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Why Consider Off-Farm Dairy Processing?

By Fay Benson
The purpose of this article is to help dairies that are interested in having their milk processed into salable dairy products. Off-farm processing will alleviate the considerable time, effort, and expense of creating a farmstead cheese house.  This alternative method of dairy processing can have benefits such as:

  1. Off farm processing reduces capital to enter a niche market
  2. Centralized processing reduces labor by New York State Inspection Personnel, which in turn could increase food safety.
  3. Spend more time marketing and less experimenting
  4. If the new venture does not fit with the farms’ goals, it’s easier to quit the venture before large amounts of capitol and time are expended.

The following are issues, regulations, and suggestions to get raw milk from farm to a processor and back to farms for retail.  Following the article is a budget to help figure a business plan for the processing of raw milk into dairy product, which can be sold direct to consumers.  More information and application for licenses can be found at:  http://www.agmkt.state.ny.us/DI/DIBusiness.html#0
Involving the staff at NY Ag&Mkts Milk Control Division can save the farmer much time and frustration in this endeavor.
Choosing a Processor:
If you are interested in diversifying your dairy’s income, selling dairy products directly to consumers is a possibility. The potential to take 10 lbs of your milk which is worth $0.20/lbs when milk prices are at $20/cwt, and sell that 10 lbs as 1 lbs of cheese for $10 to $20, you are left with a gross margin of $8 to $18 for every 10 lbs of milk. Like any change in a farm’s business structure, planning is crucial to limiting risk to the existing structure. Conversations with farmstead cheese producers have highlighted certain pitfalls that can be avoided by breaking the change into components or “small steps”. These steps include:

Approximate Cost of Production for Hard Cheeses

Based on information from Marge Randles – Argyle Cheese, Argyle NY
All figures based on starting with 3000 lbs of raw milk, which will produce approximately 300 lbs of hard cheese. There was no charge for cost of milk only production costs.
Labor:
Cheese Production, collecting, forming, and cleaning
15 hours @ $20/hr $300
Turning Cheese in Storage for 60 days
8hrs @ $20 $160
Transport of raw milk to cheese house: approx. $ 80
Ingredients: $25
Utilities:
@ $20 / month X 2 months $40
Misc. $10
Return on Cheese House investment:
@ $3.00/ cwt X 30 cwt $90
Total to produce 300lbs hard cheese $705
Or $2.35/ lbs of hard cheese

  1. Producing high quality milk. The old adage “Garbage in, garbage out” is especially true with dairy processing. Any farm considering selling a product made from a sole source of milk needs to first assure the quality of that milk.
  2. Choosing a Cheese maker.  After milk quality, the cheese maker has the most influence on the outcome of a quality product. It stands to reason that every cheese maker has to make a certain amount of bad batches. Choosing a cheese maker should involve tasting their cheese over time to see if they can repeat quality every batch. An exceptional cheese maker can tell which dairy products would fit the “nature” of a farm’s milk. There are more nuances to a milk’s structure due to the animal’s diet than can be measured just by its makeup of protein, fat, and quality. This is referred to as the milk’s “gout de terroir” or taste of the soil. Research completed by Cornell’s Peter Van Soest looking at grazing dairy cows in Italy showed that plants grazed by a milking cow had profound effect on cheese flavor. Other questions which need to be addressed:
  • Is their cooler large enough to store your product?
  • Is their aging facility large enough to handle your product?
  • How will you identify each individual cheese?
  • There are more questions then can be listed but these will give you a start

 

  1. 3.    Retailing the product.  Many farmstead cheese producers comment on the amount of time it takes to retail their product. Packaging is a component of retail and there is much time invested in designing logos and containers. In addition any package decisions have to be approved by governmental agencies. Once the products are packaged the least time consuming method is to sell direct at the farm but many producers also sell through: Farmers Markets, wholesale through regional marketers, CSAs, and other marketing avenues.

