EDITOR’S NOTE: From milk supply, pro-curement access and rural impact to consumerdemand, new products and efficiencies … Thisis the first in a two-part series that examinessome of the good, the bad, and the ugly in theEmpire State, to offer background as a spring-board for solutions.

By TAMMY GRAVES andSHERRY BUNTINGSpecial for Farmshine

NEW BERLIN, N.Y. -- While fluid milksales continue their trend ofdecline, consumer demand forother dairy products is a brightspot in the Northeast. Annualestimated total fluid milk salesin 2010 declined by 1.4% from2009, according to early-2011data from the USDA’sAgricultural Marketing Service.

Everyone -- from dairyfarmers and media outlets, tocounty economic developmentboards and state and federallawmakers -- is talking aboutNew York’s dairy resurgenceand its expected positiveimpact on dairy farms andrural communities.

New York State is home toabout 110 dairy processingplants of which 30 are fluidplants. More noteworthy,today, is Chobani, the leadingyogurt brand in the UnitedStates, according to markettracking software that tabu-lates retail sales by brand.

Chobani Greek Yogurt isproduced in New Berlin, Townof Columbus in ChenangoCounty, near South Edmeston,N.Y., where in 2010 theyexpanded the former KraftFoods’ plant purchased in2005.

The brand name comesfrom the Greek “chopani,”meaning “shepherd,” andsymbolizes “unconditionalgiving that comes from theheart.”

“It’s a word that is near anddear to Hamdi’s heart,” saysNicki Briggs, Agro Farmadirector of communications.The Turkish born Agro Farmafounder, Hamdi Ulukaya, hadthe vision for Chobani.

Like an oasis in what wasfast becoming a Central NewYork desert, Chobani is lead-ing a yogurt explosion that isgiving jobs and economic

vitality back to the region. The company is alsoknown for its charitable contributions.

Other Greek yogurt production in New Yorkincludes the Fage brand in Fulton County,which is in the midst of an expansion construc-tion project. There are also plans for AlpinaFoods to open a yogurt-production plant inGenesee County.

What is Chobani’s impact on New York’sdairy industry? Are dairy farm families posi-tioned to mutually benefit from the yogurtexplosion here? Agro Farma’s Chobani yogurt,for example, is a new dairy product in a tremen-

dous growth phase (300% growth in the pastyear).

Is Greek-style yogurt a silver bullet for sus-taining the foothold and footprint of dairy farm-ing within New York’s landscape of economicvitality, environmental stewardship, and com-munity revitalization?

Is expanding production in New York Statepossible for Chobani brand owners?

Do current milk marketing models pass-through enough premium in the mailbox milkprice to move milk from New York’s dairyfarms to in-state plants that need more of it?

And will enough price incentives be passedback to help these dairy farm families stewardthe state’s dairy-friendly natural resources byproducing more milk for the growing demand?

THE GOOD: A dairy processor in NewYork State has a supply of raw milk.

It takes three pounds of milk to make onepound of Chobani Greek Yogurt. At the end of2010, New York State held its rank as third inthe nation for milk production (althoughUSDA’s most recent report for May showedNew York’s production fell 1.4% below year

turn to page 14

Farmshine, Friday, July 15, 2011 — 3Being a dairy processor in New York State (part 1)

Close look reveals the good, the bad and the ugly

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Close look from page 3

ago, while total U.S. milk production increased1.3% above year ago).

NYS Department of Agriculture andMarkets reports the total amount of cow’s milkused in production at New York State dairyplants for the month of December 2010 was0.83 billion pounds (830 million pounds).During this same month, NASS reports that thestate’s dairy herds produced 1.07 billionpounds of milk.

Chobani, which employs 600 people, wasreceiving 40 million pounds of milk per month(22 trucks x 26.5 days) according to DFAreports in December 2010. As of May 2011,Chobani was receiving 65 million pounds ofmilk per month (35 trucks x 27 days). AgroFarma’s Chobani plant expansion that began in

August 2010 provides a 55-truck load capacity.Agro Farma has a 7-year, full-supply con-

tract with Dairy Marketing Services (DMS).DMS delivers 1.96 billion pounds of milk permonth (942 trucks/day) to various plants,including Chobani.

Information at the DMS website explains themilk marketing organization annually marketsapproximately 16 billion pounds of Northeastmilk, produced by more than 8000 farms, andmanages a hauling system of 180 contract milkhaulers delivering more than 900 loads per day.The DMS website also notes that the milk mar-keting organization was established through anagreement between Dairy Farmers of America,Inc. and Dairylea Cooperative, Inc. in 1999 “toensure that Northeast dairy producers have asuperior market and return for their milk.”

DMS is self-described as “(serving) dairyproducers, and the industry, by combining themilk supplies of independent and cooperativefarms for the purposes of creating efficiencyand the reduction of cost on milk assembly,field services and transportation. With DMS, alldairy producers can effectively and efficientlymarket milk in the most profitable manner,”according to its website information.

(Note: DMS did not provide answers toquestions submitted with this author’s inter-view request.)

When asked about milk procurement, AgroFarma vice president of operations KevenBucklin states: “We are not against any supplymodel and are open to any idea.” He says hewill discuss supply opportunities with inde-pendent cooperatives.

