MMPA AR 2019

2019 Annual Report

CULTIVATING CONNECTIONS CULTIVATING CONNECTIO DRIVING INNOVATION DRIVING INNOVATION M I C H I G A N

M I L K

P R O D U C E R S

A S S O C I AT I O N

CULTIVATING CONNECTION Photo by: MMPA Member Cassie Packard, Clare, Michigan

2019 Annual Report

NS DRIVING INNOVATION

A Message from

As we reflect on another fiscal year gone by, I can’t help but think about last year’s annual meeting theme “Emerge.” I don’t think we could’ve known back then how appropriate a theme that would be for 2019. Our farms, co-op and industry all showed positive signs of emergence heading into a new decade.

As farmers, we all had to emerge from one of the wettest years on record. It was a struggle to get crops in for most farmers, some not getting row crops planted at all. For dairy farmers, fallow ground doesn’t feed the cows. Working with our partners in agriculture as well as state and federal government agencies, we were able to emerge with modified rules for harvesting forage on prevent plant acres. This put precious feed in the bunk until we have the chance to emerge again next year.

As a co-op, we took a significant leap into the value-added dairy space this year with our new ultra-filtered (UF) investment inside of our Constantine plant. We went from concept to

KRIS WARDIN BOARD CHAIRMAN

nearly maximum processing capacity in just over one year, a tremendous accomplishment by our dedicated staff. This was the first major step for our manufacturing plants to emerge from producing mainly commodity products to higher value, customer tailored solutions. We are driven and focused to continue this path toward value-added dairy processing investments.

As an industry, we finally saw signs of emergence from the brutal milk prices of the last 5 years.

An important bridge to higher prices, 2019 brought relief in the form of a much-improved dairy safety net, the Dairy Margin Coverage (DMC) program. This program took a giant effort from all of us in the industry and the MMPA board and staff certainly did their part to work with legislators to get this program implemented. The DMC program paid out over $300 million to dairy farmers nationwide in calendar year 2019, which was a tremendous boost after years of negative margins.

As we finish reflecting on another fiscal year a new theme emerges. “Cultivating Connections, Driving Innovations” speaks to our focus for the upcoming year and years to come. We must continue working with our farmers, other co-ops and industry partners to drive further innovation. MMPA will continue to be a leader, keeping dairy relevant with today’s consumer and proving our place as nature’s most perfect food. We look forward to connecting with you throughout this next year to share our progress in the journey to market our members’ milk to the greatest advantage possible.

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A Message from

Building off of the momentum that we established last year with the commissioning of the ultra-filtered (UF) milk operation, our strategy of diversifying our product mix while cultivating relationships progressed nicely. Through collaboration and our ability to customize customer specific products, we were able to successfully penetrate a new market that transformed our business proposition into a working partnership that will provide mutual benefits for years to come. It is here where we recognize the power of connecting relationships through innovation.

In addition to our successful launch, we finalized the financing for the UF project as well as refinanced some of our existing obligations at attractive rates. These new arrangements allow us to be more flexible and present savings opportunities well into the future. This was the result of a strong financial balance sheet and the relationship we have with our financial partners that allows us to connect opportunities to our strategy.

JOE DIGLIO

PRESIDENT & CEO

Speaking of opportunities, after another challenging year in dairy, we took advantage of our strong financial position by returning as much as possible to our member-owners. Through the reduction of net savings, paying out more throughout the year was one way we felt we could help without comprising the strength of the association. Although we took a slightly different approach from previous years, our balance sheet improved year-over-year, further solidifying our financial position.

Acting fiscally responsible is, and will continue to be, a priority for MMPA. With the recent announcements of bankruptcies and concerns over the viability of some in the dairy industry, it’s important to have a strong supporting cooperative that can be relied upon for future growth and success.

As we progress forward, we will continue to manage our financial position in a way that best supports our member-owners and allows us to react swiftly to opportunities that align with our strategy.

Along with investing, we continue to work with our strategic partnerships on opportunities that mutually benefit all parties. These current opportunities consist of milk supply collaboration, customer product development and expanding our product portfolio. Working cohesively continues to be effective and an opportunity for future success.

