After such a long gap in posting anything to this blog I'm not sure if anyone will read this. But for those that are interested please find below the text of my speech to last weeks UK & Ireland Nuffield conference.
I am a dairy farmer milking around 200 cows on a grass based, spring calving system, on the Ards Peninsula in County Down.
Our farm like all other dairy farms produces a perishable product with a short shelf life which needs to be collected on a regular basis.
I regard my dairy co-operative which in my case is United Dairy Farmers to be an extension of my farm business. Its performance (or lack of performance) will have a significant impact on the profits of my farm, both now and in the future.
It is with this in mind that I chose to study “World class leadership and capital structures of dairy co-operatives fit to meet the challenges and opportunities of the 21st Century.” On my travels I visited New Zealand and the United States.
I would like to thank my sponsors who made this all possible. The Thomas Henry Trust, United Dairy Farmers, Ulster Farmers Union, Royal Ulster Agricultural Society, Young Farmers Clubs of Ulster, Ulster Bank and Northern Bank.
In my study I looked at leadership structures, including such issues as board composition, recruitment, election and evaluation. Capital Structures looking at share structures, valuation methods, capital funding etc. The issues surrounding the merger and consolidation of co-operatives, and the legislation under which co-operatives are incorporated and governed which is in urgent need of review in the UK.
The issue I wish to talk to you about today is leadership. Why have I picked this issue? The reason is quite simple. If you get leadership right everything else will follow. Indeed this does not just apply to co-operatives but to any organisation.
So what is Leadership? There are many definitions; my favourite comes from Peter Drucker “Management is about doing things right, Leadership is about doing the right things”. This is particularly relevant to co-operative governance where too often Boards spend time debating management decisions rather than looking at the big issues.
There three key areas on co-operative leadership are education, evaluation and election.
EDUCATION
So where do we start on leadership? The level of ignorance on the basics of what co-operatives are all about and on corporate governance is incredible. We need to start at the very beginning.
Modules on leadership, co-operatives and corporate governance need to be included in all agricultural colleges and not just for degree or HND students. This needs to be supplemented with further more specialised courses and programmes which should be operated by co-ops, NFU, YFC etc. In short we need a zero tolerance policy on ignorance. We don’t just need our Boards and committees to be well informed and educated. We need intelligent and probing questions coming from the floor at annual meetings as well.
Not all education need be formal or class based. Getting out, travelling, and meeting positive people are all a vital part of this process. I know I wouldn’t be standing here today if it was not for the beneficial influence of some quite remarkable people. We need to pick out our best young farmers and make sure they “Soar with the eagles and don’t scratch with the Turkeys”
EVALUATION
We need to actively trawl the members of our co-operative looking for the brightest and the best and encourage them to stand for the Board. I believe that in countries the size of the UK or Ireland there is no justification for geographical wards. We want the best directors on our Boards period, whether they come from Devon or Dundee, Down or Dingle is of no relevance. Let’s get one misconception cleared up right away. Directors are not on a Board to represent at particular sector or region they are there to govern. Representation is the job of the shareholders council.
One benefit of changing from a regional to a whole-territory system of election is that the election is no longer a popularity contest. All co-operatives should put in place a candidate assessment panel, this would interview and assess all those wishing to stand for elections and produce a report on each candidate. These reports would be shown to the candidates first giving any who wish to do so a chance to bow out gracefully. Reports on all the remaining candidates would be sent out to all members along with the ballot papers.
It should be recognised that there is no such thing as the “ideal director”. A good board should have a mix of personalities. Leadership guru Brian Rothwell defines four different kinds of leadership style Warrior, Sovereign, Magician and Lover. You need a mix of all these personalities on your board.
ELECTION
The final choice as to who goes onto the Board must remain with the active producer members of the co-operative. It is their co-op, it is their livelihoods that are at stake.
I recommend that votes should be allocated to members in proportion to their participation in the co-op (i.e. volume of milk supplied). Also where there are more than two candidates in an election the single transferrable vote system should be used.
On my travels I asked those who I met what they felt was the best size for the Board. The best answer came from Gary Oldman a Nuffield Scholar and Vice-Chairman of Tatua Co-operative in New Zealand. He said that while seven was probably the best number for discussion and decision making it can take new Directors time to get up to speed, so nine farmer directors would be a more prudent number. My recommendation would be to have three farmer directors elected each year for a term of three years. With a further two to three “external non-execs” co-opted to the Board to provide specialist knowledge.
I know there are those who say that Farmers should be locked out of the Board for their own good. I have to say that I couldn’t disagree with this more. If we can’t find sufficient people with the necessary skills and qualities to be a good director (albeit with a little training), then quite frankly there isn’t any hope for our industry and we should all pack up and go home.
Board remuneration is often a thorny and divisive issue at Annual Meetings. In a year, such as this one, when prices are poor it is often tempting for the Board not to seek a rise. It has often been said to me that “We don’t want people to stand for the Board just for the money”. While this is a valid point, it is just as important that good potential candidates are not put off because they feel they will lose too much. The age of the Gentleman farmer is over!
The best idea I saw for solving this thorny issue was Fonterra’s policy. Each year at the AGM a small remuneration committee is elected. During the year they meet with Directors, and look at comparable positions elsewhere. They then come back to Annual Meeting the following year with an independent recommendation on Board remuneration. This means that the Directors are not put in the undignified position of proposing their own pay rise. In Fonterra’s case the recommendation of the remuneration committee typically passes with 95% of the vote.
Now that we have our Board in place how do we keep them operating at peak performance? Education, evaluation and election.
Education
When a new Director is elected they should undergo an intensive induction process. This should involve time with the Chairman, CEO, CFO and other members of the executive team. During the first few months of their tenure they should see round all of the co-ops manufacturing operations and get a good grounding in marketing as well.
But it doesn’t end there, training should be continual. I believe the best practice is that one day each month the Directors meet in the morning for their formal Board meeting. This should usually finish by lunch time. The afternoon should then be given over to Board development. This doesn’t always have to be formal training, it might involve team building or a specialist briefing by the marketing team.
Evaluation
Evaluation of every director on the Board (including the Chairman) should take place at least every 18 months. This should be done by 180 degree evaluation. Each Director scores their colleagues on a scale of one to five on a variety of issues. Here are some examples of the key issues:
1. Avoids intruding inappropriately on management matters.
2. Is able to keep up with the diversity and amount of information about the business.
3. Contributes effectively to the development of business strategy.
4. Expresses his views in ways that enhance rather than shut down discussion with fellow directors and management.
5. Supports Board decisions after decisions are made.
6. Displays aptitude for free (rather than ‘follow the leader’) thinking.
These results are then collated and the averages presented. It is then the task of the Chairman to meet each Director and discuss their performance and to suggest remedial action that could be taken to address weaknesses (e.g. additional training, or possibly a change in behaviour). If at the next evaluation the Board member has not improved sufficiently the Chairman should suggest that they stand down when their term expires.
