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...integration milk manufacturing/processing sectors, new trade rules and practices, and changes government programs.
These factors contributed to the trend of consolidation and mergers among dairy cooperatives, which accelerated during the waning years of the century. As a result, just four cooperatives marketed 49 percent of all the milk marketed by cooperatives, or 41 percent of all milk sold to plants and dealers in the United States in 2002 (Ling).
Furthermore, the four largest dairy. cooperatives marketed 74 percent of the natural cheese, 76 percent of the nonfat-dry milk and 80 percent of the butter produced by cooperatives. (The make-up of the top four cooperatives varies, depending on dairy product).
However, in spite of these trends (or perhaps because of them) there was another marketing development in the 1990s. While many dairy cooperatives were growing larger in size and scope, there was corresponding growth in interest by milk producers in "niche marketing."
Niche marketing means that members' milk is manufactured into specialty or branded dairy products for specific market segments. These activities are typically conducted on a small scale.
The idea of niche marketing is to add value to member milk by producing a unique product, capitalizing on its specific attributes and selling it to a relatively narrow target market. The increasing interest of consumers in where their food comes from and how it is produced has created a growing market for products with attributes such as "organic," "artificial hormone-free," "pasture-based" (grazing), locally produced and "freshness."
Co-ops and niche markets
While some producers have delved into these activities individually, others have banded together with like-minded dairy farmers to form small cooperatives to market milk into these niche markets. These efforts have been spurred on by several factors: the need to preserve a market outlet, milk production style, and/or producers' desire to generate added returns on their milk above what their traditional outlet offers.
In at least two cases, niche-market co-ops were formed when milk buyers would no longer accept producer milk via their established delivery method. Thus, to preserve an outlet for their milk, they decided to own the outlet themselves. The option of adopting new technology on the farm to meet market demands was not available to them due to religious considerations.
Similarly, another group of producers found that the payment plan they had enjoyed from their milk buyer was being terminated. They banded together to seek markets that would continue to pay them premiums based on the quality and composition of their milk.
Other producers that formed niche-market co-ops shared the belief that consumers desire, and will pay for, certain special attributes of their milk. These select characteristics arise from production techniques that they believe affect the quality of their milk (and resulting dairy products). These include no use of artificial hormones, pasture-based production, organic production, the breed of dairy cow, the location of the farms and the size and ownership of the dairy farms.
Furthermore, some of the members were small-scale producers, hard pressed to make a living in an environment of increasing costs and volatile milk prices. They sought continued viability for their farms by capturing a higher return through these specialized cooperatives.
These producers may look for additional revenue from niche markets rather than attempt to gain efficiencies through traditional means (such as increased size of farm operation). In...
NOTE: All illustrations and photos
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