Considerations for On-farm Processing

- [Mat] Good afternoon.

This is Mat Haan with Penn State Extension.

I'd like to welcome you to this month's edition of the dairy management Monday webinar series.

Today's presentation will be considerations for on farm processing presented by Ginger Fenton and Samantha Robinson, both with Penn State Extension.

Before I turn it over to them for the presentation I just wanna walk through a few housekeeping items for everybody who might be new to this webinar series.

If you're having any audio troubles down the lower left hand corner of your screen, you should be able to find a little tab that says audio settings.

If you click on that tab a box will open up and be able to adjust the audio settings within the zoom interface there, or you can also adjust audio on your computer controls also.

So either one of those should be able to help you if you're having trouble hearing us.

If you have a question as we go through today's presentation or comment, we'll be using the chat function to do that.

So also in the lower center of your screen, there should be a little button that says chat that's highlighted down here.

If you do have a question or comment, just click on that chat and a pod will open up, you'll be able to type your question in to that chat screen, there.

You will also be able to direct your question to either all panelists and attendees or just to all panelists.

However, you want to send that out.

So that's how you will communicate with the presenters today.

If you want to go to a full screen mode on your computer, so kind of bring in larger image, there is a icon just down there just click enter full screen and the upper right hand corner of your screen.

If you want to address all the full screen mode, click on the Escape key and that'll take it to shrink it back down to a smaller screen there so you can adjust the screen to your preferences.

This webinar is being recorded as are all webinars in the Dairy Management Monday Webinar Series as well as the other Penn State Extension webinars.

So once we get the today's program finished up, it'll take about a week or so before we get it loaded up to the Extension website, but it will be available there for your viewing.

After that, so if you have to leave early or if you want to recommend this program to a co-worker, it will be available for you to do that.

All right, so without any further delay, I will go ahead and give it turn over to Samantha and to Ginger.

I believe Samantha is gonna start off are you there?

Sam?

- [Samantha] Haan, can you hear me?

- [Mat] I hear you fine.

Okay, so let me stop sharing this screen and let me get you your presentation powered up here.

The second here.

There we go.

All right, so everybody should be seeing the title slide there for Sam and Ginger's presentation.

So, I'll go ahead and turn it over to you.

I will mute myself but I will.

- [Samantha] Okay.

Hello, everyone I'm Samantha Robison.

I just want to introduce myself and my colleague Ginger just briefly, to give you some of our backgrounds.

I'm a dairy business educator located in Cumberland County prior to joining Penn State, I worked in private industry as the Director of Training for an agricultural business firm.

I also worked at one of the world's largest dairy manufacturing companies as a production supervisor in one of their great a facilities producing various types of yogurt.

My colleague Ginger is also an Extension Educator.

She is based in Mercer County.

She does programming and milk quality, value added dairy and food safety and FSMA for the animal, food and dairy processors.

So, if you go to the next slide, so a quick presentation overview so you know what you're gonna get out of this webinar, knowing your numbers, motivation and management, preparing a business plan, what is value added, regulatory considerations, milk supply and other resources.

Okay, Mat.

So, before we go further, Ginger and I wanna take a step back from the processing facility and talk about some important business management items you need to know prior to starting your processing facility journey.

Knowing your farms numbers is critical step and if you have not done this yet, it should be on your list to do next.

You should also know your farms breakeven cost of production.

This is the first step into determining an operations break even cost a production on a cash basis.

Right now is probably the perfect easiest time to get those numbers because you'll be getting them, for your accountant to prepare your year end tax returns and next thing we're gonna talk about in this business section will be business ratios.

Understanding your business's ratios will help you identify problem areas that you can work on.

The income statement and your beginning and ending balance sheets are where lenders, your accountant and deciding extension pull the information from to create these ratios.

While there are many ratios, the dairy management team would say there's four major ones that we like to look at.

They are the return on assets, the current ratio, the operating expense ratio and the debt to assets ratio.

So if you can continue on.

So the first ratio, the rate of return on your assets equals your profitability.

This is determined by taking the net farm income plus interest minus the value of labor in management divided by average farm assets.

Two major areas to look at here are the total feed costs including both home raised and purchase feeds, as well as labor costs including owner drawl and hired labor.

So if you go back, continue, I'm sorry Mat.

Your current ratio is your business's liquidity.

This shows the extent to which forms assets if liquidated would cover current liabilities, paying bills on time as a strong liquidity versus late payments.

