Lakes manufacturing sites.
Diglio: As an industry, we have to compete for labor with other industries in a labor market that’s already short. The dairy industry needs to work together to show talents in the workforce the benefits of the industry, whether it’s the nutritional value of dairy products, our workplace’s stability in the market, or the growing use of technology to attract the next generation. In addition, when we talk about labor challenges, it’s not just about lack of labor, but the training of new employees in the workforce as well.
A solution to the challenge is to implement technology to reduce the reliance on legacy processes that require excess human labor and to create efficiencies in workflows that save employees’ time. We need to continue investing in technology to adapt to workforce needs and prepare for the next generation of employees. We need to evaluate our employee policies: where they work from, how they work, and how many days a week they work. Today’s new generation of workers are different than in the past and it’s critical that we continue to adapt to the evolution of the workplace while meeting the demand for the products we produce.
Artificial intelligence (AI) is a major buzzword this year. Do you think AI can help the dairy industry or you specifically? In what ways?
Diglio: Our industry has an opportunity to capitalize on AI. I don’t have all the answers, but the speed with which AI can give us information and its ability to analyze data makes me believe that it addresses many of the challenges we’re facing today. Its ability to replicate and streamline processes is going to be critically important in the future, and it can be the solution to aligning supply and demand domestically and globally.
Rodenbaugh: I don’t yet personally believe we’ve achieved artificial intelligence. I consider generative AI to offer increasingly functional algorithms that can support cognitive and operational enhancement applications.
In the past, people worried that computers would eliminate jobs. They didn’t eliminate jobs, but they changed the way we live and how we performed our jobs. I see artificial intelligence and other emerging technologies as something that can improve our ability to be efficient performers and do more within the days and hours we have. Increasingly, employees are wearing multiple hats and are stretched. They need and deserve the type of support that artificial intelligence may offer. As soon as ChatGPT became available, I began trialing it. Not for business use, but I wanted to see what it could do and see how it evolved. I initially saw something in its infancy, which was simultaneously intelligent and dangerously inaccurate. However, month after month, I’ve seen improvements; effectively transitioning from a crawl to a walk and moving faster each day. I decided that our organization will not be in the middle of the pack or at the back of the pack with AI or emerging technologies. We must drive forward to the front to both understand how we adopt the best attributes and capabilities, as well as understand how to avoid the inevitable risks and dangers that accompany any technological breakthrough.
As a result, we’re adding an Emerging Technology Officer role, and we’re building an enterprise-wide team across the organization to drive evaluation and integration of AI throughout the cooperative to maximize performance and avoid risks.
McClelland: I like to say we prioritize our talent investment in HI (human intelligence), not AI. We believe the power of human intelligence is invaluable as the driving force behind the success of Prairie Farms. That’s not to say there isn’t a place for AI to help manage logistics, identify market trends, provide consumer insights and enhance other data management functions, but AI will always serve as secondary support to HI.
Omer: Emmi Roth is committed to continuous improvement in all areas, including manufacturing operations and using technology to help us produce our award-winning products. The benefits and potential impacts of AI continue to evolve. As use cases for AI arise, our team will continue to evaluate available tools and consider implementation if they can benefit our business and our customers.
Anfang: Our farmers are always looking for new ways to innovate so they can do more and better with less. To ensure we can support farmers well into the future, we’re continuously investing in innovative products, services and market connections that support the long-term relevance of our member-owners, the viability of their communities and an abundant global food supply. To cultivate innovation, Land O’Lakes Inc. and Microsoft Corp. launched a multi-year strategic alliance in 2020 to build cloud, edge computing, sensors and AI solutions to improve services for farmers and dairy producers, propel sustainability initiatives and boost broadband connectivity in rural communities.
In many dairy segments, dollar sales have risen, with unit sales falling (with some exceptions of course). Do you think this trend continues, or will it change as inflation lessens?
Anfang: Leading within the dairy industry is particularly difficult given current economic conditions and supply chain constraints. But demand for dairy remains resilient, indicating that dairy is a household staple despite rising prices for consumers across the country. We’re working specifically to manage the price point of products on the shelf, ensuring that consumers continually have access to all the dairy staples they know and love while prioritizing our member-owners’ bottom lines. We’ll continue to work closely with member-owners and our corporate staff to chart our path forward as supply chain constraints persist.