It is important to note that having a good Chairman is a super-critical to the success of the Board. Directors must not hesitate to replace an ineffective Chairman. When I met John Roadley the founding Chairman of Fonterra he told me he questioned the need for a vice-chairman. The general opinion is that you need someone able to step in if the Chair is incapacitated. However John says that if any of the Directors are not capable of chairing a meeting they should not be on the Board!
A set of behavioural and procedural rules must be agreed and adhered to by the Board. These include issues such as induction, attendance, board papers, minutes, decision making, personal demeanour, out of meeting communications, Director Appraisal and the personal responsibilities of directors.
Election
Just as it is the Board’s responsibility to evaluate, hire and fire the Chief Executive. It is the responsibility of the members to evaluate, hire and fire the Directors. Directors seeking re-election should be subject to candidate appraisal in just the same manner as other candidates.
Term limits can be somewhat arbitrary. Ideally the Board should manage its own succession. However once a Director has served for 12-15 years you have to ask what more he has to give? If the grim reaper is the only person who removes directors from the Board then you are in trouble.
So there it is – Education, Evaluation and Election. Three vital ingredients to ensure a well run co-operative or indeed any kind of organisation, commercial or otherwise. Without it the talented and thoughtful will often be supplanted by that perennial Board room weed the Meglomaniac.
Finally it must be remembered that leadership is not just for Board members. Co-operatives belong to their members they are our businesses. It is up to each of us to play our part. As with all things in life if you are not part of the solution, you are part of the problem.
Thursday, November 5, 2009
Tuesday, August 18, 2009
Notes on talk by CEO of Great Lakes Cheese at DFA Conference
Gary Vanic, CEO, Great Lakes Cheese
Great Lakes Cheese packs one out of every four packets of cheese in the US. They also manufacture some of the cheese which they pack.
Gary said that he has been in the dairy industry for over 30 years and has never seen times like these.
Great Lakes Cheese does most of the sorter brands and also is well involved with the food service sector.
The company was founded in 1958 by a Swiss family. There sales total $2 Billion the total US cheese sales are $10 Billion..
They have 3 super plants as well as other smaller speciality plants.
Sales of Great Lakes Cheese have grown at three times the national average. They are very selective about which farms they source the milk from.
Employees get a stake in the business. The employees own 20% of the business and the original family own the remaining 80%.
The current recession has seen the most radical change in consumer behaviour for 30 years. There has been a 6.2% drop in the US GDP. Personal consumption accounts for 70% of US GDP.
Individual Federal Tax receipts are down 22%, corporate tax receipts are down even more.
Unemployment is nearing 10% and around 16.5% of the workforce is “underemployed” (working short time).
Consumers are afraid and holding onto their money:
• 6% of people are in panic mode buying only the absolute essentials
• 67% are looking at value
• 27% have not changed their buying habits
FOOD SERVICE
• Consumers are eating out less.
• Food Service down 3%
• Top and mid-range restaurants (white table cloth) are going through tough times
• Bottom tier OK to good
• Value-Value-Value
Value meals are being pushed hard by the bottom tier and even the mid-range restaurants are using promotions like two starters and entrees $20.
RETAIL
• Consumers are eating at home more
• Consumers are shopping a lot less frequently
• Retailers need to get consumers back in the store
• Over the last decade or so most stores have spent a lot of money on the outside of their stores – fish, counter, butcher, deli, bakery etc. At present consumers are more interested in the value items in the centre of the store.
• Store brands have taken off, leaving private brands in the dust. There is a 30% saving between store and private brands.
• Value-Value-Value
Stores are also doing promotions where if you buy a packet of private brand product (e.g. Kellogg’s Corn Flakes) and get a packet of store brand corn flakes free
Annualised cheese consumption in the US grows by an average of 2.9% per year, it rarely tops 4%, during the past year there has been a record growth in cheese sales of 6%. This is mainly due to weekly store promotions. Also consumer behaviour ihsa been fixated with value and cheese has been at a low price.
This unique situation has filled refrigerators (I have seen this for myself – cheese piled or rather heaped high). This is probably the limit of current demand. As prices go higher the promotions will slow down and stop. Consumers will then switch to other value options.
The existing infrastructure of plants in the Mid and North East are very old. The area needs new cheese infrastructure. Great Lakes Cheese have just commissioned a new “super” plant (165,000 square feet) in Adams, New York. This is the first cheese plant to be built east of the Mississippi in over 30 years.
15-20% of DFA’s milk goes through either the Great Lakes Cheese plants or the plants of their suppliers.
Great Lakes Cheese packs one out of every four packets of cheese in the US. They also manufacture some of the cheese which they pack.
Gary said that he has been in the dairy industry for over 30 years and has never seen times like these.
Great Lakes Cheese does most of the sorter brands and also is well involved with the food service sector.
The company was founded in 1958 by a Swiss family. There sales total $2 Billion the total US cheese sales are $10 Billion..
They have 3 super plants as well as other smaller speciality plants.
Sales of Great Lakes Cheese have grown at three times the national average. They are very selective about which farms they source the milk from.
Employees get a stake in the business. The employees own 20% of the business and the original family own the remaining 80%.
The current recession has seen the most radical change in consumer behaviour for 30 years. There has been a 6.2% drop in the US GDP. Personal consumption accounts for 70% of US GDP.
Individual Federal Tax receipts are down 22%, corporate tax receipts are down even more.
Unemployment is nearing 10% and around 16.5% of the workforce is “underemployed” (working short time).
Consumers are afraid and holding onto their money:
• 6% of people are in panic mode buying only the absolute essentials
• 67% are looking at value
• 27% have not changed their buying habits
FOOD SERVICE
• Consumers are eating out less.
• Food Service down 3%
• Top and mid-range restaurants (white table cloth) are going through tough times
• Bottom tier OK to good
• Value-Value-Value
Value meals are being pushed hard by the bottom tier and even the mid-range restaurants are using promotions like two starters and entrees $20.
RETAIL
• Consumers are eating at home more
• Consumers are shopping a lot less frequently
• Retailers need to get consumers back in the store
• Over the last decade or so most stores have spent a lot of money on the outside of their stores – fish, counter, butcher, deli, bakery etc. At present consumers are more interested in the value items in the centre of the store.
• Store brands have taken off, leaving private brands in the dust. There is a 30% saving between store and private brands.