An increase in payables can also influence the current ratio.

Next slide.

Turn to debt coverage ratio is your repayment capacity.

So this determines the firm's ability to generate enough income to cover all scheduled intermediate and long-term debt payments.

Lenders typically like to see at least the 1.25 or greater here.

Next Mat.

And the last ratio here is the farm debt to asset ratio which that means your solvency.

So this looks at the farms total assets owed to creditors.

So what does this mean to you?

Poor solvency can result in lenders denying any future loans.

The implications here are very significant as the future viability of the farm is in jeopardy.

So next, if you want to go next, Mat, next we're gonna discuss your farms break even cost the production per hundred weight.

There are two methods of doing this.

It's a cash flow basis and the profitability basis.

For today I'm just going to discuss the cash flow.

This is the simpler of the two.

This considers any prepaid expense and accounts payable for any category.

Loan payments including principal and interest as well as family living expenses are used to calculate this breakeven number.

Next Mat.

Once your break even number income number is known, we can then continue on to the breakeven and come over feed cost per cow and milk margin per hundredweight.

These are sometimes used interchangeably and create confusion on a herd status due to the nature of how they are determined and what they are relaying.

The breakeven income over feed costs can be calculated for the dairy enterprise or it can include the whole farm.

Penn State's program calculates this number by taking the total outflow minus the milk cow feed so that means your home raised and your purchase minus your non-milk income.

Next slide.

The money leftover must cover all other expenses including the feed for the dry cows and heifers.

This metric can easily be used monthly to evaluate how the herd is doing on both production and financial performance.

Monitoring your income over feed expense on a per account basis is useful because it relates how well the cow is converting feed into milk.

Data from the dairy business team have found on average feed costs can make up to 40 to 60% of your milk income.

I also want to put there that, when you're thinking about doing a processing facility, you also need to think about (clears throat)

what you're going to be paying the processing facility for that milk.

Many times individuals think that well it's my farm.

So technically, the milk is free.

But that's not the case because if you would be selling it to a co-op, they would be giving you a price.

So you wanna make sure that you are including a price on that milk that you're taking from the dairy to your processing facility.

So, motivation and management.

Managing both a farm can be challenging for just one or two people and vice versa for a processing plant running both on the same amount of manpower can be overwhelming.

Consider some of these questions when thinking about starting a processing facility.

As we think about the production side of the value added dairy, think about how you would answer these questions.

First, consider why do you farm?

Do you like to be outdoors?

Do you value independence?

And working at your own pace?

A value business could change your responsibilities and your job description.

Next, do you consider yourself a "cow" person?

Or "goat" or "sheep" person?

Some dairy producers enjoy working with their animals every day.

A food processing business could change the amount of time that you are with the animals because of a need of for separation due to a food safety concerns including possible cross contamination, and also as your time may devote it be devoted to other tasks away from the farm, like manufacturing and marketing your products.

Are you passionate about creating a product?

Becoming a food processor may require you to learn a new skill set.

A genuine desire and excitement for your product may be reflected as you manufacture or marketed?

Do you want to share the goodness of their dairy product with others?

Another question is think about your personality.

Next Mat.

Are you willing to educate consumers?

Operating a value added dairy business may require more and different types of interaction with people that you may encounter while farming.

How do you feel about promoting and marketing your products?

Can you handle consumer issues, questions and or complaints?

Also, do you have the patience and desire to manually manage a new business since considerable time may be required for manufacturing the product, marketing, delivering and selling.

Okay, Mat.

Okay, do you have a plan for your management?

Additional management responsibilities may be related to balancing help from family or hired labor to cover the both the on farm tasks and the processing tasks.

Expertise is needed in multiple areas when another venture is added to the farm business.

So this may require outside help, or that someone involved gain additional training.

For food safety reasons, a segregation of duty is between the farm and processing is required.

Production schedules may revolve around times when extra labor is needed on the farm.

Signage training and other measures may be needed to maintain a separation between the farm and the processing environment to avoid contamination, especially for outsiders who are less familiar with the farms operations, such as salespeople, neighbors, or others that may call on your farm.

Also consider who will be responsible for the transportation and retail of the product.

A support network of experts, consultants, dairy industry professionals, and peers who have value added experience will be an invaluable resource for you.

Next.

Preparing a business plan.

Business plans are very important or a very important strategic tool for your business.

