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Adapting to a Changing Industry

August 2004

Another year of organizational growth and structural changes in the U.S. dairy industry prompted renewed thinking about the future of the American Jersey Cattle Association (AJCA) and National All-Jersey Inc. (NAJ) at the Annual Meetings in Seattle, Wash.

The 136th Annual Meeting of the AJCA set the tone on the morning of July 3, when Neal Smith, Executive Secretary and Chief Executive Officer, stated, “We have to have the courage to keep changing and stay focused on what is profitable. If it is not profitable, our members are not going to support it.”

In his first address as President to the 46th NAJ Annual Meeting, James Ahlem picked up on Smith’s comment, saying, “As technology improves, I think that we are going to find that maybe our Jersey milk is more unique than we know.” Newly appointed NAJ General Manager, Erick Metzger, said the foundation would be “to focus on the fundamentals.”

Over 300 Jersey enthusiasts made the trip to Seattle, Wash., with nearly 200 members and guests in the audience for each of the sessions.

136th Annual Meeting of the American Jersey Cattle Association

A record-breaking year for participation in many areas for the Association was reported by Smith. These included:

• 69,244 registrations, the eighth-best year in history;
• 98,215 cows in 929 herds enrolled on testing and type evaluation programs, third best in history;
• 67,249 cows scored in the type appraisal program, an all-time record;
• 625 herds on REAP, an all-time record;
• $357,946 invested in Project Equity activities;
• $7,280,379 in sales (on 5,365 lots) by Jersey Marketing Service, fourth-best year in history; and
• 545 ad pages in Jersey Journal, its fifth consecutive year of 500-plus advertising pages.

But among all records set during 2003, the one that mattered most was, for the first time in history, that domestic sales of Registered JerseyTM semen crossed the one million unit mark.

“This is a real significant indication of what is happening in our industry among dairy business owners in the U.S.,” Smith said.

The emphasis of Smith’s report, however, was to look at the structure of the dairy industry today and consider what the AJCA needs to do to continue being “the only dairy breed in the U.S. growing.”

Using color charts and graphs, Smith pointed out key changes in the dairy industry and in Jersey herds utilizing AJCA services. In general, the number of herd owners is decreasing, while the number of cows per herd is increasing.

A total of 9.1 million cows in the U.S. are housed on 91,000 dairy farms. Smith’s first chart showed that while 80% of the farms in the U.S. consist of less then 100 cows, 1% of the farms in the U.S. have 1,000 or more cows.

Similarly, there are 34 herds enrolled on REAP that own 41,671 cows that accounts for 43% of the total enrollment. So, Smith pointed out, as the industry changes, the challenge will be “to find services so we all benefit.”

Ahead in Breed Promotion

“Our mission is to improve and promote the Jersey cow,” Smith noted. “If we do more promoting, all of the success that I have mentioned will speed up.”

The new livestock tampering and sabotage law passed by the Commonwealth of Kentucky, which will allow for “mandatory ultrasound testing to the first and second place animals of the All American Show,” was a positive development for Smith.

“Why should we worry about this show?” Smith asked. “Because this is our best opportunity to promote our breed.”

Smith encouraged greater advertising by herd owners and for them to talk to neighbors about the merits of Jerseys. “Hand them one of our promotional items.”

Topping his list was the breed comparison of Productive Life, showing Jerseys with a 149-day advantage over the majority breed. “This is my favorite chart and is the association’s best promotional tool.

“Everyone should have one of these in your pocket, on your truck dashboard, somewhere that you can always see it. We need you to spread this word.”

The reason? Quite simply, “We want to change the color of the dairy industry,” he stated.

Report of the AJCA President

Retiring AJCA President James S. Huffard, III, Crockett, Va., also spoke of change and progress in his report to the members of the Association.

“We must be receptive to the changes forthcoming in the industry and the marketplace. These changes will continue to present challenges to all breeders of Jersey cattle and this association,” said Huffard.

“It is often said, ‘Those who invest wisely, invest for the long term.’ Every dairy business owner has witnessed this, first-hand, these last couple of years. However, for the dairymen who invested in Registered JerseysTM, the dividends have been far greater than from other ‘live’-stocks of the trade,” stated Huffard.

“The Jersey cow continues to reveal her high profitability to the U.S. dairy industry,” Huffard said of the increases in breed m.e. production averages of 47% in the last 20 years.