• Value-Value-Value
Stores are also doing promotions where if you buy a packet of private brand product (e.g. Kellogg’s Corn Flakes) and get a packet of store brand corn flakes free
Annualised cheese consumption in the US grows by an average of 2.9% per year, it rarely tops 4%, during the past year there has been a record growth in cheese sales of 6%. This is mainly due to weekly store promotions. Also consumer behaviour ihsa been fixated with value and cheese has been at a low price.
This unique situation has filled refrigerators (I have seen this for myself – cheese piled or rather heaped high). This is probably the limit of current demand. As prices go higher the promotions will slow down and stop. Consumers will then switch to other value options.
The existing infrastructure of plants in the Mid and North East are very old. The area needs new cheese infrastructure. Great Lakes Cheese have just commissioned a new “super” plant (165,000 square feet) in Adams, New York. This is the first cheese plant to be built east of the Mississippi in over 30 years.
15-20% of DFA’s milk goes through either the Great Lakes Cheese plants or the plants of their suppliers.
Dairy Farmers of America
Dennis Rodenbaugh,
Chief Operating Officer, Mid East Region
Dairy Farmers of America
Dairy Farmers of America operates in all of the 48 contiguous States. Its operations are divided into Seven Regions.
Each region has a Council. The Mid-East Council is broken down into 18 districts. The members in each district elect the Councillors. Each farm can have up to three voting members (on condition that they are a partner in the farm business). Each district also elects a delegate and a reserve onto the region’s Policy and Resolutions Committee. They also elect six delegates of which three go forward to attend the Companies Annual Meeting in Kansas City.
The Mid-East Council appoints 7 of its members to the Corporate Board. The number of Directors assigned to each region varies and is determined by a 50:50 mix of the number of farms and the volume of milk in a region.
The Chair of region along with the Chairman and Vice Chairman form the Executive Committee of DFA. These are the Directors who the CEO keeps informed on a week to week basis.
Each region forms a business unit with its own P&L account. They are fairly autonomous, and are managed by a Chief Operating Officer (COO), with the Council acting as the Board for that region. They are responsible for collection and sales of milk in each region. Whilst most of DFA’s factories are held by a separate business unit each area has a number of “balancing plants”, which make powder to use up any surplus milk on a day-to-day basis. In addition each area council draws up its own system of milk premiums.
Each region will trade milk with its neighbours from time to time depending on seasonality and supply and demand in each area. It is up to each COO to negotiate a price and if he can get a better deal outside DFA he will go with that.
Each region has a separate Resolutions and Policy Committee. They draw up new resolutions which are presented at the Annual Meeting for adoption. An example of a resolution was one to support the Cooperatives Working Together (CWT) herd buyout programme.
I can’t help thinking that those who drew up DFA’s system of governance must have taken a lot of inspiration from the United States Constitution. The Executive Committee is like the cabinet with the corporate board more like the senate. Each region enjoys a certain degree of autonomy like the constituent states. With resolutions being considered at each Annual Meeting; somewhat analogous to a meeting of Congress, including no doubt its own version of the President’s State of the Union speech.
I asked Dennis about how DFA came about. It started at a time when prices where very low. Co-operatives had been fighting the bit out against each other. Finally at a industry meeting the Chairmen of several large co-operative got together to discuss the issues. Seven co-operatives where involved in the first set of negotiations. Four co-operatives joined together in the initial merger with another two joining shortly after. They also have joint ventures with Land O Lakes and Dairylea.
To get over certain issues, a procedure known as “Grandfathering” was used. An example of this was the different patronage schemes of each of the merging co-ops. While a new joint scheme was set up for new entrants existing members would continue to have the same rights to withdraw patronage upon retirement as they always had.
New offices where set up in a different location, to create a new feel and identity for the co-op. It also helped to avoid the feeling that one co-op had taken over another.
The system of regional councils was set up to avoid tensions between North & South and East & West.
I then asked. If each region operates like its own mini-coop, what is the advantage of being merged at a national level.
The answer is combined strength and resources. Such as being able to make investments, a meaningful R&D programme, market strength and position. DFA has a number of customers such as Dean Foods and McDonalds who purchase on a Nationwide basis. DFA can offer them local product in every state. They also are in a better bargaining position with the banks, and have not had to ask their members for additional capital funding.
Retained patronage funds are revolved back to members after ten years. When a new member joins he is required to build up $1.75 in equity for every cwt of milk that he sells. 10 cents per cwt is taken of his milk check until he has $1 built up. Then revolving equity payments (which he would receive after ten years) are not paid out until he has $1.75 per cwt built up.
New Directors and Area Councilors receive a day’s training, this focuses on their fiduciary duties. There are no external Directors on the Board however Legal Council attend Board meetings to look after the Directors interests.
The corporate Board meet one a month, each meeting lasts two days. Each area council meets around six times a year.
I couldn’t get exact pay for Directors and Councillors but it is pretty modest at around $300 a day for Directors and $200 a day for Councillors.
Chief Operating Officer, Mid East Region
Dairy Farmers of America
Dairy Farmers of America operates in all of the 48 contiguous States. Its operations are divided into Seven Regions.
Each region has a Council. The Mid-East Council is broken down into 18 districts. The members in each district elect the Councillors. Each farm can have up to three voting members (on condition that they are a partner in the farm business). Each district also elects a delegate and a reserve onto the region’s Policy and Resolutions Committee. They also elect six delegates of which three go forward to attend the Companies Annual Meeting in Kansas City.
The Mid-East Council appoints 7 of its members to the Corporate Board. The number of Directors assigned to each region varies and is determined by a 50:50 mix of the number of farms and the volume of milk in a region.
The Chair of region along with the Chairman and Vice Chairman form the Executive Committee of DFA. These are the Directors who the CEO keeps informed on a week to week basis.
Each region forms a business unit with its own P&L account. They are fairly autonomous, and are managed by a Chief Operating Officer (COO), with the Council acting as the Board for that region. They are responsible for collection and sales of milk in each region. Whilst most of DFA’s factories are held by a separate business unit each area has a number of “balancing plants”, which make powder to use up any surplus milk on a day-to-day basis. In addition each area council draws up its own system of milk premiums.
Each region will trade milk with its neighbours from time to time depending on seasonality and supply and demand in each area. It is up to each COO to negotiate a price and if he can get a better deal outside DFA he will go with that.
Each region has a separate Resolutions and Policy Committee. They draw up new resolutions which are presented at the Annual Meeting for adoption. An example of a resolution was one to support the Cooperatives Working Together (CWT) herd buyout programme.