A good business plan not only helps the businesses owners to focus on the specific steps necessary to make their business idea succeed, but it also helps them achieve their both short-term and long-term objectives.

While business plan is essential to owning a business, many do not see a need for it.

Many are reluctant to have their plan written down.

Lenders want to see your financials from the dairy in addition to how you're going to formulate, execute and implement a strategic plan to make your business idea work.

Business plans help you see the whole business.

Business planning done right connects the dots in your business.

So you get a better picture of the whole.

Strategy is supposed to relate to tactics with strategic alignment.

Does that show up in your plan?

Do your sales connect to connect to your sales and marketing expenses?

Are your products right for your target market?

Are you covering costs including long-term fixed costs, product development and working capital needs as well?

Take a step back and you wanna look at the larger picture.

It also provides strategic focus.

Startups and small businesses need to focus on their special identities, their target markets and their products or services tailored to match.

It helps you set priorities.

You can't do everything, business planning helps you keep track of all the right things and the most important things allocate your time, effort and resources strategically helps you manage change with good planning processes, you will regularly review assumptions, track your progress and catch new development so you can adjust.

It helps you develop an accountability.

Good planning process sets expectations and it tracks results.

It's a tool for regular review of what's expected and what happened.

Good work shows up, disappointments show up as well.

A well run monthly plan review, with planned versus actual included becomes an impromptu review of tasks and accomplishments.

It will help you manage cash.

Good business planning connects the dots and cash flow.

Sometimes just watching profits is enough but one sells on account physical products, purchasing assets or repaying debts are involved.

Cash flow takes planning and management.

Profitable businesses suffer when slow paying clients or too much inventory impact your cash flow.

A plan helps you see the problem and to adjust to it.

Your milestones.

Good business planning sets milestones you can work towards.

These are key goals you want to achieve, like reaching a defined sales level hiring a sales manager.

We're human we work better when we have visible goals that we can work towards.

It gives you metrics.

Put your performance indicators and numbers to track into a business plan, where you can see them monthly and a plan review meeting.

Figure out what numbers matter to you.

Sales and expenses usually do.

But there are also ones that you don't often think about such as your trips to promote your product.

Use your business plan to define and track your key metrics.

This will also provide you realistic reminders.

We all want to do everything for our customers, but sometimes we need to push back to maintain quality and strategic focus.

It's hard during the heat of the everyday routine to remember the priorities and focus.

(clears throat)

The business planning process becomes a regular reminder.

Okay, Mat.

And the last section I'm gonna talk about is preparing a business plan.

You want to have your company description.

So what you plan to do, how you plan to do it, and what markets you plan to serve.

You wanna create a clear mission statement of your goals and a timetable by which you plan to achieve them.

Have you done a market analysis?

Where you're located can it support a business?

Are you going to be spending a lot on your transportation costs?

Structure of your business.

Who is going to be in charge of what?

This is critical and it will help if you're planning on doing a family business with other family members.

This will help you guys keep an alignment with who's in charge of what.

Your product line.

What products do you plan to produce?

And how do you plan to produce them?

They also should include your marketing sales.

So how do you plan to market your products?

What is your sales strategy?

And lastly, funding.

How do you plan to fund this business?

So in closing with my section, a business plan is critical and key in the first steps prior to beginning your processing journey, as well as knowing your breakeven of your current farm operation.

Okay, Ginger, it's all yours.

- [Ginger] Okay, thank you.

Hopefully everybody can hear me out, all right.

Sam and I thought that this was a nice place to transition to my portion of the program.

We wanted to highlight the findings from a survey of grass-based dairies in Vermont.

71 were part of this study.

And I guess we thought it was important because the findings of this study reflect the needs of farmers that were interested in value added dairy businesses.

They wanted more technical information on how to make value added products, how to market those value added products and how to finance a value added enterprise.

And just a couple notes before we go on.

I'll tell you the average herd size for the study was small.

With, let me see, 21 cows in the value added group that but were actually had a value out of business of those that indicated they were interested there were three study groups.

They had 50 cows and the largest group that was not interested but served as a control had 70 cows.

So the average was pretty low.

The average sales from the value added business yearly was $7,554, just something to keep in mind.

Next slide please, Mat.

And then animation in this one too.

So if you hit return again, thank you.

Just to make sure that we're all on the same page, let's review how value added dairy is refined or defined.

A product is considered as value added when it can be set apart from the competition, which allows the seller to request a higher price or to reach a new market.