Omer: The many factors that contributed to this trend as a result of this recent inflationary period will continue to evolve but may not go away. It is up to us as a company to continue to produce the best products we possibly can to provide value for our customers. To that end, we’re continuously looking for ways to improve the value of our products to consumers, such as packaging innovation to keep freshness longer, larger club sizes and unique new products.
Diglio: I believe that consumers will continue to purchase products that are both desirable and necessary. Economic conditions may influence whether consumers purchase branded or private- label products, but if our industry continues to tout the necessity of the nutrition dairy provides, I believe that consumers will continue to purchase at levels that can be sustainable. People will always need food and will always seek nutrition, so regardless of the economic conditions, I view that as an opportunity for our industry to continue to evolve and tout the benefits of dairy.
McClelland: Retail market data does suggest that inflation has impacted many dairy segments. Because Prairie Farms prioritized expanding our distribution footprint, growing in segments outside of retail, and focusing on the basics of sales and service, it has been a successful year for us.
Sustainability is a major goal, but difficult to reach. Can you briefly describe your sustainability efforts?
Omer: We’re proud of our commitment to becoming a more sustainable company. We have a dedicated Sustainability Manager who partners with our Sustainability Steering Team to work toward reaching our sustainability goals, including achieving net-zero emissions by 2050, reducing our water use and implementing recyclable packaging. The publication of our “Do Good Report” is part of our commitment to sharing our goals and progress with our customers, stakeholders, and consumers.
Snyder: Since our founding in 1909, our farmer-owners have built everything with a long-term outlook to ensure we are here for generations to come. Stewardship lies at the heart of everything we do, and we take seriously our responsibility to the people, animals and environment surrounding us, and we are taking steps to show it. As a Certified B Corp, we’re committed to reducing our impact to help protect and preserve our planet now and for future generations.
To be part of the climate solution, TCCA has aligned with the Innovation for U.S. Dairy’s Stewardship Commitment to reach net-zero emissions by 2050 and last year, we set an interim goal of 30% reduction in emissions by 2030. We are not the first company or industry with climate goals and solutions, but we must unite as an industry at large to address climate change head on.
While there is still more work to do, we have made some recent progress toward our Stewardship efforts and goals. In 2022, we reduced our overall GHG emissions by 9% compared to our 2020 baseline. Other progress projects include transitioning our truck fleet to renewable diesel (R99) at the end of summer 2022, which will reduce fuel emissions from our fleet by 66%.
Diglio: Sustainability isn’t an end goal to reach, it’s the continuation of efforts that benefit the communities we work and live in. Our goals will continue to progress as we achieve results and make a positive impact on the people we influence, the planet we live on, and the value we provide. Our cooperative’s sustainability efforts focus on finding improvements to historical practices and seeking innovations to create new opportunities that offset our carbon footprint while supporting our members, employees and customers. We’re dedicated to investing in sustainable technologies that can be a positive solution we can use redundantly throughout the supply chain.
McClelland: This question often arises, and a quote from one of our farmer-owner board members best sums up Prairie Farms’ sustainability efforts, “You don’t throw bent nails away, you straighten them and reuse them.” A disciplined approach has guided our cooperative since 1938 on our farms and in our manufacturing facilities. This means reducing, reusing and recycling at every stage of the production and distribution process. Just as our farm-to-table cycle has evolved in 85 years, so will our sustainability goals as we continue to identify areas of opportunity where we can make significant progress in building a sustainable future for our planet.
Anfang: Land O’Lakes is focused on supporting and helping achieve our own and our customers’ sustainability commitments. In 2021, we created the Dairy 2025 Commitment to help our more than 1,000 member-owners complete an intensive, industry-leading on-farm sustainability assessment by 2025. Data points in the assessment include fuel, electricity and water usage, nutrient application, crop rotation and manure management.
As our Dairy Foods business works to meet the rising market demand for cheese products, we’re exploring more sustainable methods for making cheese with our members’ milk to streamline processing, reduce waste, use less packaging and lower transportation costs.
Our Dairy Foods business has established several sustainability projects with customers to help achieve shared supply chain goals:
- This summer, the United States Environmental Protection Agency (EPA) and the Hershey Co. announced the joint commitment of $2 million for Land O’Lakes member dairy farms in Pennsylvania to support clean water, climate and sustainable farming initiatives.
