At Ellsworth Cooperative Creamery, it all starts at the farm. We recognize and reward our top three high quality milk producers with an award each year at our annual meeting. Please join us in congratulating this year’s winners!

1st Place: Maple Leaf Acres Inc., Elk Mound, WI (49,000 Ave. SCC)

2nd Place: Tony and Matt Berktold, Lake City, MN (53,000 Ave. SCC)

3rd Place: Brad and Kristen Afdahl, Arkansaw, WI (61,000 Ave. SCC)

Beginning last month, we began to see some interesting dynamics that are affecting market conditions and driving milk prices down. I wanted to share what I am seeing in the market, how milk prices will be impacted, and when we hope to see the market stabilize and being to improve.

First, a fire at an AMPI processing cheese plant in Portage, WI, is impacting the market more than anyone expected. While having one cheese plant go offline may not seem significant, the industry does not have a lot of reserve capacity and that affects everyone in making processed cheese and using barrel cheese. We’re seeing a huge amount of backlog of barrel cheese in the marketplace creating big price disruptions. Barrel cheese inventory will have to be used before we see supplies return to normal levels.

Additionally, in the beginning of 2022, our larger key customers ordered large quantities of cheese curds for breading in anticipation of supply issues due to the pandemic. There is now an over-amount of breaded cheese curds in inventory than the marketplace can consume. This is similar to what happened with toilet paper during the beginning of the pandemic—people overbought and now have toilet paper stockpiled that will need to be consumed before they have a need to buy more. While the retail side of cheese curd sales is doing fairly well and holding steady, a large percentage of cheese curds sold in bulk are being impacted by this earlier run on the curd market.

P1 denotes regular market pricing. When AMPI’s fire occurred, they stopped purchasing barrels which shifted demand for barrel cheese in the marketplace downward (P2). Impacting the market further is the decreased demand for cheese curds leading to more barrel cheese, further adding to an over-supply (P3).

Compounding matters, milk supply is plentiful throughout the country and there is more milk than the industry can absorb. Normally, we would sell milk during times such as this. This option is currently not available to unless we choose to take a deep discount of 70-80% of the value of the milk. Delay in adjusting the federal milk order pricing gives the wrong signal on what Class 3 pricing should be compared to the actual cost associated with manufacturing cheese.

P1 denotes regular market pricing. Milk is in excess supply and as a result milk prices are being driven down (P2).

Micro-economic effects and economic conditions on a world-scale may cause a slowdown in the economy that could lead to less buying of our product. As economies slow down, we see less dollars available to purchase dairy products.

Each of these factors is outside of our direct control. What we are experiencing is basic economics and the above supply and demand charts illustrate current market conditions. All factors combine, creating a perfect storm of increased barrel cheese inventories and lower milk prices for the next several months.

We expect these influences to negatively impact milk prices until April or May, at which time we typically see an increased demand for cheese curds. We hope that will lead to more favorable conditions and a recovery in pricing. As demand for cheese curds increases, we will stop making barrels. Barring a major economic downturn, we should begin to see a shortage in fresh barrel cheese and as barrel cheese is consumed in the marketplace the pricing dynamics will shift in our favor. Once AMPI is again online and consuming barrel cheese, that will shift prices higher yet again.

As we begin the New Year, let us take a moment to briefly reflect on 2022.

The biggest and most notable accomplishment of the year was the startup of the Menomonie location. We started our first test batch of cheeses in February and began to move product in late March. Producing quality product out of a new plant requires patience and some trial and error. From experience, I know it can take a year before production and quality are right. I’m pleased with how things are progressing.

One challenge was that we didn’t have as many employees transfer from Comstock to the new production facility as we expected. However, we had great success hiring skilled staff for the Menomonie location. Our presence in Menomonie has been well received and the community has been supportive and welcoming.

We continue to be challenged by lingering Covid supply chain issues. Supplies that normally would be easily and quickly sourced in the past are much more difficult to find today. This impacts production at all the plants, making it difficult to achieve the level of production and efficiency we would like to see. One example of such an item is metal springs, which are now extremely difficult to find. There are millions of springs needed to construct an efficiently operating new production facility.

Despite the challenges, we continue to make progress in Menomonie. We are running more milk than we had out of the Comstock facility. We continue to work with our team and expand our skillsets so we can continue to increase production and quality. In addition to cheese production, we transferred all cut and wrap to the Menomonie location, which was another learning curve for our crew.

The Menomonie retail store has been a success and those who have visited offer positive feedback. The store looks fantastic–open, bright, and spacious with fun and decorative elements that fit our organization’s personality. The location makes visitors smile. We continue to implement strategies to increase visitor count and retail sales. We have a great team in place there that offers consistent hospitality, and we are now working to build our reputation in this new market and establish the store as a destination, just as we did with our Ellsworth location.

In our New London processed cheese plant we set several records in 2022, the first being in production. The team did a great job of getting 41 million pounds made, which is 15 million more than 2018. New London is now making about 57% more cheese than when we first purchased the location. We are looking to add some key pieces of equipment to allow the plant to function even better in 2023 with additional capacity and less strain on our employees. The plant continues to play a key role in adding value-added cheese capacity and profit to the creamery.

It was another big year for our Ellsworth location. However, we continue to be hampered by restrictions on supplies, particularly CO2. We are installing additional storage on-site to allow us to meet our cheese curd demand while avoiding running short in the future. Despite this, we were still able to increase cheese curd sales by 15% in 2022.

Our crew continues to battle different aspects of cheesemaking that are causing disruptions. We are adding processes and equipment to more adequately handle disruptions so we can better process wastewater. Moving the cut and wrap to Menomonie offered efficiencies that allowed us to add more retail customers for 2023. Being more efficient is important and we continue to look for ways to add and supplement our system for better operations in the future.

We continue our process of transitioning ownership of our Comstock Facility to Hastings Creamery and have been working closely with them to ensure the transition is a smooth one. Our strategy here is two-fold: We would like to see the Comstock location continue its legacy of cheesemaking and thrive in the community, and by having an additional line of value-added cheeses available to our sales team we can better position the creamery as our customers first choice in new cheeses. This is why we’re working with Hastings Creamery to not only provide a successful transition of the facility but to also support them in introducing their product to a new market.

As we look to 2023 our focus is on growing sales across all locations with key vendors, as well as taking on some new cheese curd retail volume with exciting new retail partners. Our team is looking forward to the opportunities the New Year will bring.