A special guest joins The Milk Check this month: Tom Gallagher, CEO of Dairy Management, Inc.

Ted, T3 and Anna ask about how DMI allocates the funds it collects from the Dairy Checkoff program; Gallagher explains why recent changes to DMI's advertising strategy position the industry to interact with today's consumers. (Spoiler: There's a reason you don't see "milk mustache" commercials on TV anymore.)

Gallagher also urges farmers to band together against aggressive animal rights groups who he says want to put dairy farms out of business.

 

Anna: Welcome to "The Milk Check," a podcast from T.C. Jacoby & Co. where we share market insights and analysis with dairy farmers in mind. Today on "The Milk Check," we interview Tom Gallagher, CEO of Dairy Management, Inc. DMI is responsible for increasing sales and demand for dairy products by spending the money generated through the Checkoff program.

T3: First, I'd like to say thanks for joining us today. We really appreciate you taking the time to discuss DMI and some of DMI's activities and the Checkoff program. And I think the best place to start this conversation would be Tom, tell us about the Checkoff program and how the money is used and where DMI is spending Checkoff dollars today.

Tom: Okay. Well, on the Checkoff money we get money, $0.15 per hundredweight that is provided by dairy farmers by law to the Checkoff. And $0.05 of that goes to the National Dairy Board and $0.10 goes to local promotion groups. So let me start there and also state that the Checkoff's been in place since 1983 when dairy farmers approached Congress and said, "Look, the government is sitting on 17 billion pounds of excess product. That's not good for the government, it's not good for taxpayers, it's not good for dairy farmers. We have had a voluntary Checkoff for years. We'd like a mandatory Checkoff and we will fund it. We will pay for USDA oversight because we believe farmers need a voice in the marketplace." And since that time, we have seen per capita consumption grow 75 pounds per person in the United States. And prior to that, which really shocks a lot of people, in the early decades of the 1900s, per capita consumption was on a straight decline until just about the time the Checkoff went into place.

So we take that money that we receive and we do a number of things with it. We have an export company that is run by former secretary Vilsack from USDA. And there are 120 members of that company that export dairy products. And through that company, the Checkoff funds about $20 million in marketing activities. The 120 members fund about $1.5 million that can be used for policy, trade policy, so the dairy in the street speaks with one voice, which is really a very, very powerful and important thing to do as an industry to make sure that we're unified. And it's necessary to have those member dollars because Checkoff cannot do lobbying. So with that, that company was created in 1995 by processors, manufacturers, traders, farmers. And then the Dairy Management organization itself focuses on increasing sales and trust. So maybe I should stop there and let you take it deeper.

Ted: Roughly what percentage of the Checkoff money goes to USDEC? Keeping in mind that Jacoby & Co. is one of the original members of the USDEC. And we greatly value the assistance that USDEC has given our company in marketing products overseas.

Tom: Yeah. Well, and we appreciate that you were an early member. And so Dairy Management, Inc. was formed by the National Dairy Board, which gets the nickel, and that's about $100 million. And then state and regional organizations that get the $0.10 but not all of them are members. So they have about $100 million to $120 million. Not all state and regionals are members.