I can’t help thinking that those who drew up DFA’s system of governance must have taken a lot of inspiration from the United States Constitution. The Executive Committee is like the cabinet with the corporate board more like the senate. Each region enjoys a certain degree of autonomy like the constituent states. With resolutions being considered at each Annual Meeting; somewhat analogous to a meeting of Congress, including no doubt its own version of the President’s State of the Union speech.
I asked Dennis about how DFA came about. It started at a time when prices where very low. Co-operatives had been fighting the bit out against each other. Finally at a industry meeting the Chairmen of several large co-operative got together to discuss the issues. Seven co-operatives where involved in the first set of negotiations. Four co-operatives joined together in the initial merger with another two joining shortly after. They also have joint ventures with Land O Lakes and Dairylea.
To get over certain issues, a procedure known as “Grandfathering” was used. An example of this was the different patronage schemes of each of the merging co-ops. While a new joint scheme was set up for new entrants existing members would continue to have the same rights to withdraw patronage upon retirement as they always had.
New offices where set up in a different location, to create a new feel and identity for the co-op. It also helped to avoid the feeling that one co-op had taken over another.
The system of regional councils was set up to avoid tensions between North & South and East & West.
I then asked. If each region operates like its own mini-coop, what is the advantage of being merged at a national level.
The answer is combined strength and resources. Such as being able to make investments, a meaningful R&D programme, market strength and position. DFA has a number of customers such as Dean Foods and McDonalds who purchase on a Nationwide basis. DFA can offer them local product in every state. They also are in a better bargaining position with the banks, and have not had to ask their members for additional capital funding.
Retained patronage funds are revolved back to members after ten years. When a new member joins he is required to build up $1.75 in equity for every cwt of milk that he sells. 10 cents per cwt is taken of his milk check until he has $1 built up. Then revolving equity payments (which he would receive after ten years) are not paid out until he has $1.75 per cwt built up.
New Directors and Area Councilors receive a day’s training, this focuses on their fiduciary duties. There are no external Directors on the Board however Legal Council attend Board meetings to look after the Directors interests.
The corporate Board meet one a month, each meeting lasts two days. Each area council meets around six times a year.
I couldn’t get exact pay for Directors and Councillors but it is pretty modest at around $300 a day for Directors and $200 a day for Councillors.
Sunday, August 16, 2009
DFA Mid-East Leadership Conference
On Thursday I had the good fortune to be invited to the Dairy Farmers of America Mid-East Region Leadership Conference.
The first person to speak was Rick Smith. President and CEO of DFA.
He started out by telling the conference not to worry about DFA during this difficult time. Farmers had enough to worry about with the survival of their business. He told them that as bad it is in other parts of the country Colorado was “Ground Zero”. There the bank which most of the farmers did their business with had collapsed. Loans where about to be sold. It is hoped that these will be bought by other banks, however that there is the real possibility that “vultures” will buy these loans at a knock down price and try and make a quick buck by foreclosing on the farms.
He referred to an off the cuff comment quoted in the press that he made at an Irish conference where he said “We sometimes have a way of killing the golden goose”. He said that in this case they didn’t kill it off. The goose just died!
He believes that the recovery has begun but fears that it will be a very slow recovery. “We can see the light at the end of the tunnel, it’s not an oncoming train, we just don’t know how long the tunnel is”.
He predicted that milk payouts would be up around $15 by October/November.
Over the past few years there has been a steady increase in US exports, this had been matched for a while by the growth in world demand. He told the conference “We are now in a global industry whether we like it or not.”
One local initiative was to try and increase the amount of cheese of pizzas. The average pizza used to have 9 oz of cheese on it, this had now been reduced to 4 oz.
He said that the Holstein Association’s supply management program was a long term rather than a short term solution. He felt that the term growth management was better than supply management.
Cooperatives working together (CWT) are now exploring a partial herd liquidation program.
To help farmers as much as possible DFA are paying out 100% of this years patronage out in cash. The latest payment is 5c a cwt for the first half of 2009, this is a total of $9.5 million.
Last year DFA made $68.4 Million. Around two-thirds of this is profit from members which is distributed as patronage. One thirds of the profit comes from non-members this is taxed and not distributed.
A new initiative DFA has started up is Dairy Graziers Services to help US dairy farmers get more out of pasture. The CEO promoted this, “It’s not about getting the most milk out of the cow but about getting the most profit out of a cow”.
John Phipps.
TV Host of US Farm Program and award winning Agricultural Journalist.
“The end of the [outside] world we are all in this together.”
John started of by saying that as a crop he felt the ethanol subsidy has outlived its usefulness. It has disadvantaged crop farmer’s oldest customers (dairy farmers) in a way that is reprehensible.
He told the meeting that the current crisis was not their fault.
The atmosphere internationally is saturated with fear. Fear passes from person to person, it interferes with good decision making. The conscious part of the brain is disabled and we do all our thinking with the “old” or “reptile” brain which thinks in terms of “fight or flight”.
So many things considered “unthinkable” have happened in the last year that out “fear filters” don’t work anymore. This is why so many Americans are currently convinced that the US Healthcare Bill contains provisions for “death panels”.
Some people like to conjure up in their minds the worst possible scenarios thinking that they will be more prepared if they happen but they aren’t.
Conflict is really risky at the moment.
Don’t let a arbitrary number add another stress level to your life. This could be a yield per cow, financial figure or even a date by which you feel you must have something done or achieved.
Even if you are not feeling brave, pretend to be brave – the results are the same.
Think about the other side. In years to come your children and grandchildren will ask you about how you got through this time, after you survive this other challenges won’t seem so daunting.
He finished by comparing the current situation with Shakespeare’s account the Battle of Agincourt, “The reason why we’re not all speaking French today”. Henry V’s forces were outnumbered by a much larger French army, yet still gained the victory.
This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.
The first person to speak was Rick Smith. President and CEO of DFA.
He started out by telling the conference not to worry about DFA during this difficult time. Farmers had enough to worry about with the survival of their business. He told them that as bad it is in other parts of the country Colorado was “Ground Zero”. There the bank which most of the farmers did their business with had collapsed. Loans where about to be sold. It is hoped that these will be bought by other banks, however that there is the real possibility that “vultures” will buy these loans at a knock down price and try and make a quick buck by foreclosing on the farms.
He referred to an off the cuff comment quoted in the press that he made at an Irish conference where he said “We sometimes have a way of killing the golden goose”. He said that in this case they didn’t kill it off. The goose just died!
He believes that the recovery has begun but fears that it will be a very slow recovery. “We can see the light at the end of the tunnel, it’s not an oncoming train, we just don’t know how long the tunnel is”.
He predicted that milk payouts would be up around $15 by October/November.
