Ingredients for Success

Written by Emily Battmer

When you go to the dairy section of your grocery store, you’ll see plenty of DFA products.

But branded, consumer-ready products such as Borden Cheese and Plugrá butter account for only a portion of DFA’s commercial investments. Almost half of DFA’s processing facilities are dedicated to producing dairy ingredients for sale to customers like Nestle and Mead Johnson.

“The term ‘ingredients’ means that we’re taking the raw milk and processing it into something that our customers will further process and add value to,” says Gary Wietharn, vice president of ingredients manufacturing.

DFA’s ingredients include cream, butter, anhydrous milkfat, butterfat blends, condensed milk, nonfat dry milk (NFDM), whole milk powder (WMP) and dry whey, among others. Some DFA ingredient plants also produce Italian-style cheese. These cheese products are considered ingredients because they are sold to regional and local restaurants and food service companies that are looking for local, high-quality cheeses, and are destined for further processing into pizzas, entrees and other products.

With so many ingredients on the list, roughly half of DFA’s manufacturing facilities are dedicated to producing these products. Sixteen of DFA’s 33 plants fall into the ingredients division, compared with nine that manufacture fluid milk and ice cream; five that process dairy-based foods and beverages, such as chip dip and coffee or energy drinks; and three that make products for DFA’s consumer brands, such as Keller’s Creamery and Cache Valley.

DFA markets almost 3,500 tankers of milk every day, representing about 30 percent of the market share of total U.S. milk production. Ten percent of this — about 350 tankers — is destined for one of these 16 ingredient plants.

There are several key reasons to invest in ingredients production, Wietharn says, but it all boils down to one purpose: to bring more value to DFA’s member-owners.

One of the practical reasons for ingredient manufacturing is balancing purposes. DFA balancing plants are strategically located throughout the United States to process excess milk after demand sales are met. This excess milk is converted into a form that helps DFA accomplish two objectives: balancing and producing ingredients for food manufacturers desiring a broader dairy ingredient portfolio, including products such as milk powders and cream.

“We need to be able to market and maximize value for our farmer-members’ milk,” he says. “And by converting it to ingredients like dry milk powder, that gives us more options. This is one of the best opportunities for us to process milk and maximize market channels for that product.”

Of these markets, some of the most exciting are those growing overseas. Wietharn says one of the biggest advantages of manufacturing ingredients is the potential to grow DFA’s global footprint.

“Our greatest potential, the reason we built the Fallon, Nev., plant, is that there’s a tremendous growth in demand for export. Global customers value reliable, high-quality dairy protein,” he says. 

Demand for dairy products in regions such as China, Latin America, Southeast Asia, the Middle East and Africa is increasing as the middle class grows. More people now have the money to purchase high-quality, nutrient-rich dairy products, including infant formula, a product that uses the milk powder ingredients produced at DFA’s Fallon plant.

The state-of-the-art Fallon plant, which began processing milk in April 2014, manufactures milk powder for overseas shipment and U.S. customers desiring high-quality dairy protein. The plant is the first that DFA built from the ground up, and it was designed specifically to meet global customers’ demands, with the capacity to process 2 million pounds of raw milk daily.

In addition to Fallon, three other plants commonly produce ingredients for export: Portales, N.M., Hughson, Calif., and Fort Morgan, Colo. Together, the four plants supply NFDM, WMP and skim milk powder to customers throughout North America, Latin America, Asia, the Middle East, North Africa and Australia, says Michael Lichte, vice president of dairy marketing and business planning.

Lichte says the markets change rapidly, but generally, Latin America and the Asia-Pacific region, which includes China, the Philippines, Taiwan, Vietnam, Indonesia, Malaysia, Singapore and Australia, are the leading markets for export sales.

“There’s a huge market out there for milk powders,” Lichte says. “And we produce more than we can use domestically. So if we didn’t export it, we’d have a problem.”

Each year, Lichte says the United States produces a total of about 1 million metric tons of NFDM. In contrast, the United States only consumes 410,000 metric tons. As a result, a significant percentage of U.S. milk powder — including the powder ingredients produced by DFA — is exported to foreign markets, where demand continues to grow.

The trend in rising global demand for U.S. dairy products like milk powder isn’t expected to change anytime soon.

“Global export sales have grown to encompass 12 to 15 percent of total annual milk production in the U.S.,” Wietharn says. “In just a few years, it could approach 20 percent. So that’s a huge demand in global markets for high-quality dairy protein, and the most effective way for us to ship it overseas is in dry powder form.”

Wietharn says the ingredients division will continue to pursue these global opportunities, but the future also holds some opportunities to continue improving existing processes and markets.

“We’re going to continue to look at new opportunities for additional plants in strategic locations, where there’s a need based on dairy production and where dairy farmers are growing,” he says. “Our other focus will be a continuation of raising the bar on quality, and I think you’ll see us continue to look for ways to find new markets for milk components.”

DFA’s ingredient plants

Roughly half of DFA’s facilities throughout the country are dedicated to producing ingredients, from milk powder, cream and butter to condensed milk. Our ingredient processing plants include:

  • Hughson, Calif.
    buttermilk powder, nonfat dry milk, skim milk powder, condensed skim milk, condensed whole milk, cream, bulk butter, condensed buttermilk
  • Turlock, Calif.
    condensed whey, liquid whey protein concentrate (WPC) 34, liquid WPC 80, cream, Italian cheese
  • Fallon, Nev.
    whole milk powder, nonfat dry milk, skim milk powder, powder blends, cream
  • Beaver, Utah
    condensed whole milk, condensed skim milk, cream and American cheese
  • Fort Morgan, Colo.
    nonfat dry milk, condensed skim milk, condensed whole milk, cream
  • Portales, N.M.
    nonfat dry milk, skim milk powder, milk protein concentrate (MPC), milk permeate, condensed skim milk, condensed whole milk, cream
  • Winthrop, Minn.
    condensed skim milk, condensed whole milk, sweetened condensed skim milk, sweetened condensed whole milk, cream, anhydrous milkfat, anhydrous milkfat blends, clarified butter oil
  • Zumbrota, Minn.
    buttermilk powder, nonfat dry milk, powder blends, dry whey, WPC 34, condensed skim milk, condensed whole milk, whey, cream, whey cream, American cheese, Italian cheese
  • Goshen, Ind.
    nonfat dry milk, condensed skim milk, condensed whole milk, cream
  • Cass City, Mich.
    condensed skim milk, condensed whole milk, cream
  • Adrian, Mich.
    nonfat dry milk, condensed skim milk, condensed whole milk, cream
  • Linwood, N.Y.
    skim milk, cream
  • Middlebury Center, Pa.
    whole milk powder, nonfat dry milk, condensed skim milk, condensed whole milk, cream
  • Reading, Pa.
    whole milk powder, nonfat dry milk, powder blends, condensed skim milk, condensed whole milk, sweetened condensed skim milk, sweetened condensed whole milk, cream
  • New Wilmington, Pa.
    nonfat dry milk, dry whey, WPC 34, cream, Italian cheese
  • West Middlesex, Pa.
    Italian shredded cheese