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0208 PD: Alaska’s largest processing plant quits, dairymen may dump milk

Ellen Lockyer Published on 14 January 2008

Four dairy farmers in Alaska’s Matanuska Valley may start dumping milk this month. And may be forced to shut down their operations unless stop-gap measures are put in place immediately.

The state-owned Matanuska Maid Dairy, a milk processing plant in Anchorage, Alaska, has been up for sale for months, but there were no takers so the production plant has been shut down, leaving local dairymen with no pasteurization and homogenization facilities. It short, it means no place for dairymen to sell their milk.

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The plant’s closure has been a long time in coming. A state panel decided in June 2007 that Mat Maid’s operating losses – over $1 million in 2007 alone – warranted closure of the 70-year-old processing facility. Joe Austerman, who has been running the business end of the plant for the state during the shutdown, says the demise of Mat Maid is symptomatic of a changing demographic and a changing economy.

“Alaska is a small market,” Austerman says. “The grocery and retail chains are no longer locally owned. The ability of Alaska to compete on a commodities level is challenged. Safeway can buy milk cheaper [than we can].”

Matanuska Maid Dairy, or Mat Maid as it was known to local residents, processed some 150,000 gallons of fresh milk a month, most of it destined for retail grocery stores and the commissaries of two Anchorage-area military bases.

During the plant’s heyday, in the 1970s and 80s, Mat Maid was the only operation in town, Austerman says. But in the early 1990s, Wal-Mart arrived in Anchorage and its Matanuska Valley suburbs. And then Carr’s, a former locally owned Alaskan grocery chain which carried Mat Maid’s milk, was bought out by Safeway in the late 1990s.

“Local dairy producers didn’t have enough milk to satisfy Mat Maid’s retail market,” Austerman says. “So about two-thirds of the milk we process now is shipped up from Washington State, which we buy at the going federal rate.”
Mat Maid is among five popular brands sold at local grocery stores. Supplementing local milk supply with imported milk worked for awhile, but when milk prices began to climb (reaching $24 per hundredweight last summer), the plant couldn’t pencil out a profit after adding in shipping costs.

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Mat Maid’s retail price for a gallon of milk in Anchorage was about $5.50, compared with Safeway and Fred Meyer’s price of $4.79 for their in-house brands.

Mat Maid plant manager Gary Nelson says big retail chains use milk as a ‘loss leader,’ using low milk prices to lure customers, then offsetting the loss with markups on other items, such as potato chips.

“The problem our business has always had in our model is that our biggest competitor is also our biggest customer,” Nelson says. “The people of Alaska want our product and ask for it on store shelves. But [Safeway and Fred Meyer] can integrate costs into the pricing on their own brands. We can’t . We have fixed costs as a small processor. We will always be the highest-priced milk on their shelves.”

Gary Nelson is among 48 employees who lost their jobs. He has worked for Mat Maid for 33 years. He says the plant started in 1936, when Depression-era farmers came to Alaska’s fertile Matanuska Valley under a federally funded program. The cooperative sold milk to local communities. In 1964, an Anchorage milk processing plant was built with a loan from the state – and the dairy business boomed along with the rest of Anchorage while the Trans Alaska oil pipeline was constructed during the 1970s.

Point MacKenzie, some 75 miles northwest of Anchorage, is the site of three of the remaining dairy farms that supply Mat Maid. The farms began because of a state plan to boost dairy production during the 1970s. Dairyman Wayne Brost bought a 1,000-acre repossessed farm from the state 12 years ago. He owns 200 head, most of them Holsteins.

“Right now, I’m producing 3,500 pounds of milk a day. That varies, seasonally, because I may have 20 more cows than I’m milking right now out on pasture in the summertime,” Brost says.

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Brost milks his 70 lactating Holsteins 2X in a double-6 herringbone parlor. With no tanker coming to collect his milk, Brost is examining his options. They are: Hang on through the winter until a market opens up at a fledgling cheese factory in Wasilla or slaughter his cows.

He admits slaughter is the last option.

“We are spending about $20,000 a month to run this operation. Wintertime is our lowest net profit time of the year. We are heating the barn, pushing snow around and not grazing on pastures, fighting subzero temperatures and spending more money on propane, diesel and feed for the cows. Obviously, if we are not bringing in a milk check, we will not go very long before we start hauling cows to the slaughterhouse. That’s just basic economics. That’s the way it is.”

But Brost, like other dairy farmers, is holding on to a glimmer of hope for Alaska’s dairy industry. A local entrepreneur, Kyle Beus, plans to open a cheese production factory, using locally produced milk to process the cheese. And, Beus says, in the future he plans to be selling fluid milk. But it’s bound to be March before cheese goes into production, and until then, the regular every-other-day milk pick-ups in the Matanuska Valley will cease.

Mat Maid made its last scheduled run on December 17. After that, Matanuska Valley farmers began selling their milk to a small dairy about 350 miles northeast of Anchorage in Delta Junction, called Northern Lights.

Northern Lights may continue buying a portion of the Matanuska Valley milk, but not all of it. Brost says dumping the 7,000 pounds of milk he produces every two days is the next step, unless some plan is advanced to salvage the stuff. He says he can spread it over his fields for fertilizer, or other farmers may use it to feed cattle or pigs. And there is talk of processing the milk and donating it to food banks, but Austerman says that is unlikely since the processing equipment at Mat Maid has been shut down. Brost says the state could have done more to help the dairy farmers.

“Now don’t you think it would be a good investment if they worked a little bit to keep four or five farmers here? I spend about a half a million dollars each year in this community. Well, there’s no way you are going to find any fresher milk. There’s no way,” Brost says. “It’ll be interesting to see during this transition from Mat Maid to this small plant in the valley whether or not the state wants to help.”

A last-minute proposal put forward by the state’s creamery board, a five-member panel which oversees Mat Maid’s operations, asks the Alaska Legislature for $200,000 to tide the valley farmers over until a plan can be worked out.

So it looks like this Christmas was the last most Alaskans will have toasted the holidays with fresh Mat Maid eggnog, as the venerable plant fades into history. PD

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