Over the past few years there has been a steady increase in US exports, this had been matched for a while by the growth in world demand. He told the conference “We are now in a global industry whether we like it or not.”
One local initiative was to try and increase the amount of cheese of pizzas. The average pizza used to have 9 oz of cheese on it, this had now been reduced to 4 oz.
He said that the Holstein Association’s supply management program was a long term rather than a short term solution. He felt that the term growth management was better than supply management.
Cooperatives working together (CWT) are now exploring a partial herd liquidation program.
To help farmers as much as possible DFA are paying out 100% of this years patronage out in cash. The latest payment is 5c a cwt for the first half of 2009, this is a total of $9.5 million.
Last year DFA made $68.4 Million. Around two-thirds of this is profit from members which is distributed as patronage. One thirds of the profit comes from non-members this is taxed and not distributed.
A new initiative DFA has started up is Dairy Graziers Services to help US dairy farmers get more out of pasture. The CEO promoted this, “It’s not about getting the most milk out of the cow but about getting the most profit out of a cow”.
John Phipps.
TV Host of US Farm Program and award winning Agricultural Journalist.
“The end of the [outside] world we are all in this together.”
John started of by saying that as a crop he felt the ethanol subsidy has outlived its usefulness. It has disadvantaged crop farmer’s oldest customers (dairy farmers) in a way that is reprehensible.
He told the meeting that the current crisis was not their fault.
The atmosphere internationally is saturated with fear. Fear passes from person to person, it interferes with good decision making. The conscious part of the brain is disabled and we do all our thinking with the “old” or “reptile” brain which thinks in terms of “fight or flight”.
So many things considered “unthinkable” have happened in the last year that out “fear filters” don’t work anymore. This is why so many Americans are currently convinced that the US Healthcare Bill contains provisions for “death panels”.
Some people like to conjure up in their minds the worst possible scenarios thinking that they will be more prepared if they happen but they aren’t.
Conflict is really risky at the moment.
Don’t let a arbitrary number add another stress level to your life. This could be a yield per cow, financial figure or even a date by which you feel you must have something done or achieved.
Even if you are not feeling brave, pretend to be brave – the results are the same.
Think about the other side. In years to come your children and grandchildren will ask you about how you got through this time, after you survive this other challenges won’t seem so daunting.
He finished by comparing the current situation with Shakespeare’s account the Battle of Agincourt, “The reason why we’re not all speaking French today”. Henry V’s forces were outnumbered by a much larger French army, yet still gained the victory.
This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.
Co-operative Network
David Ward
Director of Dairy and Government Relations
Cooperative Network of Wisconsin and Minnesota
Background
David is from a dairy background and was a seven-term member of the Wisconsin State Assembly and Vice-Chairman of the Joint Finance Committee.
The Cooperative Network serves more than 600 member co-operatives owned by Wisconsin and Minnesota residents by providing government relations, education, marketing and technical services for a wide variety of co-operatives including farm supply, health, dairy marketing, consumer, financial, livestock marketing, telecommunications, electric housing, insurance, worker owned co-operative and more.
Dairy Co-operatives in the Upper Mid-West
The Upper Mid-West is seeing a steady increase in very large dairy farms. Farms with 1,000 cows or more tend not to have a bulk tank but rather put the milk directly into a milk truck parked in the “dairy”. This means that milk has to be chilled very rapidly before it gets to the truck. Electricity cost in the US is around 11 cents per kilowatt hour.
Most of these trucks are owned by the plant, in some cases they are owned by the farmer. In a few rare cases the farmer owns the tractor as well.
These larger farmers demand volume bonuses. By law these volume bonuses are restricted by:
1. The amount that can be justified by cost savings eg lower transport and administration costs, or
2. To meet competition.
In other words so long as the coop (or private dairy) up the road is paying very high volume bonuses you can too!!
There are 8 Dairy Co-operatives operating throughout the state of Wisconsin as well as a number of small local co-ops operating in specific areas. Dairy Farmers (especially the larger ones) will move from one Co-op to another. There tends to be more loyalty to the milk truck driver than to the Co-operative and if he moves jobs from one co-op to another many of the farmers on his old route will move with him.
The members of one co-operative Alto who were performing poorly accepted an offer from a private Canadian company to buy out the co-op. The Canadian company offered to pay the members all their revolving equity. Given that it was unlikely that these members where unlikely ever to see their equity otherwise they accepted.
There are also a number of “Swiss” type co-ops. In a traditional co-op (or private) milk supply contract the milk becomes the property of the co-op as soon as the milk is pumped into the tanker. In Swiss style co-ops the milk remains the property of the co-op member until the finished product (cheese) is processed, matured and sold on the market.
Many co-operative dairy plants are now running at capacity. This raises the question as to how co-ops pay for expansion. This is a difficult issue. One co-operative in Michigan has a capital program deduction of 10 cents / cwt. However this can be tricky is the co-op down the road isn’t deducting a capital levy.
David feels that the competition between co-operatives is a good thing as it keeps them on their toes. He wouldn’t want to see rationalising to the point were farmers had only one choice. He highlighted that in the State of Vermont there two dairy co-operative, however one has BST free policy so farmers using BST have only one co-op they can sell to.
Futures Contracts
Unlike Europe, farmers in the US have the ability to forward sell their milk on the futures market or by buying “Puts”. They can also lock in the price of their inputs.
Producers could have locked in the price for this entire years supply at $16-$17 / cwt. Only 6% of producers take advantage of this scheme which would be the difference between making a substantial loss or a modest profit. Most farmers didn’t take the option because they hoped for much higher prices.
Activities of the Cooperative Network
Around 15 years ago California took the title of Americas Dairyland from Wisconsin. To try and encourage expansion of Wisconsin’s dairy industry the Cooperative Network successfully lobbied the State Government gave tax credits for capital investment. Also land near settlements which had been zoned for building but was still being farmed was taxed at its full investment value. This was changed to the a valuation on the agricultural economic potential of the land.
One relatively new development was the formation of a Farmer Health Co-op. Most people in the US are provided with family health insurance by their employer. Individual policies can be very expensive and will often exclude cover for illnesses relating to pre-existing medical conditions.
The Farmer Health Co-op now has 2,600 members. It was expected that the average age of those joining might be very old, however this has not turned out to be the case. The average age is 38. Some of their members have seen their premiums drop by up to 50% since joining.
The Co-operative Network provides a variety of board training for its members this includes subjects such as:
• How to hire a CEO
• I can I or can I not do as a Director
• Directors legal responsibilities and liabilities.
They also run youth seminars in agricultural colleges and train co-operative employees on credit issues. They also have a committee of dairy plant managers to enable them to network and discuss common issues.