“Our Chobani plant is driven by wheneverand wherever we can utilize local resources,like local farmers and local contractors.Whenever we can partner with a farmer, it’s agreat place to start,” adds Bucklin, noting thatAgro Farma has built its companies by startingwith mother-nature and farmers.

Born on a South Dakota 70-cow dairy farmowned and operated by his brother, Bucklinsays: “I enjoy being part of a company that isbringing excitement back to the dairy industry.”

Greek-style yogurt has high levels of proteinand fewer calories than conventional yogurt. Itis said to be a health food disguised as a dessert.It is a snack, dessert, and offers culinary versa-tility in recipes.

Agro Farma owns and operates non-poolplants that are home to the Chobani GreekYogurt plant in New Berlin, N.Y., and theEuphrates feta cheese plant in Johnstown, N.Y.Non-pool plants do not have a direct-from-pro-ducer supply. Therefore, Agro Farma is notdoing a Federal Milk Market Order pooling,which allows sharing of the pool values.

On the other hand, Stewart’s Shops, withmilk bottling and ice cream production in itsdairy portfolio, is a pool-handler, with a pro-

ducer supply, balancing their daily supply, andsharing in pool values.

The New Berlin plant production historyincludes Kraft cream cheese and Breyersyogurt, immediately prior to Agro Farma’sfacility purchase. In Johnstown, N.Y., crumbledfeta cheese and feta in brine for food service hasbeen made since 2000 and marketed under twoname brands. The cheese is sold in 4-poundtubs to 33-pound pails to food service accountsmostly east of the Mississippi River. Bucklinsupervises production and manages operationsat both plants.

THE BAD: A dairy processor in New YorkState needs access to raw milk.

DMS markets milk production from variousstates, predominantly in the Northeast region,and records indicate around 63% of New YorkState’s monthly production is marketed byDMS.

Dairy Farmers of America/Dairy MarketingService (DFA/DMS) has 40% of its milk com-mitted to the fluid (Class I) processors, accord-ing to Federal Milk Marketing Order One. TheFederal Order requires only 10% of a handler’svolume to be sold for Class I/fluid.

In addition to the Federal Milk MarketingOrder One, there has been a Western N.Y. MilkMarketing Order since March 1987. TheWestern N.Y. Milk Marketing Order had 117producers delivering 358.2 million pounds in2009 according to its annual report. Its Class Iutilization of pooled milk was 50.7 percent of318.9 million pounds in 2009.

Agro Farma pays the minimum Class II(manufactured) price – plus premiums and han-dling – for milk used in their Chobani GreekYogurt operation. As much as 3.2 millionpounds of milk are received there daily. Theirexpansion began in August 2010 and providesa 55-truckload capacity, while it currentlyreceives only 35 trucks per day due to milk sup-ply access limitations.

“Our challenge is going to be milk supply,”says Bucklin of the Chobani brand. “We wouldlike to have 40% more milk volume for expan-sion. We would like to have the access to milkto continue to grow immediately.”

Rumors are growing in frequency and vol-ume that California will be home to a Chobaniplant to allow Agro Farma to ramp up itsgrowth.

Jennifer Tavaris of Commerce Chenango, aneconomic development entity, says there is noplanned expansion that she can comment on.Commerce Chenango assisted Agro Farmawith applying for a Community DevelopmentBlock Grant (CDBG) that provided funding totheir financial package when they purchasedthe New Berlin facility.

In New York State, the Office of CommunityRenewal administers the CDBG program,which provides financial assistance to eligiblecities, towns, and villages with populationsunder 50,000 and counties with an area popula-tion under 200,000, in order to develop viablecommunities by providing decent, affordablehousing, and suitable living environments, aswell as expanding economic opportunities,principally for persons of low and moderateincome.

Currently, the nation's leading yogurt brandis 100% produced at the New Berlin, N.Y.plant. However, news reports last week (July 8)indicate that the Norwich-headquartered AgroFarma has received about $18 million in feder-al new market tax credits to expand locally andhas also acquired a large Australian dairy man-ufacturer and distributor, Beads Foods, toexpand globally.

According to Bucklin, 95% of their yogurt-making milk is coming from New York and theremainder from Pennsylvania. Communitymembers, who have observed license platesduring milk deliveries, report milk is also com-ing from Canada and Ohio.

Please look for Part 2 of “The Good, the Bad,and the Ugly” (the "Ugly" and some more"Good") in next week’s Farmshine.

Turkish born Hamdi Ulukaya (left) founded

Agro Farma in 2005, the parent company of

Chobani Greek Yogurt. He is pictured here

with Keven Bucklin, vice president of opera-

tions at Agro Farma. Bucklin supervises pro-

duction and manages operations of the New

Berlin and Johnstown, N.Y. plants that pro-

duce yogurt and feta cheese, respectively.

Photo provided by Agro Farma

The brand name, Chobani, comes from the

Greek “chopani,” meaning “shepherd,” and

symbolizes “unconditional giving that comes

from the heart.” As the nation's leading

yogurt brand (by retail tracking) its fans are

known as "Chobaniacs," and they are empty-

ing store shelves in New York State and the

suburbs of Philadelphia. Chobani sold over

$500 million worth of yogurt last year and

now ships to stores in all 50 states. Access to

New York!s third-in-the-nation milk supply is

a hurdle for Agro Farma to meet the explod-

ing consumer demand for Chobani Greek

Yogurt.

Photo provided by Agro Farma