- The increased funding builds on the “Sustainable Dairy PA” initiative started by Land O’Lakes, Hershey and the Alliance for the Chesapeake Bay in 2021, which takes a collaborative, industry-led and public sector-supported approach to accelerate on-farm conservation practices that improve water quality and reduce greenhouse gas emissions.
- In 2022, we were recognized for our work with Bel Brands USA and Boadwine Dairy, a fourth-generation farm in South Dakota that ships milk to Bel Brands’ facilities. We received the Outstanding Supply Chain Sustainability Award by the farmer-founded Innovation Center for U.S. Dairy.
- The multi-year pilot program increases the use of cover crops and other sustainable agricultural practices, boosted by technical expertise and cost incentives to participate. The success of the program has shown it’s a scalable way to drive positive climate outcomes while supporting farmers by mitigating risk and creating new market opportunities.
What are you most excited about for the future of the dairy industry?
Snyder: I’m excited for the world and industry leaders to see the dairy industry as innovators who are helping address some of the world’s toughest challenges. Elevating the work and progress of the dairy industry will help show others that we are problem solvers and play a key role in the fight against climate change.
Rodenbaugh: Something I often tell our employees is how fortunate we are. We get to go to work every day serving family farms throughout the country, while working within a leading global dairy cooperative serving consumers’ nutrition needs around the planet. Every one of our 19,000 team members are committed to what they do, each having ideas that can drive improvements, efficiencies and contribute to a positive culture and community. I’ve challenged each of us to come to work each day and offer one thing that can be improved by 1%. When that is accomplished, find another and another. Imagine the exponential ripples of this connected effort. If we can do that for our farmer-owners and consumers, what greater purpose is there? It is not a job you have to do, but an honor and a privilege that not everyone gets to do.
McClelland: The dairy industry should be very proud that milk and cheese can be found in more than 90% of households, with ice cream, yogurt and novelties trailing slightly behind at over 80% penetration. The Prairie Farms’ portfolio includes products in all Top 10 dairy categories, and we’re expanding our options in some key Top 10 segments very soon. Our new products will appeal to Prairie Farms’ tried-and-true milk drinkers, and we’re also looking to bring in new consumers who may have moved away from 100% real milk. We’re most excited about filling up more refrigerators and freezers with Prairie Farms’ award-winning dairy products in homes across America.
Omer: There is so much to be excited about. While the world has seen many changes in recent years, I don’t think anyone could have anticipated the lasting impacts of the evolution of consumer behavior. Consumers are constantly surrounded by inspiration to enjoy incredible food experiences. The products our industry produces are often at the center of that, from charcuterie boards to a comforting recipe. Our increasingly digital world allows us to be part of that experience and to engage with our customers in a new way. We can literally see in real time what our customers want and what trends they are excited about.
On a company level, I’m most excited about how our new cheese conversion facility and headquarters will help us better serve our customers and create products that consumers want and need. The new 158,000-square-foot Stoughton, (Wis.) facility is one of our largest sustainability initiatives to date, with energy efficient building features and a more sustainable operations model. One of the biggest benefits of the facility is the reduction of transportation lanes, which helps reduce carbon emissions from transportation.
Anfang: Today’s consumer not only cares about the end product a company offers but also wants a brand’s values to align with their own. We want to tell that story. Last year, we launched the “Eat it Like You Own it” campaign, to remind consumers that when they buy a Land O’Lakes product, they are directly benefitting more than 1,000 dairy farmer-owners who work tirelessly to provide the milk for the dairy products they know and love. Being a force for good in our communities — and for our planet — is a role Land O’Lakes takes seriously as a part of the dairy industry. It means using our voice as an industry leader in agriculture to showcase the areas of impact that our farmers and members are making across our cooperative network and the globe. We are excited to continue to build our brand trust and create deeper relationships with consumers by sharing the stories of our farmers and the power of the cooperative system.
Diglio: What excites me is the continuation of using technology to change the products we produce or change how we’re producing them to achieve results. Milk is so dynamic that it has the ability to be a solution to so many different challenges we’re facing as a country and as a global population today. There will always be a need for dairy in the future and that’s exciting. What other industry has the ability to provide nourishment and welfare for so many while achieving a sustainable environment that everyone can benefit from?
