Dairy Kings

Posted on May 1, 2011 :: Cover Story
Posted by , Insight on Business Staff Writer

Photos by Shane VanBoxtel of Image Studios

Jim Ostrom is a firm believer that happy cows are healthy and produce lots of milk. • “It’s all about the cows,” says Ostrom, who grew up milking cows on a Jefferson County farm. “If the cows are happy, then we’re doing something right.” • Ostrom and his Milk Source LLC co-owners John Vosters and Todd Willer have a lot of cows to keep happy – more than 17,500 at three dairies in Rosendale, Omro and Kaukauna. • On a walk through a barn the size of four football fields in the Town of Rosendale in Fond du Lac County, where 4,000 cows spend most of their day eating, chewing their cud and resting, barely a moo was heard.

The quiet extends to a second barn with another 4,000 cows and the state-of-the-art parlor where up to 160 cows can be tended to on twin circular rotary milking parlors. • Quiet cows are happy, Vosters says. “Cows don’t make much noise if their needs are being met. We make sure they have a comfortable place to lie down, the temperature is comfortable for them and that they’re milked three times a day.”

All those black and white Holsteins translate into a lot of green: In 2010, Milk Source generated $73 million in sales. The Rosendale cows produce 16 tanker trucks of milk a day that head straight to Foremost Farms in Appleton, where the milk is turned into cheese. Omro Dairy also supplies milk to Foremost, while the Tidy View Farm outside of Kaukauna provides milk to Saputo Cheese in Black Creek.

Today, Milk Source’s owners are changing the legacy industry of America’s Dairyland. By increasing the amount of milk produced and delivering it to local cheese plants, they are growing a regional supply chain. Foremost Farms is putting the finishing touches on a $47.2 million expansion, fueled in large part by Milk Source’s ability to provide a large reliable source of milk from its Rosendale and Omro dairies. The expansion allows Foremost to double its mozzarella cheese output and hire more than 30 new employees in Appleton.

“Rosendale Dairy is located in a region of Wisconsin where significant reinvestment has been and continues to be made in dairy facilities,” says Joan Behr, director of communications and brand management for Baraboo-based Foremost Farms USA. “Increasing cheese demand from food service customers and the growth in our members’ milk volumes in eastern Wisconsin – along with their plans to steadily grow production over the next few years – positioned Foremost Farms to expand cheese manufacturing in Appleton.”

And although 85 percent of Wisconsin’s total milk output is used by cheese manufacturers, Jayme Sellen of the Dairy Business Association says cheese makers still must import milk from other states to meet their demands.

“Cheese making is a global industry and the demand keeps growing and growing. We need to provide our cheese makers here in Wisconsin with a consistent supply of quality milk, which is what expanding dairies like Rosendale and Tidy View are doing,” Sellen said.
Milk Source’s dairies also create a significant economic impact on the surrounding area. The Rosendale Dairy creates an estimated $36 million impact; Tidy View, $28 million; and the Omro Dairy, $12 million.

Milk Source plans to build two dairies in Adams County. The New Chester and Richfield dairies are expected to eventually be home to 8,600 cows. The estimated economic impact from those dairies is a combined $36 million.

Not Your Father’s Farm

One thing’s for certain – Milk Source’s dairies are a far cry from the farms its owners worked on growing up. Willer says there’s a reason for that.

“Having a small farm is difficult. You work seven days a week every day of the year. You put in a lot of time and effort and then you don’t even know if you’ll make it,” he says.

Milk Source’s owners all grew up milking cows and studied agriculture at the University of Wisconsin. They each traveled at some point to California in the late 1980s and early 1990s and saw large dairies that dwarfed the size of what was back home.

“I thought, ‘Why can’t we do that here?’ It really hit home that it’s not a farm, it’s a business,” Willer says.

At the same time, the number of dairy cows in Wisconsin declined as farmers retired and fewer members of the next generation decided not to go into the family business. And the economic challenges of running a small farm turned many sons and daughters away. The price for corn to feed the cows keeps rising as more of the crop is used for non-food uses such as ethanol, while the price being paid for milk is inconsistent. In 2010, the average price for 100 pounds of milk was $16.30, according to a University of Wisconsin study – a 27 percent increase over 2009 when milk prices fell due to declining demand.

