Scenic Central: Still running with no debt

Jan Shepel
Now Media Group


The past year has been a challenging one for the dairy industry and for staff at Scenic Central Dairy Cooperative, said co-op president Clayton Bare last week at the annual meeting of the group in Richland Center. But, he added, the staff did a really good job of 'meeting the challenges before them' — including finding homes for spot loads of milk — and 'got better at doing their jobs.'

Ron Statz, the cooperative's general manager, said milk production from co-op members exceeded 510 million pounds in 2015 — a growth of 13 percent from a year earlier.

Most of the growth came in the Scenic region of the cooperative's procurement area — south-central areas of Wisconsin. It is one of five regions in which the co-op operates.

The cooperative had $107 million in sales and kept its operating budget to about 19.3 cents per hundredweight. Scenic Central's 'cost of sales' was $106 million and its operating income was $97,701. Board and management set those goals each year and strive to meet them.

'Our goal is to return as much profit to producers as possible,' Statz said. 'In most cases the more milk we add helps lower our cost per hundredweight.'

Statz said that 99 percent of the cooperative's monies go to producers in base price and component programs for their milk. 'Our goal at Scenic Central is to operate on one cent out of a dollar.'

The co-op began in 1999 and by 2002 it was handling 44 million pounds of milk with sales of $6 million. Board members must be involved in the daily milking of cows and shipping of milk to the co-op. 'The board hasn't put a cap on where we intend to grow but we know it has to be smart growth and the goal is never to change the idea that we have no debt,' he said as he showed members a slide proclaiming in big block letters 'no debt.'

'I never want to have to change that slide,' he said.

The cooperative also operates a program for its member-owners by which Scenic Central contributes to an annuity investment if producers contribute. Statz said that since the program began, members have invested over $2 million into their own individual retirement investments and Scenic Central has contributed $1.5 million. (The reason the two amounts aren't equal, despite the 'matching' program of 5 cents per hundredweight from the coop is that some farmers put more of their own money into their annuities – an amount greater than that which is matched by Scenic Central, Statz explained.)

He said he isn't sure about the total value of these investments because the farmers own them outright and the cooperative is not entitled to that information.

Co-op members also heard from dairy editor Pete Hardin, editor and publisher of The Milkweed, a monthly dairy newspaper, who noted that the normal predictors for dairy prices don't seem to be working these days.

'The crystal ball is clouded today as trends we once would have seen would predict better prices,' Hardin said. 'Milk production in New Zealand is down, California is down. New Mexico lost 12 percent of its dairy cows in a freak blizzard and Texas lost some as well. But none of those factors seem to be bringing our prices up.

'I thought we'd see a couple of bad months into 2016 with low milk prices and then it would improve, but weather and economic conditions continue to pull milk prices down,' he added.

These impacts may be part of a 'structural change' in the dairy business, he said, as the big interests get really big.

Hardin also called attention to what he called a 'lack of integrity' in some dairy circles, like the recent news stories relating to packaged Parmesan and Romano cheese products that contained 7-10 percent cellulose. 'Obviously that's cheaper to put into something labeled cheese than cheese would be.'

The U.S. milk supply could probably also benefit from some kind of supply management if dairy producers are to expect to make a decent profit, he added. In the Northeast and as nearby as Michigan, there is so much milk that it overwhelms the processors and it has to be dumped.

He noted that in some regions the cream is skimmed off before it is dumped and presumably dairy farmers are not paid for that lost value – another instance of a lack of integrity in the industry.

Hardin also criticized the federal dairy program. A review of USDA data from last year showed that for every dollar dairy farmers put into the Dairy Margin Protection Program, they only received one cent back. He said it is not a valid safety net program because of several deficiencies in the calculations.

Milk production, Hardin said, is moving away from the West Coast and to regions of the country where there is ample rainfall and groundwater, including Ohio and Wisconsin.

Despite lower or non-existent profits on the dairy farm Hardin urged farmers not to skimp on minerals for their cows' ration because long-term benefits in breeding and health are related to those minerals.