Two expansions in dairy processing in south-central Idaho are welcome news to dairymen, who are experiencing negative margins due to the state’s oversupply of milk.
Magic Valley Quality Milk Producers, a milk marketing cooperative owned by dairy farmers with a facility in Jerome, has broken ground on a $20 million project.
A mile and a half away, Commercial Creamery, a fourth-generation family owned business that produces cheese powders and snack seasonings, will break ground this spring on a $7 million project.
The projects are absolutely good news, said Rick Naerebout, CEO of Idaho Dairymen’s Association.
“Any expansion in processing capacity that increases the infrastructure supplied by dairy producers is a positive thing,” he said.
Magic Valley Quality Milk Producers supplies about 3 million pounds of raw milk a day to Idaho processing companies that manufacture such finished products as cheese and butter, said Alan Stutzman, the co-op’s general manager.
The processing component will allow the co-op to separate milk into cream for resale and process the remaining skim milk into either ultra-filtered skim milk or condensed milk, depending on the market, he said.
Additional capacity is expected to be up to 1 million pounds of milk a day and gives the co-op the ability to expand its market geographically, probably all over the U.S., he said.
“It’s another avenue for some of our milk,” he said.
Adding a processing component has been in the planning stages since about 2005. It’s the first phase in the co-op’s long-term plan for further processing milk into finished product, he said.
“It’s a long-term investment that will do what we needed to do,” he said.
The project is expected to be completed in about a year, he said.
With dairymen facing negative margins for the next six to 12 months, the investment by the co-op members is impressive, courageous and extremely positive, Naerebout said.
It’s certainly a help to the oversupply situation. But realistically, Idaho’s market is oversupplied by 1.5 million to 2 million pounds of milk per day. The expansion is significant but won’t completely solve the problem, he said.
“We still have more milk than the market can handle,” he said.
Over at Commercial Creamery, the company doesn’t use milk. But it purchases 40 pound blocks of cheese, millions of pounds annually, said Will Gilmartin, the company’s operations manager.
The expansion will potentially grow production of its dry cheese and seasoning spray powders 20 to 30 percent, he said.
“It will enable us to continue growing at the rate we want … and upgrade the facility and phase out old equipment at the same time,” he said.
The company sells its dry product in bulk to food manufacturers, such as tortilla and potato chip companies. But its products are also used in other products, such as rice and pasta dishes, frozen vegetables, entrees and dressings, he said.
The project is expected to be completed by the end of the year, he said.