They also help organise the annual Co-operative Day at the State Capitol in Madison. Minnesota has a “Dairy Day” instead at their State Capitol in St. Paul.
They can also mobilise all cooperative members to aggressively lobby if one sector is threatened. A recent example was a proposal by the Governor and Legislature of Wisconsin to impose an oil gross receipts tax in the state budget. They pointed out that this tax would not just affect “big oil” companies but also co-operatives that distribute motor fuel. They got all their member co-ops to put a flyer in their monthly mailing to their members along with pre-printed post cards for their members to complete and mail into their local State Assemblyman and Senator.
Director of Dairy and Government Relations
Cooperative Network of Wisconsin and Minnesota
Background
David is from a dairy background and was a seven-term member of the Wisconsin State Assembly and Vice-Chairman of the Joint Finance Committee.
The Cooperative Network serves more than 600 member co-operatives owned by Wisconsin and Minnesota residents by providing government relations, education, marketing and technical services for a wide variety of co-operatives including farm supply, health, dairy marketing, consumer, financial, livestock marketing, telecommunications, electric housing, insurance, worker owned co-operative and more.
Dairy Co-operatives in the Upper Mid-West
The Upper Mid-West is seeing a steady increase in very large dairy farms. Farms with 1,000 cows or more tend not to have a bulk tank but rather put the milk directly into a milk truck parked in the “dairy”. This means that milk has to be chilled very rapidly before it gets to the truck. Electricity cost in the US is around 11 cents per kilowatt hour.
Most of these trucks are owned by the plant, in some cases they are owned by the farmer. In a few rare cases the farmer owns the tractor as well.
These larger farmers demand volume bonuses. By law these volume bonuses are restricted by:
1. The amount that can be justified by cost savings eg lower transport and administration costs, or
2. To meet competition.
In other words so long as the coop (or private dairy) up the road is paying very high volume bonuses you can too!!
There are 8 Dairy Co-operatives operating throughout the state of Wisconsin as well as a number of small local co-ops operating in specific areas. Dairy Farmers (especially the larger ones) will move from one Co-op to another. There tends to be more loyalty to the milk truck driver than to the Co-operative and if he moves jobs from one co-op to another many of the farmers on his old route will move with him.
The members of one co-operative Alto who were performing poorly accepted an offer from a private Canadian company to buy out the co-op. The Canadian company offered to pay the members all their revolving equity. Given that it was unlikely that these members where unlikely ever to see their equity otherwise they accepted.
There are also a number of “Swiss” type co-ops. In a traditional co-op (or private) milk supply contract the milk becomes the property of the co-op as soon as the milk is pumped into the tanker. In Swiss style co-ops the milk remains the property of the co-op member until the finished product (cheese) is processed, matured and sold on the market.
Many co-operative dairy plants are now running at capacity. This raises the question as to how co-ops pay for expansion. This is a difficult issue. One co-operative in Michigan has a capital program deduction of 10 cents / cwt. However this can be tricky is the co-op down the road isn’t deducting a capital levy.
David feels that the competition between co-operatives is a good thing as it keeps them on their toes. He wouldn’t want to see rationalising to the point were farmers had only one choice. He highlighted that in the State of Vermont there two dairy co-operative, however one has BST free policy so farmers using BST have only one co-op they can sell to.
Futures Contracts
Unlike Europe, farmers in the US have the ability to forward sell their milk on the futures market or by buying “Puts”. They can also lock in the price of their inputs.
Producers could have locked in the price for this entire years supply at $16-$17 / cwt. Only 6% of producers take advantage of this scheme which would be the difference between making a substantial loss or a modest profit. Most farmers didn’t take the option because they hoped for much higher prices.
Activities of the Cooperative Network
Around 15 years ago California took the title of Americas Dairyland from Wisconsin. To try and encourage expansion of Wisconsin’s dairy industry the Cooperative Network successfully lobbied the State Government gave tax credits for capital investment. Also land near settlements which had been zoned for building but was still being farmed was taxed at its full investment value. This was changed to the a valuation on the agricultural economic potential of the land.
One relatively new development was the formation of a Farmer Health Co-op. Most people in the US are provided with family health insurance by their employer. Individual policies can be very expensive and will often exclude cover for illnesses relating to pre-existing medical conditions.
The Farmer Health Co-op now has 2,600 members. It was expected that the average age of those joining might be very old, however this has not turned out to be the case. The average age is 38. Some of their members have seen their premiums drop by up to 50% since joining.
The Co-operative Network provides a variety of board training for its members this includes subjects such as:
• How to hire a CEO
• I can I or can I not do as a Director
• Directors legal responsibilities and liabilities.
They also run youth seminars in agricultural colleges and train co-operative employees on credit issues. They also have a committee of dairy plant managers to enable them to network and discuss common issues.
They also help organise the annual Co-operative Day at the State Capitol in Madison. Minnesota has a “Dairy Day” instead at their State Capitol in St. Paul.
They can also mobilise all cooperative members to aggressively lobby if one sector is threatened. A recent example was a proposal by the Governor and Legislature of Wisconsin to impose an oil gross receipts tax in the state budget. They pointed out that this tax would not just affect “big oil” companies but also co-operatives that distribute motor fuel. They got all their member co-ops to put a flyer in their monthly mailing to their members along with pre-printed post cards for their members to complete and mail into their local State Assemblyman and Senator.
Tuesday, August 11, 2009
Landmark Services Co-operative
Larry Swalheim, CEO
Landmark Services Co-operative
Landmark are a very successful Co-operative. In the last year there sales grew from $235 to $332 million with profits increasing from $11.2 million to $14.8 million. For some co-operatives “profits” is a dirty word, not so for Landmark. During the year $41 million of cash was paid back to members – Cash patronage of $2.8 million and $1.3 million in equity distribution.
Since 2006 Landmark has increased the cash proportion of equity from the legal minimum of 20% to 30%.
Each member is required to accumulate and maintain a vested equity account of $2,000. The Co-op aims to reduce the time taken to revolve equity over $2,000 from over 20 years to the goal of 10 years.
Landmark have four main divisions, these are Energy, Animal Nutrition, Grain Marketing and Agronomy, they also have two smaller Transport and Retail divisions.
Energy Division – This includes supplying heating oil, diesel and propane (used for grain drying as well as domestic use). They also own 5 filling stations. Last year they sold 40 million gallons of fuel.
The Animal Nutrition Division supplies a wide variety of livestock enterprises from five locations. Last year they sold $43 million of feed products.
The Grain marketing division has grain storage for 12 million bushels. They have the facilities to load a 100 car train with grain. This gives them a lot of options on where they can sell their grain.