There are several ways that value can be added to dairy products, including creating or manufacturing a new product, utilizing an alternate production system or through new marketing practices.

Next slide please, Mat.

Here are some additional examples of the ways that value can be added to dairy products by the three avenues that I just discussed.

Manufactured products can include bottling raw or pasteurized milk for sale in smaller packages smaller than the bulk tank by comparison, making butter, cheese, yogurt, ice cream, kefer, cottage cheese and one that I think is increasingly getting more popular, flavored milks.

That's definitely not an exhaustive list.

In some instances, practices on the farm will be the driver for the value added enterprise.

If you choose to market a value added product based on a production system, such as organic, grass fed, testing and marketing your milk as A2 positive or selling sheep or goat milk.

Those would be examples where production has been the driver.

There are guidelines and procedures to follow to meet the criteria for whatever your determined designation might be.

You may even use production practices as an angle for marketing.

For example, saying it's locally raised or using an animal welfare angle such as the amount of time that the cattle are in pasture.

We see some retailer say no antibiotics administered.

You also may choose to market your product under a branding program.

For example, in Pennsylvania, one of the options is using the PA preferred brand.

You could take advantage as I kind of hinted at a minute ago, the Buy Fresh, Buy Local movement.

You may choose to sell at farmer's markets.

You may have an on Farm Market or a stand.

Seasonal events or festivals may be the route that you choose to go.

Partnering with a community supported agriculture group or a CSA has is more commonly referred to or even partnering with specific retail outlets like restaurants or wineries.

But just remember also that food safety practices are not a marketing designation, but a requirement.

Next slide please, Mat.

I thought we just talked very briefly, this is the big picture of where value added is right now.

There are few overarching trends that we see in value added dairy in the United States specifically.

In general, consumption of fluid milk has been decreasing, especially in some of the reduced fat options such as skim and 1%.

We're also seeing a decline in consumption of frozen products, which includes ice cream and frozen yogurt.

And if anybody's following some of the dairy newsletters just here in the past couple of days, USDA report was released that indicated that 2019 saw the second largest decline in fluid milk sales since recording began in 2000, which I think is a little discouraging.

Organic fluid milk is declining as well but not as rapidly as conventional milk.

And also those of you that have watched the markets have probably observed an upswing in recent years.

In some other products, there are some bright spots, cheese and butter.

In particular, some that have seen an upswing.

I think it's fascinating to walk through the dairy aisle at your local supermarket and see all the dairy products there are many new and innovative products reaching store shelves.

These include things like high protein, beverages, sports recovery drinks, coffee or tea based beverages for energy, flavored butters.

And then it's also interesting to see all the creative packaging ideas or pairings with dairy products with other types of products in order to appeal to different markets.

Next slide, please Mat.

And this one has animation as well.

The dairy industry is subject to many regulations both on the farm and for processing facility.

These regulations may be from the different levels depicted here at the federal, state or local level.

Contact your regulatory agencies, talk with your inspectors so that you know what applies to your operation because that's your responsibility to figure those things out.

There are people that will help, but there you bear a strong burden in that.

Next slide please Mat.

Keep in mind that your dairy food business may need to be registered as a food facility with the federal government.

According to Section 415 of the Food, Drug and Cosmetic Act, this is a free registration.

And it can be done through the FDA.

You can do it online and I believe they have a paper based version or you call them.

The FDA website has information.

Many dairy products have a defined or have defined composition and manufacturing standards called product standards.

These are found in the Code of Federal Regulations.

So I would encourage you strongly to check into these requirements for whatever intended product that you're going to manufacture.

And then the third point here under regulations refers to FSMA or the Food Safety Modernization Act as what the acronym stands for.

This requires that processors have certain practices in place to ensure the safety of our food supply.

The regulation places emphasis on prevention of biological, chemical and physical hazards through the application of preventive controls, or steps that reduce or minimize a hazard.

Additionally, all employees should be trained for the tasks they're performing.

By following good manufacturing practices, which include things like good personal hygiene, hand washing, clean clothes, et cetera.

Sanitary operations and maintaining equipment and utensils in good repair.

Some facilities will complete a hazard analysis and a food safety plan, probably the majority facilities will.

Some facilities however, may be considered a qualified facilities and these ones are subject to a modified version of the requirement.

Qualified facilities must meet certain requirements.

Meaning they have to submit at test stations, to the FDA to document that they meet these requirements.

Additional information is available on the FDA website.