Milk Source was formed in 1999, but traces its roots back to the mid-1960s when Vosters’ parents started Tidy View with just 30 cows. Through the years, the farm slowly grew.
Then in the mid-1990s, Ostrom approached Vosters and his father with the idea of growing the farm to 600 cows. After the elder Vosters retired, Willer joined the partnership. Tidy View went from 600 cows to 900 cows to 1,300 cows and beyond to the current count of 6,800.

Following Tidy View’s success, the partners next purchased the Omro Dairy, which had failed under two previous owners. Taking what they learned at Tidy View, the three were able to reopen the dairy and turn it around. After Omro, the trio began to think bigger and made the leap to building a dairy from scratch.

“The economies of scale allow us to be successful. We can grow our own corn, which helps keep some costs in line, and with the system we have in place we can constantly be milking,” Willer says.

When looking for a location for their new dairy, Ostrom says they wanted a place surrounded by plenty of usable farmland so corn and alfalfa could be grown locally to     feed the cows. A search led them to a location in the Town of Rosendale.

Neighboring farmland was purchased and Milk Source now pays those farmers to till the land, with supplies and harvesting all paid for by the business. And instead of the corn being shipped hundreds of miles away, it now just goes down the road to the dairy where it’s stored and fed to the cows.

The milk those cows produce then travels less than 40 miles to Appleton where it’s turned into cheese. “The overall carbon footprint of the dairy is small compared to what was previously being done with the corn being trucked away so far,” Ostrom says.

Building an 8,000-cow dairy from scratch was daunting. Milk Source went through an exhaustive permitting process with the Wisconsin Department of Natural Resources as well as some protests from a couple of neighbors worried about manure odor and traffic as well as concerns about it being a “factory farm.”

The first half of the dairy with 4,000 cows opened in 2008; two years later the second half with an additional 4,000 cows was operational.

“It was challenging to get through, but we learned a     lot,” says Ostrom. Rosendale Dairy has been committed from the outset to address concerns, he adds, particularly those regarding odor and pollution.

All dairies with more than 700 cows are subject to strict DNR rules regarding storm water and run-off. Of Wisconsin’s 12,700 dairy farms, about 1,891 are regulated. About 265,000 of the state’s 1.265 million dairy cows live on the regulated farms.

As for the manure, the Rosendale Dairy has a state-of-the-art processing facility that begins with the sand bedding provided to the cows. (Sand is more comfortable and easier on the hooves than hay, Vosters says.)

Three times a day, when the cows are taken to the parlor to be milked, sand-laden manure is scraped from the free stall alleys into cross augers, which take it to the manure processing building’s collection pit. From there, a thorough separation is done – eventually 90 to 95 percent of the sand is reclaimed and can be reused. The solid manure is placed outside where it becomes compost and spread on nearby fields in response to farmers’ needs while any remaining liquid – also known as tea water – is pumped out to a three-stage lagoon system. The tea water can also be used as fertilizer and the DNR recently approved a plan allowing the dairy to pump the water using a 10-inch pipeline up to five miles away.

Holding two bottles – one with chemical fertilizer pellets and one with compost created by the Rosendale cows – Ostrom says, “Farmers never have enough manure. It’s better for the fields than chemicals. This fertilizer is natural and has a lot of good stuff in it (for the crops).”

The Rosendale manure processing facility – along with the rest of the dairy – attracts visitors from all over the world. On a chilly February day, a group from the Ukraine was followed by a group from UW-Oshkosh, closely observing how it all worked. In 2010, people from 47 countries visited the dairy.

“We’re not the only ones expanding. There are other dairymen out there doing what we’re doing,” Ostrom says. “Right now, we’re just the largest, and Rosendale – for at least now – is the most modern.”

As Milk Source begins work on the Adams County dairies later this year, Ostrom says they’ll take what they learned at Rosendale and create a more effective manure processing facility there.
“The dairy is sustainable and efficient. The cows eat corn grown on nearby fields and their manure is then used on those same fields as fertilizer,” Ostrom says. “The farmers don’t have to truck out their corn and we don’t have to truck in food.”

The dairy is also energy efficient. Rosendale won a Focus on Energy Award in 2010 for reducing energy use through a number of methods, including the utilization of heat-recovery tanks, using plate heat exchanges on its milk pumps and energy efficient lighting and livestock watering equipment. Focus on Energy estimates the dairy saved $288,000 in energy costs with those changes.

“We took all the best ideas we saw while visiting other dairies throughout the country and brought them together at Rosendale,” Ostrom says.