On Board With The Chairman - January 2024
The board held their scheduled meeting on January 30, the fifth Tuesday of the month, which provided our finance team with an extra week to finish the year-end analysis. While the board was able to review preliminary results, we will have final numbers for members once our audit is completed in March.
Brad opened the meeting with reports on December sales of butter and powder for CDI. Our butter team at Challenge and within CDI finished the year well, but powder sales are still a significant drag on our business right now. A combination of escalated manufacturing costs due to sustained inflation in recent years and poor international demand and markets are still key factors, but we continue exploring ALL aspects and opportunities within that part of our business. Valley Natural Beverages is well into construction, with some floors poured and tilt-up walls beginning to be delivered soon. It is exciting to see this progress on time and on budget so far. We have secured shelf space for our new protein snack (protein puffs under the brand "In Good Hands") in all Mollie Stone’s Market grocery stores right now (a small regional chain of nine stores in the Bay Area), and in April we will be in all 420 Sprouts stores across the country. This is a great first step in testing the consumer interest in this brand-new product category for CDI. Brad also reviewed several projects we are working on: some big and some small, but all important to our bottom line. More details will be presented at the annual meeting or when they are ready for launch.
Phil presented the financial report for December and the full year 2023. These reports will be available to the membership once our audit is completed, as there is the potential for minor adjustments made by our auditor, Moss Adams. Based on the latest financial forecast, the Board of Directors voted to discontinue the market assessment beginning with January milk, so you will not see a market adjustment on your January final payment that is distributed later this month. While the current projections for CDI indicate consistent positive cash flow for Q1 and Q2, it is important to maintain financial discipline as markets remain volatile and international demand for powder remains poor. Removing the market assessment is a positive step forward, but before distributing additional revenue above the federal order blend, we need to ensure we have adequate reserves and confidence in market trends and product demand in the second half of 2024. At the annual meeting, staff will share our plan to achieve our stated goal: pay out the full federal order blend plus depooling on a consistent basis.
Dennis then gave the operations report. As many of you may have heard, we had a fire at the Tipton plant this past month. The fire was brief and mitigated by safeguards in the system, but nonetheless a concern, so Dennis went over how the situation occurred and what measures have been put into place to prevent a re-occurrence – either at Tipton or any of the other dryers in our network. All systems worked pretty well, and the net impact of this fire was an unscheduled "bag change" (regular maintenance required on all our dryers 1-2 times during the year), and the dryer was back up and running within three days. He also reviewed some of the capital projects happening within the plants and timelines associated with each. These are mostly focused on expanding the product capabilities in Visalia and Tipton and will be discussed in more detail at our annual meeting.
Rob presented his membership report. As a cooperative, we continued to be down in milk production for December (compared to December 2022), but total milk fat produced was UP slightly year-over-year as we all strive to improve genetics and feed management, which shows in our production numbers. We all know we don't sell milk, but rather butterfat and nonfat solids, and our membership has done a great job producing more of the valuable components, even if there is less overall milk in the tank. Rob also discussed our Washington, DC strategy moving forward, which has always been a big part of CDI's presence there. Also, the FMMO hearing has finally finished after beginning last August, with a few stops and starts in between. The next steps that we look forward to are a preliminary decision from USDA in late June with a possible vote in Q4 of this year. This would likely put implementation in late Q1 or early Q2 2025.
As we have finished a very tough year on-farm and at CDI, we ask for patience and understanding as we strive to address these issues. We hope to see many of you at the CDI tent at the World Ag Expo in a few weeks. Enjoy the rain we are currently being blessed with; we pray it is not a repeat of last year's devastation. We pray for rain, but ultimately, our God decides what we get and when.
