Pasturing for profit

At least two Minnesota farm co-ops think the milk money’s greener on the pasture side of the fence. Whole Farm Cooperative in central Minnesota and PastureLand Cooperative in southeast Minnesota are marketing cheese, butter, milk and ice cream made from the milk of grass-fed cows.

Whole Farm Cooperative, a group of about 30 farmers who market together, has sold Grazer’s Cheese since 1998. The group also sells beef, poultry, vegetables, eggs, grain and other produce directly to consumers through Twins Cities churches.

The co-op targets consumers who share Whole Farm’s ideals: sustainable production methods, land stewardship and small, diversified family operations.

Two years ago, AURI helped the group add cheese to its product line. Co-op members Kevin and Brad Donnay make six varieties of premium cheese for Whole Farm at their farmstead dairy plant near Kimball. Whole Farm sells about 500 pounds of Grazer’s Cheese a month, says Herman Hendrickson of Little Sauk, the co-op’s volunteer cheese consultant and chief cheerleader.

Grazer’s milk coming

Having established a direct market for their cheese, co-op members are preparing to introduce Whole Farm “Grazer’s Milk” to their customer base. Fluid milk is “one tough market,” acknowledges Hendrickson, a retired Kraft Foods executive renowned locally for his love of buttermilk and milk — just about the only beverages he drinks. “There’s a short window of time to get your milk sold. But our dairy grazers want to try.”

The co-op will bottle at Pride of Main Street Dairy in Sauk Centre, one of Minnesota’s few remaining independent creameries. Pride of Main Street, which produces kefir, a fermented milk, will also make premium ice cream for Whole Farm. “We’ll be using the butterfat in our ice cream,” Hendrickson says. “So we’ll end up with a lot of skim milk, which we’ll have to find a market for.”

Grazer’s Milk will sell for about 10 percent more than standard retail, making the brand competitive with other specialty milk, such as pro-biotic and organic, Hendrickson says. “We price from the bottom up. We calculate the return our producers want and add production, processing, and distribution costs to arrive at the customer price.”

Whole Farm dairy producers hope direct marketing will boost their returns on milk to $18 per hundredweight. That’s about 50 percent higher than current average prices, which have fallen to historic lows.

Access the main concern

It wasn’t just low milk prices that prompted members of a Rochester-area cooperative to create their own brand of cheese and butter.

It was mainly fear they would have no place to sell their raw milk.

“We all have low-cost operations,” says Dan French of Dodge Center, president of PastureLand Cooperative, a group of six southeast Minnesota milk producers who use intensive rotational grazing. “We can produce milk as competitively as anybody, as far as price. For us, future market access was the biggest driver.”

The co-op’s members manage small dairy herds, ranging from 65 cows to 165. As small, seasonal producers, “we are concerned about being locked out of the market,” French says. Those fears are heightened by consolidation throughout the dairy food chain and by regional shifts that are pushing the dairy industry west and south.

Their own label

PastureLand growers had been meeting informally for several years to talk about finding new outlets for their milk.

They also wanted to get more value from the distinctive qualities of their milk. Grass-fed cows produce milk with high levels of certain nutrients, including Omega-3 fatty acids, beta carotene and conjugated linoleic acid, French says. There’s evidence these nutrients have important health benefits, he says, but their value is lost in commodity marketing channels.

Growers decided on marketing their own brand to preserve those qualities. In 1999, with help from AURI and the Minnesota Department of Agriculture’s Co-op Development Program, French’s group formed a marketing cooperative to sell grass-based dairy products under the PastureLand brand.

What matters most

Last spring, Eichten Cheese of Center City, Minn., began processing cheddar and gouda for the co-op. Members sold the cheese at the Rochester Farmers Market, moving 1,500 pounds the first season. Though labor intensive, selling at the Farmers Market was a good way to test consumer response, French says. “We were trying to see what people were interested in.”

What mattered most to consumers?

“Taste and quality,” French says. “We found that if we could get people to taste our cheese, our rate of sales was very high.”

Buying a locally made product was important to consumers, too, the co-op learned. “People want to know who they’re buying food from,” French says.

Customers also responded to PastureLand ideals — sustainable farming practices, environmental stewardship and humane treatment of animals. “To our customers, it’s important that their food comes from cattle in the pasture, not confined.”

Some responses were surprising. PastureLand growers don’t use antibiotics or bovine growth hormone. “That was important to consumers,” French says, “but not as important as we thought it would be. Taste and locale were bigger.”

Retailing footholds

At the Farmers Market, PastureLand developed a core of regular customers. That helped the group place cheeses in several Rochester-area food co-ops and HyVee stores. By working with local grocers, the co-op avoided paying steep up-front “slotting” or shelf fees, which often doom start-up food companies.

Last fall, PastureLand added butter; premium ice cream is in the works. And the co-op is exploring the fluid milk market. “But it’s much more risky,” French says, “more price competitive, more perishable. And we would need a hefty amount to interest a processor.” PastureLand looked at doing its own bottling, French adds, “but we’ve ruled it out for now. It’s too heavy an investment in money and manpower.”

PastureLand growers hope their marketing strategy will earn the equivalent of $17.50 per hundredweight of milk — about 35 percent more than average farmgate milk prices in 2000.

The PastureLand brand faces plenty of obstacles, acknowledges French, a former IBM draftsman who has been farming for 20 years. But the group believes demand for grass-fed dairy products will rise. French points to an explosion of organic milk sales, which jumped 73 percent between 1996 and 1997, and continue to grow at about 20 percent a year, according to a 1999 AURI market study.

“Organic milk is a good niche now,” French says. “But we think there’s going to be a lot of competition there soon. So we’re looking beyond organic to the next niche.”