A full discussion of these requirements, it would take much longer than we have time for in this webinar.

So it's kinda beyond the scope of this.

Next slide, please Mat.

States have their own regulations, so you should also check with your State Department of Agriculture for more information on these regulations.

Many states defer to the Code of Federal Regulations, which I mentioned in the last slide.

They also may defer to the Grade A Pasteurized Milk Ordinance or several of you probably familiar with it as the PMO.

This can be found online and is an excellent resource.

It's a very large document and has all kinds of information that can be useful to you.

A permit or license may be required by your state in order to operate the value at a dairy business.

Along with your permit or license, your facility also may be subject to inspections.

Routine testing of your milk and your manufactured products may be required.

When you're budgeting for your operation, this is another important thing to consider, budget extra in for your testing.

Your product testing and your drug testing as this expense can add up if it has been overlooked.

Next slide please Mat.

Okay, this you can tell by both what Sam presented and what I'm presenting is really important to me.

What I'm going to start with in the first point here, a clear line of separation and controls of foot traffic and possibly vehicle or equipment traffic is needed to prevent cross contamination between the farm and the processing facility.

If you're processing on your farm.

This might be an opportune time to educate your family, your employees, vendors, visitors to your farm, about areas that should have restricted access.

Because I know many times people walk right in the milk house, we really don't want them doing the same thing in a processing facility.

As you think about and plan your facility construction, think about cleaning and sanitation in order to avoid areas where bacteria could hide and multiply.

Don't be afraid to seek out expertise and guidance throughout this process.

There are many people out there that can help.

Also, don't forget to consider your storage and space needs.

Not just for the raw materials, but for your finished product.

And something that can be overlooked at times your containers.

They may need to be maintained so that they are not contaminated prior to being filled.

If you're planning to make a cheese that needs to be aged, for example, have them according to the product standards I mentioned might have a 60 day or longer aging period, then consider where this storage will be done or the aging will be done.

Also, consider having an adequate water quality and adequate water quantity and adequate water quality for whatever product you're manufacturing.

In addition to quality and quantity also, then how will that water wastewater be disposed off?

And how will waste in general be handled additional treatment systems both for water and wastewater may be required for your processing facility and can't quite see it.

This is a picture of a treatment on a farm.

Next slide please, Mat.

So this is intended just to kinda sum up the regulatory aspects.

It's not an all encompassing list, but it's a draft of a checklist of some things to consider.

The first thing I would encourage you to have conversations early with your regulatory authorities.

Talk to them as soon as you start thinking this might be an idea and look into what you need to do.

This could save you time and money, as a plan review can catch issues before literally before they're set in concrete.

Contact your State Department of Agriculture for permitting and for licensing requirements.

Check to see if you need to register with the FDA, again under Section 415.

Be aware of the requirements of FSMA that apply to your facility and attend training as needed.

Realize that food safety requires a great deal of record keeping, which can be time consuming but is necessary and also documentation in addition to laboratory testing that will need to be done.

And then also depending on where and how you want to market your product, you may be subject to third party audits to meet whatever that retailers requirement is.

I know certain chains in certain places require additional firms come in and audit do food safety audits.

Next slide please, Mat.

Okay, so we're gonna switch gears now, talk a little bit about production.

The first thing is think about how much milk you'll need.

As you think about the products that you intend to manufacture, consider what volume of milk that your value out of business is going to require.

Do you intend to use all the milk that you produce for your product?

Or will you need to find an outlet or continue to have an outlet depending on what you're doing now for the surplus.

This can be a very tricky topic to navigate.

Some processors may continue to work with you, and they may work out an agreement that would allow you to purchase milk back from them.

Others may stop taking your milk if you initiate this conversation.

So I guess I would encourage you to do your homework and do checking before you get too far into the process.

Do you intend to use your own milk?

Or will you need to purchase additional milk for the manufacture of some products?

Some value added dairy businesses rely on other producers to supply the milk.

I can think of some examples for cheese companies do this, for example.

You also may need to plan for seasonal variation.

Particularly if you're planning to make a product that you might not manufacture and sell year round such a soft serve ice cream.

Maybe you have a trailer during the summer to go to fairs or festivals.

And then the last thing to think about with your milk supply, if you're not going to be using it all or need to store milk, will you have storage tanks or additional silos for your surplus milk or for any milk that you're going to purchase?

If you're purchasing also consider quality parameters have those clearly laid out with whomever you're purchasing from.

