Continental Dairy, a dairy processor in Coopersville, Mich., processes more than 300,000 pounds of nonfat dry milk per day and exports product to roughly 17 countries around the world. COO Steve Cooper reflects on why his sector of the agribusiness industry is facing some challenges currently.
Where do you see the economy going in 2018 and how will that influence food processors?
I think we are going to low farm prices because, as far as nonfat milk or milk powder, there is a lot of powder on the world market right now. There is quite a bit of it in the E.U. now, and Canada has ramped up their exports quite a bit. Our farm prices, as far as milk, are basically driven by commodity prices, by cheese, butter and powder. We’ve had a good butter market for the last couple of years. I think we are still going to have a decent butter market. So, when you look at the skim milk market being at one of the lowest points it’s ever been at, along with a decent butter market, a so-so cheese market, I think we are going to see low milk prices.
Given the dairy sector is facing some challenges right now, how is your company positioned to weather any downturns?
The milk prices are heavily regulated by the federal government. On the plant side, if we got low commodity prices, we’ve got low milk prices coming in, so our margins are fairly OK, not great. If you are looking at this from the farm side, obviously the dairymen are going to be in a position where they are going to have to look at their costs of production and look at what they can do to ration things.
What can the producers do?
Within reason, they can change some of their feed rations. It kind of depends on the overall feed prices, if feed prices stay relatively low, which it has been. We are all going to have to tighten our belts. It is what it is. … We’ve suffered a downturn in the dairy markets, and we are continuing to sell. There is so much product out there in the world market that until we see some attrition of that product or some of these things work out with our exports, I think we are just going to be in this cycle of cinching up our belts and doing what we can do.
How do you see the discussions over NAFTA playing out next year?
I sit on the U.S. Dairy Export Council board, and, yes, we have talked about (NAFTA) ad nauseam, but we have to get something settled. If you look at it, Mexico is too big a trading partner for us and too important of a trading partner for us that we just can’t push that (issue) aside. On the other hand, we have to get that Canadian situation under control, and clearly Canada is doing some things that are in violation of NAFTA and a violation of a lot of the tariffs — with what they are doing with their new (pricing deal) and obstructing some of our product going in there as well. It’s paramount that we get this under control with the Canadian situation. I think it’s doable, but the dairy lobby in Canada is very strong.
Looking ahead to 2018, what’s keeping you up at night?
There are a lot of things that keep me up at night. I think we have some challenges ahead of us as an industry with the Food Safety Modernization Act. A lot of those regulations are getting clearer definitions, and we have compliance dates that we have to achieve. I think we are prepared for it. I think the biggest thing keeping me up are these poor markets, thinking about when we will rebound. Seeing that rebound of these markets and getting some of the production under control, we can start seeing better prices with our commodities.