The agronomy division includes sales of seed, sprays and fertiliser along with a team of Agronomists to give advice as to how to use them. This division also has a precision contacting arm which includes John Deere 4930 sprayers with a 120 foot boom and GPS precision fertiliser applicatiors.
The retail division consists of 5 convenience stores (part of the aforemention filing stations), a tyre centre which includes two vans which operate 24/7 to fix tractor tyres and one hardware store. In addition to the five manned filling stations Landmark also operates three unmanned Pump 24 stations.
The transportation division provides the haulage services needed by all the other divisions of the Co-op. This includes 14 “semis” as well as a range of smaller vehicles.
Landmark has 5,000 producer members. These are the farmers who trade with the co-op. Only these members have a vote. They also have another 50,000 customers who are called ordinary members. These are ordinary members of the public or other mall businesses who use the filling stations, buy bulk fuel or use the hardware store and tyre centre.
The co-operative is currently attracting around 80 new members per month with around 20 of these being farmer producer members.
The normal number of Directors on the Board of Landmark is nine. At present it is eleven as they recently merged with another co-op. Two directors came in from the board of the other co-op. Over the next two years as elections are held this will again drop down to nine.
There are three electoral areas, with each area electing 1 director each year for a thee year term. The Board has a nominating committee which trawls the membership for possible candidates for election to the Board. A profile is done on each candidate which is sent out to members along with the postal ballot paper.
New directors are given a thorough briefing by all the division managers as well as the CEO and CFO and are taken round all the companies various operations.
Each year Directors have a minimum of four days training, including a two day retreat.
Director’s pay is modest with $500 being paid for a full day meeting and $350 being paid for a half day meeting.
The Board has a Growth and Opportunity Committee. This spends its time looking for new opportunities including mergers with other co-operatives.
The Board has no term-limits; however the Board does carry out succession planning and Board evaluation. There is a reasonable turnover of Directors on the Board.
The Board has defined written “Position Objectives and Responsibilities” for both the CEO and the Chairman of the Board. The CEO’s objectives and responsibilities is broken down into a number of areas and extends to five pages. The Chairman’s is a little over two pages long.
Landmark will not take on any new project that has less than a 12% projected return on Investment. If returns are lower than this it’s better not to make the investment and return retained equity to its members.
I was incredibly impressed by this operation. The CEO wore a company polo shirt top like the rest of the employees As we went round some of the various operations I was struck by the rapport the CEO has with all the staff right down to the truck drivers. It felt very much like an organisation where everyone was pulling together.
Landmarks Mission Statement reads
“We are a Cooperative business dedicated to providing rural and urban customers with the highest quality products and services. We will enhance producer profitability, exceed customer expectations and keep our co-operative financially strong.”
It was evident to me that these are not just empty words.
Every Chairman and CEO of Irish Agricultural Supply Co-ops should book a space on the next plane to Madison to see this shining example of a thriving and vibrant cooperative.
For completeness I list Landmark’s Vision Statement Below:
We will anticipate and meet the future needs of our customers by:
• Conducting our business with the highest ethical standards.
• Positioning our co-operative to be financial strong.
• Evaluating growth opportunities to better serve our customers.
• Adapting the latest technology to gain maximum efficiency
• Informing our customers of the benefits of co-operative membership.
• Developing values customer relationships.
• Promoting pride of ownership with an aggressive equity revolvement program
• Hiring, educating and retaining the best employees
• Building a strong image in the marketplace.
• Being good stewards of our natural resources
• Supporting the communities that we serve.
Landmark Services Co-operative
Landmark are a very successful Co-operative. In the last year there sales grew from $235 to $332 million with profits increasing from $11.2 million to $14.8 million. For some co-operatives “profits” is a dirty word, not so for Landmark. During the year $41 million of cash was paid back to members – Cash patronage of $2.8 million and $1.3 million in equity distribution.
Since 2006 Landmark has increased the cash proportion of equity from the legal minimum of 20% to 30%.
Each member is required to accumulate and maintain a vested equity account of $2,000. The Co-op aims to reduce the time taken to revolve equity over $2,000 from over 20 years to the goal of 10 years.
Landmark have four main divisions, these are Energy, Animal Nutrition, Grain Marketing and Agronomy, they also have two smaller Transport and Retail divisions.
Energy Division – This includes supplying heating oil, diesel and propane (used for grain drying as well as domestic use). They also own 5 filling stations. Last year they sold 40 million gallons of fuel.
The Animal Nutrition Division supplies a wide variety of livestock enterprises from five locations. Last year they sold $43 million of feed products.
The Grain marketing division has grain storage for 12 million bushels. They have the facilities to load a 100 car train with grain. This gives them a lot of options on where they can sell their grain.
The agronomy division includes sales of seed, sprays and fertiliser along with a team of Agronomists to give advice as to how to use them. This division also has a precision contacting arm which includes John Deere 4930 sprayers with a 120 foot boom and GPS precision fertiliser applicatiors.
The retail division consists of 5 convenience stores (part of the aforemention filing stations), a tyre centre which includes two vans which operate 24/7 to fix tractor tyres and one hardware store. In addition to the five manned filling stations Landmark also operates three unmanned Pump 24 stations.
The transportation division provides the haulage services needed by all the other divisions of the Co-op. This includes 14 “semis” as well as a range of smaller vehicles.
Landmark has 5,000 producer members. These are the farmers who trade with the co-op. Only these members have a vote. They also have another 50,000 customers who are called ordinary members. These are ordinary members of the public or other mall businesses who use the filling stations, buy bulk fuel or use the hardware store and tyre centre.
The co-operative is currently attracting around 80 new members per month with around 20 of these being farmer producer members.
The normal number of Directors on the Board of Landmark is nine. At present it is eleven as they recently merged with another co-op. Two directors came in from the board of the other co-op. Over the next two years as elections are held this will again drop down to nine.
There are three electoral areas, with each area electing 1 director each year for a thee year term. The Board has a nominating committee which trawls the membership for possible candidates for election to the Board. A profile is done on each candidate which is sent out to members along with the postal ballot paper.
New directors are given a thorough briefing by all the division managers as well as the CEO and CFO and are taken round all the companies various operations.
Each year Directors have a minimum of four days training, including a two day retreat.
Director’s pay is modest with $500 being paid for a full day meeting and $350 being paid for a half day meeting.
The Board has a Growth and Opportunity Committee. This spends its time looking for new opportunities including mergers with other co-operatives.
The Board has no term-limits; however the Board does carry out succession planning and Board evaluation. There is a reasonable turnover of Directors on the Board.
The Board has defined written “Position Objectives and Responsibilities” for both the CEO and the Chairman of the Board. The CEO’s objectives and responsibilities is broken down into a number of areas and extends to five pages. The Chairman’s is a little over two pages long.