In closing, while prices have improved year over year, there is still plenty of opportunities for improvements. While we are off to a good start with our latest investment, we are excited about where we are going. Through the relationships and connections we have made, we will continue to progressively drive innovation.

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2019 BY THE NUMBERS 4.6 billion

869

MMPA MEMBER FARMS

POUNDS OF MILK MARKETED

$82 million

$850 million

$130 million

$21 million

MEMBERS’ EQUITY

MEMBERS’ ASSETS

TOTAL REVENUE

PAID IN PRODUCER INCENTIVE PREMIUMS

Our Mission: To market members’ milk to the greatest advantage possible.

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Our Core Values

QUALITY

INTEGRITY

PROGRESSIVE

COMMUNITY

“After the conclusion of the 2019 fiscal year, MMPA remains in a strong financial position. Based on the trends we have seen in recent years monitoring several indicators, we are looking forward to an even financially stronger year to come, allowing MMPA to continue pursuing partnerships and remain on the frontier of dairy innovation.”

LEADERSHIP

—Josep Barenys, MMPA Chief Financial Officer

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CULTIVATING CONNECTIONS DRIVING INNOVATION

We’re growing innovatively through partnerships Relationships and innovative thinking power our momentum. We’ve cultivated our connections, deepening our roots and growing new opportunities. From strategic customer and cooperative partnerships to collaborations across our industry and communities, we’re driving innovation and looking at new ways to fulfill our strategy.

Though 2019 was another challenging year due to external pressures, our strong financial positioning in 2019 enabled us to return more value to members while taking advantage of strategic finance and expansion opportunities.

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MMPA PRODUCTS AWARDED AT WORLD DAIRY EXPO

MEMBERS’ MILK QUALITY EXCELS

MMPA’s unsalted butter made at MMPA’s dairy

MMPA members continue to stand out

plant in Constantine, Michigan, were awarded

nationally for milk quality, strengthening our

first, second and third place awards at the

reputation for quality milk. In February 2019,

World Dairy Expo Championship Dairy Product

11 MMPA members were awarded National

Contest. In the cheese division, MMPA’s Colby-

Dairy Quality Awards, making up about a

jack cheese made by subsidiary Middlebury

quarter of the total winners. MMPA offers

Cheese Company in northern Indiana won third place in the Colby or Monterey Jack cheese

MMPA ENHANCES MEMBER SERVICES

a portfolio of member services to help members produce the highest quality milk

category. MMPA’s products were among over

This year, MMPA’s Merchandise Program was

possible, with field representatives working

one thousand entries in 75 product classes

renamed as the MMPA Farm Supply Store. To

closely with each member to achieve quality

including cheese, butter, fluid milk, yogurt,

offer the best service to MMPA members and

goals. In MMPA’s internal quality award

cottage cheese, ice cream, cultured milk and

the community, the Farm Supply Store added

program, 371 members earned an award in

dried whey from throughout the United States.

further benefits including cooperative stops and

fiscal year 2019.

a reduced minimum order requirement for free

4 TOTAL AWARDS RECEIVED

direct delivery. MMPA also developed a Dairy

167 THOUSAND

Care Academy to help MMPA member farms

CELLS PER MILILETER =

comply with FARM documentation requirements.

AVERAGE MMPA SCC

MOMENTUS MEMBER:

Ramona Okkema 2019 Excllence in Dairy Promotion Award Ramona Okkema of Blanchard, Michigan, was presented with the Excellence in Dairy Promotion Award during the Great Lakes Regional Dairy Conference.

The award is sponsored by the United Dairy Industry of Michigan (UDIM) and recognizes one outstanding Michigan dairy farm family member for his or her dedication to promoting dairy products.

“I’ve seen the work my father, my husband and my family do. Yet, the general public doesn’t really understand the benefits of dairy. I decided it was time to share.”

— Ramona Okkema

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MOMENTUS MEMBER:

James Weber Outstanding Young Dairy Cooperator MMPA member James Weber, of Vassar, Michigan, was named the 2019 MMPA Outstanding Young Dairy Cooperator. As the state winning cooperator, Weber will represent MMPA at various industry and association activities. He was later elected chairman of the National Milk Producers Federation (NMPF) Young Cooperator (YC) Advisory Council.