Best of all, Huffard said the Jersey cow is extremely efficient in converting feedstuffs into product and does all of this “while becoming pregnant in a timely manner, then easily delivering a healthy calf of increasing value and at a frequency that is the envy of the other breeds.”

On the organizational front, Huffard commented, “It certainly has been a rough couple of years financially for dairymen and these organizations alike. But I am proud to say that the we have maintained a sound financial position.”

Huffard thanked the candidates for AJCA President—Charles F. Luchsinger, Syracuse, N.Y., and Donald S. Sherman, Hilmar, Calif.—for stepping up to the plate.

“For the benefit of the organization, they decided to oppose each other in this election and if nothing else, have infused an interest and excitement in our duty to vote that, I must admit, at times is lacking. There are no losers and it is our gain from your involvement in this process,” Huffard commented.

As his role as President came to an end, Huffard left on this positive note:

“When I was in college, a Jersey breeder was in the minority; a minority of darkness. Today the Jersey is still a minority but a growing one with a brightness that is attracting the majority. What a difference a few decades can make when all efforts are focused toward making the Jersey cow the most profitable in the business.”

Election Results

The Constitutional amendment and election results were announced by Ray Schooley, chair of the Inspectors of Elections. There were 619 ballots cast from the 2,247 active members.

Amendment No. 1, to establish new districts, passed with a vote of 503 for and 8 against. Amendment No. 2 also passed on a vote of 479 for and 32 against. (Editor’s note: Refer to sidebar, page xx, for details.)

Donald S. Sherman was elected President for a three-year term. Re-elected as Directors were Paul Schirm, West Salem, Ohio, Fourth District; Clint Collins, III, Sylacauga, Ala., Fifth District; and Michael Fremstad, Westby, Wis., Tenth District. Paula Wolf, Beaver, Ore., was elected to her first term as Director from the Eleventh District. Wolf succeeded Bearl A. Seals, Cloverdale, Ore.

46th Annual Meeting of National All-Jersey Inc.

Members of National All-Jersey Inc. met in an afternoon session on July 3.

President James Ahlem, Hilmar, Calif., posed this question to members: “How important is National All-Jersey?”

His response: It is essential if Jersey milk is to be priced equitably.

“We strive to promote and receive a higher return for this high value milk,” stated Ahlem.

Ahlem continued, “As technology improves, I think we are going to find that maybe our Jersey milk is more unique than we know. Does she have special properties in her milk that can be converted to special uses in the pharmaceutical industry? Maybe we can feed her differently to enhance her abilities. Time will tell and we need to be out front when it happens.”

Above all, Ahlem said, “We have been leaders in identifying some of the most innovative ways to price milk that benefit not only dairymen but processors as well. I think that win–win type of thinking makes the Jersey organizations very credible to the whole industry.”

Ahlem also pointed to the vital role played by the NAJ subsidiary of Jersey Marketing Service. The reputation of JMS for “providing quality and service to both buyers and sellers of Jersey animals” further enhances NAJ’s credibility”

Talking about the future, Ahlem also commented about the growing number of breeders making the switch to Jerseys. These people can be important to the future of the Jersey organizations, “because I think they are seeing benefits that we may have overlooked. They are looking at Jerseys with a brand new set of eyes.”

Report of the Executive Secretary

“The business of National All-Jersey Inc. and the subsidiary, Jersey Marketing Service, is to sell Jersey milk and to sell Jersey cows. You need them to add value to your Jersey milk and your Jersey cows,” NAJ Executive Secretary Neal Smith proclaimed.

Smith reported that $5,257,605 has been invested in Project Equity since 1976. 2003 closed with support from 813 members of $357,956.

Even though 2003 was a year with the lowest milk prices in 25 years, Smith added JMS turned in its fourth best year for total gross, $7.4 million. “In tough times people turn to the Jersey cow even more because her efficiency comes through.”

Since 1975, JMS has generated $120,995,353 in revenue from marketing 110,459 cows, heifers, bulls and embryos, Smith reported. He summed, “That’s a lot of Jersey cows.”

JMS, activity to date 2004, was reported on by JMS manager, Herby D. Lutz.

“What a time to be in the Jersey business,” he exclaimed. “What a time to own Jersey cows. What a time to be associated with Jersey breeders.”
The 2004 sale year has already been record-breaking, he said. JMS had its first-ever million-dollar weekend in April and marketed over two million dollars of cattle in the same month.

“This would be the tenth best year in the history of JMS, if it ended today,” reported Lutz.

Lutz reassured members that it was not ending any time soon, as he announced the 12 sales on the calendar for the rest of 2004.

