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Tips from on-farm processors: Pennsylvania farmers offer advice

Tamara Scully for Progressive Dairyman Published on 09 June 2017
Emily Montgomery's family's milking herd

“The turnout is incredible. It shows there is a definite interest in this,” said Jayne Sebright, executive director of the Pennsylvania Center for Dairy Excellence, addressing the crowd at the On-Farm Processing Forum held in Harrisburg in late 2016.

The Center for Dairy Excellence has resources, including information on grants, to assist producers in assessing options – including dairy processing – to enhance their farms’ profitability. Through tools such as profit teams, transition teams and dairy decision consultants, dairy farmers can have access to experts who can put decision-making into perspective and reposition the dairy for the future.

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Processing resources, including access to food safety representatives or branding programs such as PA Preferred, are also available (Center for Dairy Excellence - dairy-processing and Center for Dairy Excellence - business tools, business transformation and resources).

The experts for this forum were three dairy farming families who opted to enhance their income streams not by turning away from dairy farming but by capturing the value of their own milk. These farmers have added value to their bulk tank, taking raw milk and turning it into a sought-after consumer product.

They shared some tips for those interested in pursuing on-farm dairy processing based on their own lessons learned.

Way-Har Farms

Lolly Lesher of Way-Har Farms in Berks County recommended those interested in processing “go visit juggers, manufacturers, cheesemakers” and others involved with dairy processing. Seeing and hearing firsthand of the experiences, challenges and rewards can have a major impact.

The biggest obstacle may well be the Food Safety and Modernization Act (FSMA). “It’s huge,” Lesher said. At Way-Har, the FSMA has forced them to add equipment to increase the tests they run on their pasteurized milk, and it has been “a very expensive task for Way-Har to meet these regulations.”

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Regulations are burdensome for juggers, Lesher advised. With capital expenditures, equipment needs, zoning laws, various licenses for milk sales and distribution, and federal, state and health department requirements, plus mandatory testing – such as water tests, “you can easily rack up $1 million for an on-farm milk processing plant.”

The time spent keeping the necessary records and with “different inspectors and auditors that come to our dairy farm” is substantial, she said.

Milk labels have to be approved, and labels are needed in a variety of sizes. Large minimum orders can be expensive, and milk jugs are only available from three East Coast outlets. Add in labor for processing and bottling the milk, as well as for the retail store, and the cost of utilities involved in the processing, and there is “not a whole lot of profit” from the $3.46-per-gallon milk sales.

Lesher has served on several dairy profit teams assisting those exploring on-farm processing. Of the three farms she’s advised, none have gone ahead with on-farm processing after feasibility studies.

“Location really, really matters,” for fluid milk sales, and according to Lesher that was the ultimate factor that forced the dairies not to enter into on-farm dairy processing.

If you do offer direct sales of your dairy products, keep the farm separate from the processing and retail operations to limit liability.

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“Eliminate as much risk and liability. You don’t want to lose the farm,” Lesher advised. “I hope you like working with people. You won’t believe the questions you get.”

Klein Farms

Klein Farms Dairy and Creamery sells raw milk, and its location – just over the border from New Jersey, where raw milk sales are illegal – has played an important role in the farm’s evolution. The farm is not located on a main roadway but is near population centers, and raw milk draws people willing to travel to a farm with a reputation for safe practices and high-quality raw milk.

Raw milk sales have increased steadily since the farm’s sales began in 2004.

Raw milk regulations require quarterly inspection, monthly water sampling, and the farm performs twice-per-month milk testing – but there is not as much oversight as pasteurized milk.

“We can charge what we want for milk” and don’t have to pay fees, such as checkoff fees, because they sell only raw fluid milk, Layne Klein said.

They do pasteurize milk, not for fluid sales but for yogurt, cheeses and spreads, and have a bakery operation. They sell ice cream made on the farm from a purchased mix, not made from their own milk. Their newly built combined on-farm ice cream stand and store is already too small, but finances prevented anything larger.

“Plan for growth,” Klein advised. “Be prepared to accept credit cards,” and get “lots of crazy questions” from customers.

Being a destination farm requires liability insurance, including a $2 million policy for raw milk and farm products, and a $2 million policy for the farm property and agritourism.

Calkins Creamery

Honesdale, in Wayne County, is off the beaten path. Visitors to the farm store are few. Instead, Calkins Creamery ships their aged raw milk cheeses, with sales via an internet store, and has product in over 150 retail outlets in Pennsylvania, New York and New Jersey. They also make pasteurized cheeses.

Sales are increasing each year since cheese making began in 2006, but along with the increase in sales, there is increase in paperwork, employee training, FSMA regulations and hazard analysis, and critical control points (HACCP) plans, which are often required by wholesale customers.

“That’s really where the growth is,” Emily Montgomery said of wholesale outlets. But they require product liability policies – as much as $5 million.

Some concerns for those going into processing include having an adequate, fresh milk supply; regulations – including labeling and packaging; and getting product to the customers.

The cheese-making operation pays the family’s dairy farm for the milk, helping to keep the dairy profitable, similar to what occurs at Way-Har Farms with the jugging operation.

Carefully selecting product names to avoid those which are defined by government regulation – like cheddar – and meeting certain percentages of fat, protein, moisture content and other variables, is prudent to avoid fines. No one ever told her about that, Montgomery said, and she wants others to realize the implications.

“Quality is your main thing. If there is any chance something is wrong, throw it away,” she emphasized.

Random state inspections every three months, plus random tests from the FDA, particularly for listeria, can be cumbersome.

“Study the sanitation requirements,” and use expert cheese consultants to help design your facility, reducing bacterial risks, said Montgomery, who has a degree in food science.

While each dairy is different and approached the decision to add value to their products in a different manner, they’ve all faced challenges along the way. Each individual lesson learned can help pave the way for other dairy farmers and help to make on-farm dairy processing a realistic option for some dairies.  end mark

Tamara Scully, a freelance writer based in northwestern New Jersey, specializes in agricultural and food system topics.

Learn more about each of the three operations featured in this article.

Way-Har Farms

Klein Farms

Calkins Creamery

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