Next slide please Mat.

So if you're a little overwhelmed thinking about regulations, thinking about some of these things, there are alternatives to processing at farm.

If space is a limitation, again, if you don't think you can go through the permitting process, if locations a barrier, there are some options.

Products could be manufactured at a facility that's not on the farm.

You could purchase a facility at another location or you could rent commercial food manufacturing space in what they call an incubator kitchen, or I believe now there are more options.

Even for mobile facilities.

You may be able to contract with a licensed manufacturer that can manufacture the product using your milk and put your label on that product.

Consider if you choose this option, transport of raw materials and also finished products back to your farm, you'll probably be responsible for that.

Another option is if there are a group of producers in your area and you're interested in value added work together.

Maybe one person has knowledge on processing and can take the lead on that part of the business.

And then finally, the last option that I listed on this slide might be to purchase dairy products that are manufactured elsewhere that are under another label and then retail them at your facility.

For example ice cream mix, or maybe cheese, this might be a good option for somebody that has a strong interest in agritourism and bringing people to the farm to educate but not necessarily in producing a value added product.

Next slide please, Mat.

Okay, so does your herd fit the bill for your value added product as production where it should be.

Some of the things to consider, include your milk quality and components.

Consider also the stage of lactation of your herd for consistent production levels.

As we know that fluctuates not only quality but also quantity and this could have possible effects on your product, depending on what you're manufacturing.

What are the genetics or composition of your herd?

If you're intending to use a certain attribute for marketing your product, such as I mentioned it earlier A2, A2 or grass fed, does your herd fit the bill for that?

If you're not currently under the production system that you're planning to use for value added and you want to transition, then you may need to plan in quite a bit of time for this, especially if you're transitioning to something like organic or non-GMO.

Consider how long it will take and what you'll do in the meantime.

Keep in mind the possible effects that changes in diet, in grazing requirements, in exercise, which may be due to moving the herd from paddock to paddock or pasture to pasture.

You may have to make adjustments in housing and also other changes in your herd health program.

All these things could affect the production levels they could affect your component and it could affect the quality of your milk.

So consider those as you're planning.

Consistent inputs are needed to produce a consistent product and to meet your consumer expectations.

Your consumers expect to get the same thing each time they purchase that product from you.

So, Sam said this earlier, but again, I'm re-emphasizing management is critical for a value added dairy.

If the farms going to be managed separately from the value added business, then communication and support are critical in both directions, from the processor to the farm and the farm to the processor.

Again, consistency is the key and that goes back to good management with attention to detail for quality and for production levels.

Next slide, please.

Next slide please, Mat.

Thanks.

I wanna talk a little bit about milk components because this is an extremely important topic, when we talk about value added dairy and goes back to on farm production.

Milk is primarily comprised of water with three other main components, butterfat, protein and other solids, which are mostly lactose and minerals.

Your components are important in the manufacture of dairy products.

They're typically listed on your milk check if this is not something that you regularly pay attention to.

I'm guessing most of you if you're dairy producers you do.

But in addition to food manufacturing, for food manufacturing reasons, it's critical or beneficial to monitor your components on a routine basis because they are also indicators of your herd health and of nutrition.

Keep in mind your components can vary seasonably and this is in the top left hand figure on the slide.

You can see the depression in components over the summer months.

If more than one of your components is out of line and you don't think it's due to seasonal variation and I would suggest that you work with your nutritionist or your veterinarian to correct these issues, many factors can affect your components.

The highest protein and fat is found in colostrum, then there's a decrease for one to two months and then an increase with a peak around 250 days after calving.

Protein and fat also decrease with age, the age of the cow.

Mastitis is going to reduce fat but it could increase blood protein in the milk.

Equipment problems can affect your components if we're having issues with cooling or too much agitation in the pipeline.

And then genetics make up a large portion of the difference in components that's observed.

So the other thing that's on this slide, a recommended goal for you would be to try and exceed breed averages and these data are older that's in this table.

So, they might have changed slightly.

But keep in mind a trade off may occur between milk fat and protein with yield.

With component percentage is decreasing when overall yield increases.

Next slide, please, Mat.

Continuing with the production slide, employees, family members or other people that help on your farm should be trained so that it minimizes variability in production and help save time and money.

Some of the key quality parameters that you want to monitor include Somatic Cell Count or SCC.

It's a regulatory requirement for one.

