Landwehr dairy cows. Photos by Tate Carlson

Landwehr dairy cow barn

The Power of Cooperation

The First District dairy cooperative in Litchfield thrives by adding value for its members

By Brian Martucci
Wednesday, August 24, 2016

Roughly one in ten of the country’s 100 largest Ag co-ops operate out of Minnesota, including the two largest: CHS and Land O’Lakes

Litchfield-based First District Association is a comparatively modest-sized dairy co-op, but it’s growing. It has roughly 975 Minnesota dairy farmers as members and processes at least 5 million pounds of milk daily. That could rise to 7 million pounds when a tentative expansion takes place in the next three to five years. First District completed a $32 million expansion in 2012.

And it’s busy.

Upwards of 100 milk tanker semis roll through every day, ceasing only for a few hours in the dead of night. The processing equipment that turns milk into cheese, whey powder and lactose crystals never goes offline. Neither does First District’s distribution, which delivers its three principal products to customers that further process, package and label them for retail sale. 

Even if you’ve never heard of First District Association, you’ve heard of its customers: the co-op sells bulk cheese to Land O’Lakes, for instance, and is one of many suppliers of cheese used by McDonald’s.

First District directly employs about 150 workers. (By comparison, Land O’Lakes has 10,000 employees.) First District employees are a loyal bunch: some 60% have been with the co-op for more than 20 years. 

Clint Fall with one of First District’s cheese-making tanks.

“We call ourselves an ‘all in the family’ operation,” says First District president and CEO Clint Fall. “Our employees’ work ethic is unmatched, and many feel like they own the place themselves.”

Of course, First District’s actual owners are dairy farmers. Most are small and midsize family operators from central and west-central Minnesota. A multi-decade consolidation trend —  exacerbated by an ongoing milk price depression that’s devastating margins across the industry — means that a relative handful of much larger operators are responsible for a disproportionate share of First District’s purchasing volume. 

“Those larger [operators] constitute a small fraction of our membership, but account for perhaps 50% of our milk production,” says Fall.

Counterintuitively, this may actually be good for Minnesota’s dairy industry, which is responsible for tens of thousands of jobs. Historically, says Fall, the Upper Midwest was chockablock with small dairies with, say, 40 to 60 cows apiece. In the late 20th century, massive new feedlots sprang up in California’s warm Central Valley, shifting the industry’s center of gravity west. Recently, this large-lot approach — what Fall grudgingly calls “the West Coast model” — has crept into western Minnesota and eastern South Dakota. The shift is likely to continue, and perhaps accelerate, as California’s water crisis deepens; adult cows require more than 100 pounds of forage and feed per day, and there’s far less competition for the water required to grow those crops in our neck of the woods. 

Small and midsize First District Association members, like Watkins-based Landwehr Dairy LLC, see the writing on the wall. Husband-and-wife co-owners Dennis and Marlene Landwehr and their son Mike (“She’s the real boss; I just work here,” Dennis laughs, ever affable) have grown the milk herd to about 850 head. They’re aiming to add another 200 cows in the medium term; a smaller spread nearby has at least 200 head as well. The Landwehrs employ about 20 people. Like First District’s processing plant, the farm runs 24/7 — except for brief cleaning breaks, the milking floor is always running. In this business, scale and margins are closely intertwined.

Dennis and Marlene Landwehr.

Despite the incessant buzz about the farm, the Landwehrs are serious about doing things the right way. They’re fanatical about milk quality and purity, thanks in part to the premiums First District pays for high-quality milk. 

“We do not tolerate sloppiness, and we will not tolerate sloppiness,” says Dennis Landwehr, his easy smile darkening.

Landwehr Dairy analyzes every batch on site to ensure compliance with tight somatic (non-bovine) cell count limits; milk that doesn’t pass is promptly tossed. (First District’s meticulous, high-tech, quality-control operation, which includes a sophisticated testing lab that processes every incoming tanker load, catches any problems its members miss.)

The Landwehrs run a sustainable ship too. Under their cow barns, great sealed holding pits capture vast quantities of manure: 14 million gallons annually, at present. Every six months, an outside contractor pumps liquefied manure out of the pits and pipes it into the surrounding fields, where tractors and mechanical diggers forcibly inject it into the topsoil. Roughly 10,000 gallons per acre is enough to offset a year’s worth of ammonium-based commercial fertilizer and helps produce, on average, 175 bushels of corn (which ends up in dairy cow feed). Local farmers are so happy to take the Landwehrs’ manure that they collectively cover the $150,000-plus removal cost each year — far cheaper, and clearly more sustainable, than paying for commercial fertilizer.

There’s a good reason central Minnesota farmers prize Landwehr cows’ manure: it starts with the best ingredients money can buy. Much of the Landwehrs’ main property is reserved for huge piles of high-quality forage material, which appear almost overnight at harvest time and dwindle slowly over the following 12 months. Super-nutritious value-add feed, a highly scientific mix developed over the course of decades, supplements the forage.

Sandy Hansen-Wolff of AgVentures with tanks full of feed for cows at Landwehr Dairy and other dairy farms

“In terms of actual nutrients, cows eat better than we do,” says Sandy Hansen-Wolff, whose Watkins-based AgVenture Feed & Seed supplies and manages the feed inventories at Landwehr Dairy’s in a value-added partnership. “We can’t expect them to produce if they aren’t treated well.”

AgVenture is one of hundreds of service businesses that keep First District’s members running. Hansen-Wolff has hundreds of customers, from small hobby farms to large dairies. Her team (and delivery truck fleet) ensure these customers have ample feed supplies, and work with nutritionists to keep the feed’s nutrient mix optimized. 

AgVenture doesn’t grind or mix its own feed — plenty of other feed companies already do, says Hansen-Wolff, and her focus is more on customer service on the farm — so it’s smaller than many feed businesses. But that’s intentional. Many quasi-competitors — feed companies with grinding and mixing capacity, and in-house nutritionists — tap AgVenture for tasks they can’t or don’t want to handle, like small-scale distribution and supply management. 

“We do what we do well, and let our partners do what they do well, so that farmers benefit from all the best pieces of their vendor companies,” says Hansen-Wolff. “We’re all on the same side here.”

So, next time you bite into a McDonald’s cheeseburger — or any of the dozens of food items containing First District’s cheese, whey protein or lactose — don’t just thank Clint Fall and his tireless team of milk processing veterans. Save some love for the Landwehrs, Hansen-Wolff, countless other agribusiness vendors, and the nearly 1,000 other First District members doing their part to keep Minnesota’s dairy industry humming along.