Landmark will not take on any new project that has less than a 12% projected return on Investment. If returns are lower than this it’s better not to make the investment and return retained equity to its members.
I was incredibly impressed by this operation. The CEO wore a company polo shirt top like the rest of the employees As we went round some of the various operations I was struck by the rapport the CEO has with all the staff right down to the truck drivers. It felt very much like an organisation where everyone was pulling together.
Landmarks Mission Statement reads
“We are a Cooperative business dedicated to providing rural and urban customers with the highest quality products and services. We will enhance producer profitability, exceed customer expectations and keep our co-operative financially strong.”
It was evident to me that these are not just empty words.
Every Chairman and CEO of Irish Agricultural Supply Co-ops should book a space on the next plane to Madison to see this shining example of a thriving and vibrant cooperative.
For completeness I list Landmark’s Vision Statement Below:
We will anticipate and meet the future needs of our customers by:
• Conducting our business with the highest ethical standards.
• Positioning our co-operative to be financial strong.
• Evaluating growth opportunities to better serve our customers.
• Adapting the latest technology to gain maximum efficiency
• Informing our customers of the benefits of co-operative membership.
• Developing values customer relationships.
• Promoting pride of ownership with an aggressive equity revolvement program
• Hiring, educating and retaining the best employees
• Building a strong image in the marketplace.
• Being good stewards of our natural resources
• Supporting the communities that we serve.
Prof. Bob Cropp, Ag Economist, UW
I talked with Bob Cropp about the system of revolving equity used by US Co-operatives instead of share capital. In traditional co-operatives no upfront capital is required when joining a co-operative. Many co-operatives will never be able to payout their retained equity to their members. Some are instead opting to payout 40% in cash and not allocating the remaining 60%. The members then only get taxed on the 40%. Most farmers are much happier with this arrangement.
Also existing co-operatives who are undertaking significant capital expenditure can find that they can get a lower interest rate from the banks if they can source 40-50% of the finance from their members.
Capital deductions are taken from monthly milk checks on a production basis (US milk coops buy milk by the hundred weight (cwt)). An account of this money kept in a producer capital account, this is separate from the revolving equity account. As the capital expenditure is completed and profits are made, this capital is paid back the farmer.
When starting a new co-operative e.g. organic or speciality cheese, upfront capital is required. These are known as new generation co-operatives. You purchase a marketing right. To ensure that the plant if kept operating at near capacity and that the co-operative meets its contracts a farmer must supply all the milk required by the marketing right. If his supply is less than this he must pay a fine. A farmer may sell part of his marketing right to another farmer.
When co-operatives merge, which Directors go forward onto the Board of the new merged co-operative is often a sticky issue. Sometimes to make a merger happen it is necessary to let all of the Directors remain on the Board of the new merged co-operative for a year. Redistricting can then be done and the Board can be reduced down to size. This is how Dairy Farmers of America have been left with a Board of 100.
With the current very low market returns for dairy produce I asked Rob if there was any move towards a type of quota system.
A Supply Management Bill is being drafted for presentation to the US Congress. This proposes that any farmer who goes over their current level of production (their base level) would have to pay a “market excess fee” (not unlike EU quota superlevy). This money would then be distributed amongst the farmers who did not expand.
However unlike EU quota super levy this market excess fee would only be apply for the first year. The following year the farmers base production would be reset at the previous years higher production level.
This supply management programme is being promoted by Californian producers and is not as popular in the traditional dairying areas of the Mid-West who are receiving around a 20% higher milk price and have lower feed costs. It is very unlikely the bill will be passed into law.
With the advent of sexed semen and its rapid adoption by US dairy farmers there are a lot more heifers set to enter the US Dairy herd over the next year or so.
One dairy magazine that I read said that there was an extra 300,000 dairy heifers set to enter the US dairy herd in the next year. This is more than the total dairy herd of Northern Ireland which stands at around 280,000 cows.
Traditionally US involvement with export markets had been small until the dairy boom of 2007. The US then rapidly expanded to take advantage of the high export markets. At the present time it is estimated that US dairy farmers are losing $60-$100 per cow per month. One dairy magazine I read had an article detailing all the various methods (Chapters) available under US law by which a farmer could file for bankruptcy.
Also existing co-operatives who are undertaking significant capital expenditure can find that they can get a lower interest rate from the banks if they can source 40-50% of the finance from their members.
Capital deductions are taken from monthly milk checks on a production basis (US milk coops buy milk by the hundred weight (cwt)). An account of this money kept in a producer capital account, this is separate from the revolving equity account. As the capital expenditure is completed and profits are made, this capital is paid back the farmer.
When starting a new co-operative e.g. organic or speciality cheese, upfront capital is required. These are known as new generation co-operatives. You purchase a marketing right. To ensure that the plant if kept operating at near capacity and that the co-operative meets its contracts a farmer must supply all the milk required by the marketing right. If his supply is less than this he must pay a fine. A farmer may sell part of his marketing right to another farmer.
When co-operatives merge, which Directors go forward onto the Board of the new merged co-operative is often a sticky issue. Sometimes to make a merger happen it is necessary to let all of the Directors remain on the Board of the new merged co-operative for a year. Redistricting can then be done and the Board can be reduced down to size. This is how Dairy Farmers of America have been left with a Board of 100.
With the current very low market returns for dairy produce I asked Rob if there was any move towards a type of quota system.
A Supply Management Bill is being drafted for presentation to the US Congress. This proposes that any farmer who goes over their current level of production (their base level) would have to pay a “market excess fee” (not unlike EU quota superlevy). This money would then be distributed amongst the farmers who did not expand.
However unlike EU quota super levy this market excess fee would only be apply for the first year. The following year the farmers base production would be reset at the previous years higher production level.
This supply management programme is being promoted by Californian producers and is not as popular in the traditional dairying areas of the Mid-West who are receiving around a 20% higher milk price and have lower feed costs. It is very unlikely the bill will be passed into law.
With the advent of sexed semen and its rapid adoption by US dairy farmers there are a lot more heifers set to enter the US Dairy herd over the next year or so.
One dairy magazine that I read said that there was an extra 300,000 dairy heifers set to enter the US dairy herd in the next year. This is more than the total dairy herd of Northern Ireland which stands at around 280,000 cows.
Traditionally US involvement with export markets had been small until the dairy boom of 2007. The US then rapidly expanded to take advantage of the high export markets. At the present time it is estimated that US dairy farmers are losing $60-$100 per cow per month. One dairy magazine I read had an article detailing all the various methods (Chapters) available under US law by which a farmer could file for bankruptcy.
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