It's also a key indicator of herd health.

Research has demonstrated that a Somatic Cell Count that's greater than 400,000 can decrease the yield of cheese.

So one reason why it's important to value added dairy, other bacteria accounts that you might consider monitoring.

And sorry, I put acronyms and didn't list them out.

But SPC stands for Standard Plate Count.

It's just a general bacteria count.

PIC, you may be familiar with that.

It's Preliminary Incubation Count.

These are the ones that can survive refrigeration temperatures and are important for storage.

LPC stands for Laboratory Pasteurized Count and these ones can survive our higher temperatures and again are getting more attention.

And then our Coliform count for Coliform bacteria is a general indicator of sanitation and also your milking prep routine.

So consider monitoring, all of those bacteria counts along with your components on a regular basis.

The length of time, temperature and storage can affect the quality and a flavor profile of your milk.

So that could should be considered even things like whether it's stored in glass containers or plastic containers and whether they're opaque or cardboard, whether you can see through it.

Many, many things can affect that.

And the last point up there, I think a good way to address this and get SOP stands for Standard Operating Procedures.

So having written Standard Operating Procedures for your farm staff can be useful to ensure that everybody's following the same procedure for things like milking routine, for herd health practices, for sanitation of your facilities, and then for other routine practices on the farm.

Next slide please.

These on farm practices can certainly affect your products.

These are just a few examples.

For example, a feed taste may be apparent in your milk if there's been a recent change in what you're feeding in your ration or if the cows have been fed some type of really strong feed just prior to milking.

Inadequate ventilation, may cause an unclean barny or wowy flavor or odor in your milk.

Inadequate sanitation practices can lead to the growth of spoilage microorganisms or pathogens, which could cause an unclean flavor and milk.

And then last one up there.

I've mentioned it previously.

But water quality is an extremely important.

One, we need to make sure our cows are drinking enough water to be productive, but also, it can affect our chemicals that we're using for cleaning and their ability to do their job which could mean we would need a treatment system for water.

The flavor defects that are apparent in milk could possibly be magnified depending on what our manufactured products are.

So keep that in mind.

Next slide please.

Just like in real estate location, location, location.

Has your farm the right fit?

Some value added businesses involved the farm as a retail outlet, or they want to be part of the agritourism industry and have visitors come to the farm.

Think about the appearance of your farm.

What image do you want to convey?

And I just want to be fair here the smaller picture on the left is after a recent fire at this farm so it was an extreme example.

Location's critical if you're doing direct sale or wholesale, for example, do you have access to major trucking routes if you're going to do wholesale?

If you're doing direct sale and consumers are coming to your farm, can they get there easily?

Or will they have to travel a long distance to get there?

Next slide please.

If you intend to sell directly from the farm, additional biosecurity measures in general security might be needed.

For example, will you control access to certain areas of the farm such as the milk house, additional fencing, gates and maybe even security cameras.

As you can see from the picture on the left, where the red arrow is there might be needed to control and monitor the visitors to your farm.

Transparency, accessibility and the backstory associated with the product are increasingly gaining importance to consumers.

So is agritourism, a part of your business plan?

Are you planning to offer tours of the farm, to host school groups or other events to educate your consumer about your farm and your products?

And if so, you'll need to do additional planning to accommodate that.

Next slide, please, Mat.

So I think this is an extremely important point, as we kind of get to the end here where we're talking about weighing our options and wrapping up.

There's a rule of thumb that I've heard, some have said that a value at a dairy enterprise is going to require as much time as many resources and as much effort is required on the production or the farm side of the business.

So basically, they're saying you're going to put as much into the value added side as you do into the farm.

If you have a strong desire, however, and feel that value out of dairy is a viable option for your farm.

I would encourage you to be diligent about putting in the time to do adequate research and explore your options.

Gather as much information as you can, from many resources.

If your farm does not have a profit team, consider forming a team to help you with the exploration of the value added possibilities.

Yeah, that team may include experts and professionals that can help guide you.

Some people take consider specialists, people that have already...

Your financial folks, manufacturing experts, and then also others that have already taken on a value added business.

You may know friends and neighbors, you may have a mentor in the business.

They would be good people to include on your team.

As well as somebody that's an expert in food safety.

So I'd encourage you to consider all aspects when you're thinking about this from marketing the intended product, your food safety regulations, to the needs of the farm related to production and how you will meet needs.

Next slide please, Mat.