Report of General Manager

Smith then introduced Erick Metzger, for his first report as NAJ General Manager.

“What a difference a year makes,” Metzger said. “When we got together last year in Columbus, we were looking at Class I and III milk that wasn’t even at $10. We were looking at cash butter and cheese that were barely over a dollar. Here we are this year, milk peaked at $20 per hundred, butter at over two dollars a pound and the same with cheese. They have settled down a little, but are certainly at a place where we can make a profit milking cows, particularly little brown cows.”

He then outlined what’s in store as he takes over the daily operation of NAJ. “We are going to focus on the fundamentals.

“This organization was formed under the premise to increase the value of and the demand for Jersey milk and Jersey cows. This has been our focus ever since we began and I don’t think we’ve ever come up with a better focus. I doubt that we ever will.

“Let’s talk about things we can do that are going to increase the value of and demand of the Jersey cow,” stated Metzger.

Four Objectives

The first, he said, would be to help producers realize over-order prices where opportunities exist.

“We really think there will be more opportunities to do more of that,” Metzger noted, pointing to recent work in Missouri to develop a true multiple component pricing (MCP) market that’s grown to over 17 million pounds of milk monthly.

“We have already been contacted by another co-op that wants to attract more high-solids milk into their cottage cheese plant. They want to work with NAJ on some kind of payment plan that will allow them do this.”

“Another objective is educating everyone involved on the processing side of the industry about the advantages of using Jersey milk,” added Metzger. “You may think this is old hat, but one of the first things I did was to attend an industry workshop that was designed for cost accountants at processing plants. These are the people that manage the cost side of whatever product you’re processing. The presenters did a phenomenal job of outlining ways to measure and control costs in a processing plant. They gave suggestions like, ‘What if you can cut out two grams of resin in a milk jug,’ but never once did they even look at the advantages of starting with a higher solids milk at the receiving dock. So we obviously haven’t gotten this message out everywhere that it needs to go.

“If you use about 100 pounds of Jersey milk, you will get about 15 pounds of mozzarella cheese. If you use 100 pounds of industry average milk, you may get 12 pounds of mozzarella cheese. One hundred pounds of Jersey milk will give you 12 pounds of Cheddar cheese. One hundred pounds of industry average milk will give you less than 10 pounds of Cheddar cheese. These are efficiencies we still need to educate the industry on.”

“The other side of the industry is dairy producers,” commented Metzger about the third objective. “We need to educate dairy producers on the economic advantages of using Jerseys.

“The California Department of Agriculture is required to produce an annual survey on the cost of milk production in the state. This past April the 2003 figures became available.

“A couple of weeks after they were published, a leading industry spokesman was quoted in a national dairy magazine saying, ‘Holstein milk can be produced for $1.44 a hundredweight less than Jersey milk in the state of California.’ Sure enough, he is right. I have no problem with that figure at all. But he forgot to tell the rest of the story.

“When you’re talking about profitability, you just can’t look at the cost of production,” Metzger noted. “You’ve got to look at the revenue side of the equation. Once we find the revenue side and subtract out the expense side, guess what? Jerseys were more profitable in 2001, 2002 and 2003.

“Who else is going to do that economic analysis looking at Jersey cows if it isn’t NAJ?” asked Metzger. “That is what we need to focus on as well, providing economic analysis on Jersey advantages to Jersey producers.
“Finally, another area we work in is representing your interests in issues in dairy policy,” said Metzger.

“No one else is going to represent Jersey interest in matters of dairy policy. All milk is not created equal. The dairy industry will formulate policy looking at 3.5% fat and 2.99% protein milk, and that’s all they want to look at. They don’t want to look at the implications of milk with 4.5% fat and 3.5% protein or better. So when these dairy industry regulations, Federal milk marketing orders and, even in some cases, state and local regulations, are being discussed NAJ is going to be your voice, representing your interests to protect your milk check and the equity you have built in your herds.

“I ask myself everyday when I drive to work, ‘What are our members going to get for their two cents per hundredweight or their $2.60 per cow?’ And when I finish my day, ‘What did they get?’

“I think that as long as we continue as a staff and Board to focus primarily on those four areas, we’ll be able to answer that every day, every week and every month,” concluded Metzger.

NAJ Elections

David Endres, chair of the Teller’s Committee, announced that J. Patrick (Pat) Rankin, Uniontown, Ala., had been re-elected to serve a second term as District 5 Director of National All-Jersey Inc.