“How do you influence the survivability of your farm beyond just what’s on your farm? You go out and you work in the industry in whatever capacity you can.”

— James Weber

FINANCIAL RESULTS SHOW STRONG CO-OP POSITION

MMPA MAXIMIZES MEMBERS’ ASSETS

The Fiscal Year 2019 ended with MMPA

MMPA is moving more milk through members’

reporting a strong balance sheet that

assets, our plants in Ovid, Constantine and

Throughout 2019, MMPA used member feedback to

exceeded the expectations set by our financial

Middlebury. We have had greater flexibility in

enhance the cooperative’s communication strategy,

institutions. Our strong financial position

utilizing our plants for balancing opportunities

including refreshing the Milk Messenger magazine.

allowed MMPA to make significant financial

with customers and other industry partners. The

As a result, MMPA won several communications

improvements in 2019. MMPA underwent debt

Constantine, Michigan expansion, which produces

awards from national industry organizations

refinancing in Fiscal Year 2019 and received

ultra-filtered milk, officially came online during

including the National Milk Producers Federation

attractive market rates that could not have

fiscal year 2019. Our ongoing strategy is to build

(NMPF), the Cooperative Communicators

been achieved without a strong financial

base volume with strong partners—domestically

Association and the National Council of Farmer

position. The debt refinancing process, along

and internationally—who are currently using

Cooperatives. The awards included NMPF’s

with MMPA’s strong working capital position,

ultra-filtered milk and to continue partnering

Outstanding Achievement in Communications

allowed MMPA to put more dollars in member

with customers to further develop new product

award, which is annually presented to a

milk checks throughout last year. MMPA’s

initiatives in a growing market.

cooperative designated as communicator of the

financial position prepares our cooperative to continue forward, ready to seize new opportunities and build more connections.

290 MILLION

year. MMPA won 10 total awards in the NMPF POUNDS OF MILK

PROCESSED INTO ULTRA-FILTERED MILK (JAN-SEP 2019)

MMPA ENHANCES COMMUNICATIONS AND EARNS NATIONAL RECOGNITION

contest, including first place member magazine and ‘best of class’ in two of the three categories.

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MOMENTUS MEMBERS:

John and Cynthia Adam 2019 Indiana Dairy Farmers of the Year John and Cynthia Adam of Goshen were named Indiana Dairy Farmers of the Year during the Indiana Dairy Producers Forum by Indiana Dairy Producers (IDP). The Indiana Dairy Producer of the Year is awarded to a dairy producer who has portrayed the dairy industry in a positive light and has been successful in the dairy industry over a period of time.

“We want to educate people about the farm, our love of animals, how we take care of the cows and how we’ve grown our family on this farm.”

— John Adam

MMPA PARTNERS WITH MICHIGAN SUGAR COMPANY TO STARTUP “CREAM & SUGAR”

YOUNG COOPERATOR CONFERENCE HITS THE ROAD

Michigan Sugar Company and MMPA

became a bus trip in 2019, allowing

2019 was a year with record-breaking weather.

collaborated with the Shaheen Development

Young Cooperators to tour two of MMPA’s

What started off as a polar vortex in January

Group to startup a locally-source ice cream

manufacturing plants and two of MMPA’s

bringing ridiculously cold temperatures led to

shop: Cream & Sugar Ice Cream Company.

member dairy farms. The refreshed, bus-tour

one of the wettest springs to date and then

Located in Bay City, Michigan, all the ice cream

format left from Lansing and visited stops

ended with unseasonably early snowfall in

is made using all-natural Pioneer sugar and

including Middlebury Cheese Company,

November. The weather wreaked havoc on all

dairy products produced by MMPA members.

dinner on an Amish member farm, MMPA’s

agriculture occupations with the cold causing

The shop tells the stories “behind the scoop,”

Constantine plant and a member farm in

depressed milk volumes, the wet spring

focusing on MMPA’s dairy farmer members

Southwest Michigan. As in the past, the

delaying planting and hay harvest, and the

who give Cream & Sugar some of its key

conference was organized with assistance from

snow impacting crop harvest.

ingredients.

the current and previous year’s OYDC winners

The MMPA Young Cooperator Conference

and runners-up.