The Reasoning behind Off-Farm Processing

Transporting the raw milk to the processing site:

• Milk Dealers License is not needed if each farm is moving less than 3000 lbs per month.
• Drug Testing, as long as milk is not co-mingled with another farm, there is no need for drug testing
• Transporting Milk – talk to the Certified Milk Inspector (CMI) through NY Ag&Mkts about the container you use for transporting the raw milk from the dairy to the dairy processing site, the tank needs to conform to road regulations as well as contain milk transfer pump and an approved cleaning procedure.
• Milk Samples are required to be taken and the time of pick up by a “licensed receiver” This license is relatively easy to get.
• Milk Samples – it is suggested that the samples should be kept refrigerated until the milk is processed. It is recommended that the samples should not be tested, but if there is a problem with processing the samples can be used to help isolate the problem.
• If samples are analyzed for instance at Dairy One, the results need to be shared with farm’s CMI (certified milk inspector).
• Regulations and Inspections during milk processing are all handled under the license of the processing plant.
After the milk is processed there are two levels of licensing required by the NY State Department of Agriculture for the sale of processed dairy products. First there is the license and regulations for display of the dairy product and the other is to age, cut and wrap and display of the product.
• The simplest method to go from newly processed products to direct sales would have transport, cheese cave, and cut and wrap area are all covered by the cheese house permit.
• If dairies want to cut and wrap and do retail at their farm they need to contact  Div, of Food Safety & Inspection: Evelyn Miles (585) 427-2273 900 Jefferson Road Suite 1200 Rochester, NY 14623
• She explained that there are two different licenses for the retail portion.
o First the Display License (article 28), which allows the on-farm store to keep wrapped or packaged products in a refrigerated display case for retail sales. The cost is $150/year.
o Second is article 20-C, for cut and wrapping or any minor food processing such as cooking hot dogs or heating a pretzel. Cost $400/year In addition there is a requirement for:
 a hand washing sink,
 2-3 bay sink for utensil washing
 Annual Nitrate Water Test
 One-time Nitrite Water Test
 Quarterly Bacteria Water Test

If you decide to sell your milk directly to consumers, a logical way to get started is to eliminate the processing step outlined in #2 above. This would allow you to focus on steps one and three; the first step of producing quality milk is one you are already involved with and will only take a limited amount of time and investment to bring to the level required for direct sales to consumers. Step three, or retailing will be your new job and will take a considerable amount of preliminary time and investment to accomplish. It is also the area where there can be the most profit return for time invested. The demand by consumers for farmstead cheese is increasing but so is the supply. From a conversation with a NY State Milk Inspector I learned that this year alone we will see 50 new farmstead cheese operations being licensed. In other words the novelty of farmstead cheese isn’t as novel as it once was. Retailing your product will become critical. The information on the number of new operations also shows the workload being absorbed by NY Department of Ag’s inspectors. Off-farm processing would reduce the number of cheese houses needing inspection.
By sidestepping doing your own dairy processing, you will be able to try your hand at retailing without investing: The capital required to build a cheese house with equipment including a pasteurizer is in the neighborhood of $100,000. You’ll save the time it takes to learn how to make hard cheese, soft cheese, yogurt, quark, shmier, or any of the other numerous possibilities of products. The time factor is one that many don’t take into account; it takes a considerable amount of time for experimenting with different enzymes, molds and processes to make the different products. Many farmers don’t count this time since it is fun. Finally, you avoid the dillemma of assessing the quality of your own cheese. Saying a cheese has a delightful after taste may in reality be just bad cheese. A beginning cheese maker or their spouse, who is trying to support the new venture, would not be the best judges of cheese.
By choosing an experienced cheese house to process the cheese, you can avoid much of the time and investment of processing and see if direct sales is the right fit for your farm. If after a period of time you feel you have the quality milk, the ability, and the avenues to market, then you can decide if a cheese house is a good investment. The other benefit of off-farm processing is avoiding food safety inspections and permits which are required for farmstead cheese processing.
As stated earlier there is a customer base in New York to support increased sales of dairy products, but the farmstead cheese market needs to start focusing in on the quality of product. The key to that movement is to educate and allow cheese makers to become experienced in their craft. This is another benefit to promoting off-farm processing:  it allows the farmer to make the best quality of milk unique to their surroundings and allows the cheese makers to focus on raising the quality of cheese production to that which is seen in other countries.
Fay Benson is a small dairy educator with Cornell Cooperative Extension of Cortland County.  He may be reached at 607-753-5077 or afb3@cornell.edu.

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