Remember, there's not one approach to a successful value added dairy business, careful and detailed farm and financial management are critical to success through a balance of feeding practices with a management of income and expenses.

It's a very, we're walking the tightrope, it is a critical balancing act.

Proper management of assets is also necessary for success.

There are many resources out there to assist you.

Next slide, please.

And this is a bit of a summary of kind of some general places where you can find some of those resources, industry groups, dairy manufacturers associations, you can find many groups out there I have a list compiled, that I would be glad if somebody contacts me an email, I'll be glad to send it to you, there are guilds.

For example, a cheese makers guild has some good food safety plans and some online courses and resources that you can use.

The land-grant universities, not just Penn State, but we're since we're from Penn State, I have that website up there.

Many of them offer programs through their food science department or through their extension services.

Another great place where there's a ton of information, are you regulatory agencies.

I've already mentioned the FDA website.

There are guidance documents that help explain the regulation and help break it down in a little different terms.

And more in layman's terms that can help guide you through these these regulations, so the FDA website.

Also in Pennsylvania, the Department of Agriculture website, if you're interested in marketing, raw milk for example, it lists the permit can be found at the website.

So talk to your regulatory agencies.

And then Penn State Extension or if you're not in Pennsylvania, other extension services.

Sam and I are both part of the dairy team.

She works with the business management team as she said earlier, we can help plan the financial part, help you work through understanding your income over feed costs and the things that you'll need to consider as you build your business plan.

We also have a value added working group in Penn State consists of myself, Dr. Carrie Collegian who does many workshops and is our expert on products.

And then Sarah Cornelus who works with the marketing aspect of value added.

So I would encourage you to consider exploring resources.

Next slide, please Mat.

And this is our disclaimer.

And so if anybody has questions, I think Sam and I will be glad to try and answer them and to follow up, and I don't know if Mat has anything in closing, but that concludes the part of my slides.

So thanks for your time.

- [Mat] All right, thank you very much, Ginger.

And thank you, Sam for your presentations.

As I'd mentioned earlier, if you do have questions or comments you'd like to make, we are using that chat pots.

If you go down to the lower center of your screen, you'll be able to see a little button there that says chat.

If you want to go ahead and click on that, and then type in your questions, any questions you might have into there.

While we're giving you a couple minutes, if that comes through, I'll bring up just some closing slides here with as I'm talking.

Alright, so as we're waiting for any comments or questions that come in, I'm not seeing anything popping there yet, but we'll give it just a second here.

We do come up with a question or a comment you'd like later on.

I've got all three of our contact information up there.

So if you have questions specifically about today's presentation of the content, Ginger and Sam's contact information is there on the screen.

If you have general comments about this webinar series, other topics you might be interested in hearing about my contact information up there, so feel free to reach out to any of the three of us as appropriate.

If they aren't anything else (mumbles)

I just a reminder next month we'll be back with another edition of the Dairy Management Monday Webinar Series.

March 23, Dr. Lisa Holden from Penn State, Animal Science Department.

We'll be assessing management with multiple generations on the farm.

And then in April we'll have Ginger back talk about management aspects of on farm culturing.

So those are coming up in the next couple months here on the Dairy Management Monday Webinar Series, always at the one o'clock on the third Monday of the month, so for March and April, there were two more of those coming up.

Also, if you're interested, Penn State has some other webinar series.

So March 16.

If you have any Spanish speaking workers on your farm, we have Applied Dairy Management Spanish Webinar Series, that's run by Dr. Adrian Barragan, talking about fresh cow management, and that one, that'll be March 16.

We also have a Dairy Grazing Webinar Series and that will be coming up the next webinar and that series is coming up on March 11.

We'll have presentations from the University of New Hampshire to talk about some recent research they have going on there and up there with different forage pasture mixes.

And just the last reminder that this webinar was has been recorded as are all webinars in the series, if you want to go back and rewatch a portion of it or recommend it to a colleague, it will be up there on the Extension website here probably in about a week or so is what's been taking.

With that and I'm still not seeing anything else come in.

I will go ahead and say thank you to Ginger and Sam.

And we'll go ahead and leave this once I close down the webinar, you should receive an evaluation, that'll pop up on your screen there.

So please ask you take a couple minutes to fill out that evaluation.

Let's know how we're doing.

Any feedback is always helpful.

So thank you very much for joining us today.

Hope to see you back here next month.

And again, thank you, Ginger and Sam for your presentations today.