5 STOPS IN 269 MILES

24 FLAVORS PRODUCED ON-SITE AT CREAM & SUGAR.

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TRAVELED

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RECORD-BREAKING WEATHER IMPACTS MEMBER FARMS

883,699 ACRES PREVENTED FROM PLANTING IN MICHIGAN DUE RECORDBREAKING WEATHER.

MMPA DONATED

LEGISLATIVE CONNECTIONS AID DAIRY FARMERS MMPA took an active role advocating for

18,000 POUNDS OF CHEESE FROM HERITAGE RIDGE CREAMERY TO THE FOOD BANK COUNCIL OF MICHIGAN

MMPA COMBATS HUNGER WITH DAIRY DONATIONS MMPA donated 18,000 pounds of cheese

legislative changes on behalf of our member-

(FBCM). IN ADDITION, MMPA PARTNERED

from Heritage Ridge Creamery to the Food

owners. Collaborating with other industry

WITH THE KROGER COMPANY TO DONATE

Bank Council of Michigan (FBCM). In addition,

organizations, MMPA advocated on members

55,000 GALLONS OF MILK

behalf on issues including international trade,

FOR DISTRIBUTION AT FOOD BANKS

dairy labeling, regulatory affairs and farm

IN THE SUMMER OF 2019.

workforce modernization. Thanks to dairy farmers’ advocacy, the passage of the Farm Bill in December 2018 significantly improved the dairy safety net and benefited dairy farms of all sizes. The Farm Bill’s investment in the Dairy

MMPA partnered with The Kroger Company to donate nearly 55,000 gallons of milk for distribution at FBCM food banks in the summer of 2019. The partnership began in 2015 when MMPA made the cooperative’s first large-scale statewide donation of milk. Since then, MMPA has made multiple donations that

Margin Coverage (DMC) Protection Program,

continue to reach all 83 counties in Michigan,

a voluntary risk management program, aided

thanks to FBCM’s network.

farm’s finances after sign-up began in June.

More than 22,000 dairy farmers nationwide participated in DMC.

250,000 GALLONS OF MILK DONATED BY MMPA TO MICHIGAN AREA FOOD BANKS SINCE 2015.

MOMENTUS MEMBERS:

The Daenzer Family 2019 MMPA Top Quality Award Winner The Daenzer family—Jacob, Doug, Todd, Leslie and Luke—received MMPA’s Top Quality Award during the 103rd Annual State Delegate Meeting in 2019. The family milks 360 cows and maintained an average somatic cell count of 53,667 cells per milliliter in the 2018 fiscal year. They credit their success to being consistent with every practice on their farm.

“High quality milk starts in the parlor. Consistency in the procedure not only gives the cows the same quality care every milking, but helps prevent infections from poor udder prep.”

— Todd Daenzer

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Our Leadership 2019 MMPA BOARD OF DIRECTORS Back row, from left: District 2 Director Tim Hood, General Counsel Todd Hoppe, Director-at-Large Gertie van den Goor, District 1 Director Hank Choate, District 4 Director Corby Werth, District 8 Director Scott Lamb, Director-at-Large Aaron Gasper, Directorat-Large Carlton Evans, District 3 Director Dave Pyle, District 6 Director Tony Jandernoa, CFO and Assistant Treasurer Josep Barenys and Director-at-Large Mark Iciek. Front row, from left: Treasurer and District 7 Director Eric Frahm, President and CEO Joe Diglio, Board Chairman and Director-at-large Kris Wardin, and Board Vice Chairman and District 5 Director Doug Chapin.

MMPA MANAGEMENT STAFF Back row, from left: Director of Member Services Dean Letter, Director of Engineering Gasper Calandrino, Director of Management Information Services Andrew Caldwell, Director of Quality Sudeep Jain, Ovid Plant Manager Ron Steinhorst, Director of Human Resources Kelly Kerrigan, Director of Supply Chain Therese Tierney, Constantine Plant Manager Dave Davis, Director of Manufacturing Kaylan Kennel, and Middlebury Plant Manager Bela Sandor. Front row from left: Senior Director of Member and Government Relations Sheila Burkhardt, President and CEO Joe Diglio, CFO Josep Barenys, and Senior Director of Sales Jim Feeney.

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