Guest Columns

The dry whey gap

John Umhoefer is executive director of the Wisconsin Cheese Makers Association. He contributes this column monthly for Cheese Market News®.

Cheesemaking margins remain deeply in the red, and a Wisconsin Cheese Makers Association (WCMA) survey of cheese manufacturers, detailed here, displays the breadth of the pain.

In short, more than 90 percent of Wisconsin cheese manufacturers do not produce dry whey, and record dry whey prices have lifted the government’s Class III milk price for dairy producers to unaffordable levels.

In June, the value of dry whey in the “other solids” portion of the Class III milk price contributed $3.32 to the announced $20.17 milk price. That value is four times the average amount that whey contributed in 2005 and 2006.

The value of dry whey has been buried in the Class III milk price formula since 2000, but record high prices — 72 cents per pound according the July 20 National Agricultural Statistics Service (NASS) price survey — have put dry whey in the spotlight.

In Wisconsin, dry whey (liquid whey, skimmed and dried) is a product that very few plants produce. And dry whey is far from a “basic commodity.” For most Wisconsin cheesemakers, dry whey is a value-added product they could never afford to manufacture. The true “basic commodity” — skimmed, wet whey — earns a fraction of the dry whey price.

WCMA received survey data from 90 cheese manufacturing sites in Wisconsin. The Wisconsin Department of Agriculture, Trade and Consumer Protection counts a total of 115 cheese manufacturing sites in the state. The plants that did not reply to this survey trend small — each plant outside the survey produces less than 20 million pounds of cheese per year (most substantially less than that).

The data from the survey are illuminating: Among the 90 cheese plants that replied to the WCMA survey, 82 plants do not dry whey products, or even have a dryer on-site. It is quite safe to extrapolate that most if not all of the plants which did not return the survey also do not dry whey products on-site. But working strictly with the survey data, 91 percent of the plants do not produce dry whey.

Nearly every plant separates cream from the whey stream. Among the 90 responding plants, 83 separate whey cream as whey leaves the cheese vat.

Many Wisconsin cheese plants do little with their whey beyond separating the cream. Among the respondents, 36 plants separate cream from their raw whey and sell the skimmed, wet whey to a whey processing facility for further refinement. Another 2 plants ship their whey without separating the cream. In other words, about 42 percent of respondents perform minimal processing and receive minimal payment for their product.

WCMA asked five plants for a snapshot of the value they earn for wet, skimmed whey. In June, this product earned between 10 cents and 20 cents per pound of solids compared to the 72 cents per pound for dry whey noted by NASS.

Most of the remaining plants in the survey perform various combinations of ultrafiltration (UF), reverse osmosis (RO) and/or evaporation to separate whey components and condense whey. Four plants in the survey landspread their whey.

Forty-two plants offered information on their use of UF, RO and evaporator technologies. Among those, 13 plants only produce UF milk and sell a liquid whey protein concentrate for further processing or to end users. Seven plants perform only RO on their whey stream. Four plants run whey solely through an evaporator.

Other plants apply combinations of technologies. Ten cheese plants process their whey through RO and UF systems. Four plants move their whey through the RO process and an evaporator. Two plants go through the UF process and then condense whey in an evaporator. Two plants reported a process including RO, UF and evaporator technologies.

These technologies condense whey or whey protein and most factories then sell these liquid products for animal feed use or human food ingredient use. Most commonly, these liquid whey products are sold for further refinement and drying.

Nearly all of these plant sites, whether selling their skimmed, wet whey or applying some filtration or condensing technology, do not produce dry whey or any dried whey products.

So where is dry whey or other dried whey products produced? The WCMA survey found whey drying capacity at eight Wisconsin cheesemaking facilities. In addition, cheesemakers (proprietary and cooperative) operate six “stand-alone” whey processing plants. Based on industry knowledge, WCMA can reasonably assume that among the plants not surveyed, none has whey drying capacity. Thus, it is reasonable to assume that Wisconsin has 14 sites owned by cheese manufacturing cooperatives or proprietary companies where whey products can be dried.

In addition, Wisconsin has whey processing and drying capacity at independent, proprietary whey processing companies such as Protient, MSC and Century Foods. These firms produce dried whey products but do not buy milk from dairy producers or participate in federal milk marketing orders. Thus, many dollars earned for dry whey are made outside of the handler and pool system. Cheese plants sell a raw material (skimmed, wet whey) to these proprietary processors, but must pay the dairy producer the value of the finished product (dry whey).

The manufacture of dry whey in Wisconsin is highly concentrated among a few (larger) dairy manufacturers. But even the data, which note 14 drying sites, overstate Wisconsin’s production capacity for dry whey. Some of these sites have drying towers sized to dry lower-volume products such as whey protein isolate. And many of these sites have buyers that demand these factories meet their obligations to produce and sell dried whey protein concentrate, rather than the relatively more lucrative dry whey.

USDA and the industry erred when selecting dry whey as a basic commodity whose value should belong to the dairy producer. The real commodity, produced by at least half of Wisconsin’s cheese plants, is skimmed, wet whey. Dry whey is a value-added product mistakenly added to a base milk price.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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