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Agriculture

Sunday, Jan. 31, 2010

State of the cheese: Valley seeing end to dairy profit freefall

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The cheese industry treasures people such as Joyce Tschetter.

During a lunch stop last week at the Hilmar Cheese Co. visitor center, the Minnesota resident rattled off the product's virtues.

"It's very versatile," she said. "It improves Mexican food. It improves American. It improves French. It improves Italian."

Tschetter — whose name happens to be pronounced "cheddar" — is among the millions of people who have helped drive the rapid growth in U.S. cheese production in recent decades.

Some of it has taken place in the Northern San Joaquin Valley, where several thousand people work at 10 plants turning out a wide variety of products.

Cheese is the No. 1 use of California milk, soaking up nearly half of the state's top-grossing farm product. If dairy farmers are to recover from the sharp drop in milk prices last year, it will be in part because of renewed demand for mozzarella and Monterey jack and the like.

Industry people said sales at U.S. retailers are fairly strong, as people eat out less to save money in a weak economy.

"Housewives who are buying for their families still see cheese as a value, good-for-you food," said Phil Robnett, vice president of marketing and sales at Hilmar.

This company makes products under various labels at the world's largest cheese plant on Lander Avenue.

Robnett said consumers increasingly are buying less expensive store brands rather than national labels. He also sees a shift toward cheese types with many uses, such as mild cheddar and mozzarella, while the economy remains slow.

The industry has seen a drop in sales to restaurants, which in better times piled plenty of cheese on pizzas, tacos and burgers.

Exports spiked a couple of years ago, as U.S. companies filled a void left by reduced production in Australia, New Zealand and Europe, said Mike Gallo, chief executive officer at Joseph Gallo Farms near Atwater.

A weak dollar, which makes U.S. goods more attractive overseas, also helped.

Surplus of dairy

A plunge in exports in late 2008 led to a surplus of dairy products and low milk prices for farmers. That has started to improve, though many farmers still make less than their cost of production.

Industry people have good reason to put their faith in cheese over the long term: It is an affordable source of protein. It stores well. It comes in a rich array of tastes and textures, from the understated notes of provolone to the mouth-tingling experience of well-aged cheddar.

This is why cheese has thrived among consumers while their fluid milk purchases have dropped.

"We do have the flexibility to change with the market, whereas fluid is fluid," said Gallo, whose company makes cheese under the Joseph Farms label from its own 15,000 milking cows.

State has advantages, challenges

Anyone walking through a large grocery store can see not just the basic cheeses, but dozens or even hundreds of unusual varieties.

"Space in a supermarket is at a premium, and obviously the (grocery) industry thinks your average consumer is inclined to spend a lot of time selecting cheeses," said Pat Dailey, the Chicago-based editor of Say Cheese, a new magazine for aficionados.

Dailey, who came across some premium Fiscalini cheese from Mo- desto while in San Francisco this month, said California producers are well-poised to take part in a continuing boom.

The state has advantages, notably efficient processing plants and mild winters that keep cows producing steadily.

But industry people noted challenges, including tough environmental rules and the cost of purchased feed. Gallo said New Zealand can keep costs down by feeding cattle on lush pastures.

The California industry's future, he said, "depends on whether we can compete in a world market, and that depends on production costs."

The state's high costs prompted Hilmar Cheese to open its second plant in Texas in 2007, though its core operation remains in Merced County.

To follow wine industry's path?

Fiscalini Cheese Co. grew fast after its 2000 founding, winning converts to its cheddar and other cheeses from cows milked on the property. The recession has slowed demand, general manager Brian Fiscalini said.

The company has boosted sales by adding Costco Wholesale stores, which do not have as much markup as other retailers, he said.

Over the long term, Fiscalini sees cheese growing in much the same way that California's wine industry took off in the 1970s.

"There are still people who think that the best cheese only comes internationally," he said. "I think California cheese-makers have been able to show that's not true."

Back at the Hilmar Cheese visitor center, Jessica Reeves of Modesto lunched with other young mothers. She said she likes a variety of cheese and the fact that it's a source of calcium.

"I just slice it up and put it on my kids' plates," she said. "My husband and I have it at night with wine."

Three-year-old daughter Katelyn chimed in about cheese, too.

"I like the white kind," she said.

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.