Big news recently came to the Northeast United States. Coca Cola plans to put a 100-acre $650 million Fairlife milk facility near Rochester, New York, which is a central location in the region and one that sits just off the main highway, making it very accessible to the most dairy-dense places in the state. Officials estimate the site will create 250 new jobs in the town of Webster, and the hope is for the site to utilize 5 million pounds of milk per day!
If you want a clearer picture of what that looks like, an average New York dairy is producing around 85 pounds of milk per cow per day, so 5 million pounds is roughly 59,000 cows needed per day to supply the Fairlife plant.
It’s a great time to be involved in dairy in the Northeast, but for those who are not be as connected to this world, many may wonder how milk is bought, sold, and marketed? For example, are farmers able to sell directly to the Fairlife plant?
For starters, milk is a tricky product to handle because it is picked up raw, it needs to stay ice cold, and it has to be processed right away. Moving milk has to be a quick job — small hold ups or truck malfunctions can lead to milk having to be dumped!
Because milk needs to move fast, it can’t go through auctions like most livestock and some produce. Plus why send it through an auction — it’s generally the same from farm to farm! But dairy farmers also don’t typically sell right to a store like some other types of farming sectors do.
Dairy farmers sell their milk to a cooperative, which is a business that is collectively owned and controlled by those who benefit from its services. Dairy farmers get to run to be elected to a board, which has some say in the cooperative, but farmers don’t get to say whether their milk ends up in Walmart or Target, or gets made into gallons of milk or pints of ice cream.
To fully understand how milk is moved from cow to you, let’s compare it to lemonade stands in a busy little town.
This pretend town has a dozen kids who are selling lemonade in their driveways every day, and they’re all over town. One day the kids band together to talk about profits, and they realize that one part of town gets way more business than the others. Rather than leaving some kids in the dust, they decide to join forces and set up one lemonade stand in the most profitable corner of town.
The kids realize that their recipes are all pretty similar, so they’ll all make lemonade in the morning, bring it to their communal stand, dump it all in the same cooler and sell it. Each kid makes as much as they can, and they’ll reap a corresponding profit.
After opening they realize they aren’t doing as well as they thought, the lemonade customers didn’t all know where the communal stand was, so the kids all put a percentage of their profits back in the bag to save up for advertising. In the dairy industry, we call this checkoff dollars: Each farmer pays 15 cents per hundred pounds of milk (abbreviated as cwt) to go into local and national milk marketing.
Now that they are advertising, profits are up! But, it’s now July, and people don’t want a sugary glass of lemonade when they’re sweating! So the kids sit down and discuss. They say we’re going to take 75 percent of the lemonade and turn it into popsicles, the rest will be sold as lemonade.
Since the popsicles reap a different profit than the lemonade, the kids are going to receive a different pay per cup of lemonade at the end of the day. Their pay per cup will change again when the weather turns cool and they need to start selling lemon tea rather than lemonade. In the dairy industry, we call this a blend price. Our price per hundredweight we get paid for is based on the price per hundredweight of fluid milk, cheese, butter, and other dairy products being made in processing.
This really is how buying and selling milk works. Farmers join a co-op (i.e. the communal lemonade stand), they pay someone to pick up their milk every day if they can’t haul it themselves, and they get taxes out of their checks for promotion, among other things such as membership dues, service fees, or equity payments.
Now back to Fairlife, not all the details have been released, but it’s likely that farmers will not be selling milk directly to Fairlife. Surrounding co-ops will be selling milk to the Fairlife plant. It would be as if the next town over from our hypothetical lemonade entrepreneurs wanted to start a stand but didn’t have kids to make the lemonade, the kids would ramp up production and sell to the next town over.
Even if farmers aren’t selling directly to Fairlife, this plant is a much needed reprieve in the industry and will have a huge positive impact on dairy farmers in the Northeast U.S. Fairlife made over a billion dollars in sales in 2022 and seems to be continuing to grow! Having a Fairlife processing plant in New York will get their products on shelves faster in one of the country’s most populated states.
To learn more about how cooperatives work, here is a great article by Dairy Farmers of America!
Elizabeth Maslyn is a born-and-raised dairy farmer from Upstate New York. Her passion for agriculture has driven her to share the stories of farmers with all consumers, and promote agriculture in everything she does. She works hard to increase food literacy in her community, and wants to share the stories of her local farmers.
