Business

Lower milk prices help drive demand for Hiland Dairy products

Hiland Dairy.
Hiland Dairy. The Wichita Eagle

It’s the holiday season. At Hiland Dairy, that means eggnog, 10,000 to 20,000 gallons a week.

But there are also vats of blueberry yogurt, soft-serve ice cream mix, no-fat cottage cheese and enough chocolate milk to float a car at Hiland’s Wichita production plant, 700 E. Central.

And, of course, there’s skim milk, 1/2 percent milk, 1 percent milk, 2 percent milk, whole milk, half-and-half, whipping cream and heavy cream.

Demand may soon be increasing because milk prices have fallen sharply after rising more or less in a straight line since 2009.

Since hitting a high in late September, milk prices have fallen more than 30 percent.

Dairy farmers, who were squashed by low prices and high costs in the first few years after the recession, wound up making very strong profits in 2014 as corn prices dropped. High prices led to high production and strong imports, which led to the fall in prices.

While lower dairy prices are unwelcome on the dairy farm, they are good news for the Wichita plant and for consumers.

The plant makes a small percentage on each gallon of milk or tub of cottage cheese it sells, whether milk prices are low or high, said general manager Jerald Grey.

But people buy more milk and yogurt and cottage cheese when prices are low. As volumes go up, it helps the company better cover its fixed costs.

“We are a business that works on pennies, so we need volume,” he said.

Its other source of profit is making operations more efficient. The historic plant, built as Steffen Ice & Ice Cream in 1931, is a factory that just happens to make food.

It’s filled with giant stainless steel tanks, machinery for heating and cooling milk quickly, pumps and pipes for moving milk around, enormous steel troughs for producing cheese curds, automated assembly lines, and a whole side operation that makes plastic gallon and half-gallon milk jugs.

The company just installed a million-dollar automated process control system.

The floor of the plant is often wet because water is used constantly to keep machinery clean and wash any stray splashes of milk down the drain. Grey estimated the plant uses 180,000 to 200,000 gallons of water per day. Despite the constant flows of milk throughout the building, there was no smell of spoiled milk.

The plant, which has 150 employees, takes in 14 tanker trucks of raw milk a day every day from dairy farms all over Kansas and beyond. Over the course of a month, the plant will process 2.5 million gallons of raw milk.

The only cow on the premises is the iconic figure over the entryway.

The plant produces much of the milk, cottage cheese and yogurt sold in Kansas. Its customers include grocery stores, dollar stores, drugstores, commercial food processors, schools and restaurants.

The cost of raw milk is the company’s biggest expense, Grey said, while labor is second.

Grey, who has been in the dairy business his whole career, has been plant manager of the Wichita plant since 2000 and general manager of the region since 2007.

Its third largest cost is utilities, he said, which the company attempts to rein in with efforts to increase recycling and reduce water usage.

One way to reduce utility costs is to give away the whey, the waste liquid remaining after milk has been curdled into cottage cheese curds, rather than pouring it down the sewer. Cattle producers haul the whey to their lots and feed it to cattle.

Hiland, headquartered in Springfield, Mo., is jointly owned by two large dairy cooperatives: Dairy Farms of America, based in Kansas City, Mo.; and Prairie Farms Dairy, based in Carlinville, Ill. The raw milk comes from members of those cooperatives.

“We’re farmer owned,” Grey said. “It keeps us very conservative, very grounded.”

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com. Follow him on Twitter: @danvoorhis.

Timeline

1897: Restaurateur Nicholas Steffen forms Steffen-Bretch Ice and Ice Cream Co.

1931: Steffen Dairy opens plant at 700 E. Central.

1985: Sterling Group of Houston buys Steffen Dairy, ending local family ownership.

1987: Zarda/Mid-Am Dairy joint partnership buys Steffen.

1991: A subsidiary of Mid-American Dairy, Hiland Dairy of Springfield, Mo., becomes owner of Steffen.

1993: Hiland renames Wichita-made products Hiland-Steffen and later Hiland.

By the numbers

▪ Hiland’s Wichita plant takes in about 85,000 gallons of raw milk per day.

▪ A tanker truck holds 6,000 gallons of milk.

▪ The plant makes an average of more than 100,000 gallons of milk a day.

▪ Whole milk is 3.25 percent fat. Heavy cream is 38.5-40 percent.

▪ It takes eight pounds of skim milk to make a pound of cottage cheese curd.

▪ The plant makes 60,000 pounds of cottage cheese a day.

▪ Cottage cheese is made by adding a tangy cream/milk dressing to the bland curds.

▪ The plant makes up to 3,300 gallons of yogurt per day, in 13 flavors.

Related stories from Wichita Eagle

  Comments