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Combined Annual Report and Sustainability Report 2018

Milkmaster

With the Milkmaster Programme, launched in 2015, DMK developed a comprehensive, progressive and direction-setting system at a very early point in time which took farmers on the path to sustainability ahead of the market. The topics of animal welfare and sustainability took on ever higher priority in public debate, which led the DMK Group to take a timely position with Milkmaster and prepare the dairy farmers continuously for these new needs within a long-term process. The Milkmaster Programme therefore promotes animal welfare and sustainability in dairy farming and represents an important contribution by the company to sustainable milk production and the welfare of animals in Germany.After several years of practical experience, however, it also became clear that there were opportunities and needs to adapt and simplify Milkmaster due to changing conditions. DMK addressed these in the reporting period with changes to the programme as of 1 January 2018.

Milkmaster as the basis of the Milk Delivery Regulations

Since January 2016, the Milkmaster Programme, based on the Milkmaster Code, has been a component of DMK’s Milk Delivery Regulations and therefore binding on all Deutsches Milchkontor eG’s dairy farmers as well as DMK GmbH’s contract suppliers and all member dairies. DMK also wants to integrate other suppliers to the company and to its subsidiaries in later steps.

The programme consists of the Milkmaster Code and monitoring by means of the internal Milkmaster Report. Confirmation by way of audits, advice to the farmers and a bonus system are further key components of the programme. The basis for the dairy farmers’ inclusion in the bonus system is participation in the company's annual volume planning.

 

The Production Code and audits are binding on all the dairy farmers involved, while participation in the self-assessment and the bonus system is voluntary. In the year under review, 85 percent - just under 5,349 - of DMK's dairy farmers took part in the self-assessment, accounting for 95 percent of the milk volume. This figure is close to last year’s level, when 5,800 participants assessed their work on animal welfare and sustainability topics, representing 84 percent of the dairy farmers and 96 percent of the milk volume.

Reporting as progress control

The Milkmaster Report presents the results of all the dairy farmers' self-assessments on the basis of 148 ratios and serves as progress control. On the basis of their self-assessments, dairy farmers receive an annual report on their results with an in-depth analysis of their own performance compared with that of other dairy farmers. The dairy farmers were able to download the reports on their results from webmelker.de from mid-June of 2018 onwards. The document summarises the data gathered in individual, three-part reports. DMK also makes selected results not comprised of individual analyses available to a wider public. In the year under review, the Milkmaster Report once more revealed differences in the structures of farms in the regions and in their size categories, reflecting the heterogeneity of the DMK dairy farmers, for example in terms of housing systems.

115 selected ratios from the Milkmaster Report form the basis of the farm audits. All active dairy farmers are routinely audited in a linked QM Milk/Milkmaster audit every two years.

The Milkmaster Programme provides for the audits for the Milkmaster bonus check-list to take place after the end of the bonus year. Calendar years 2017 and 2018 were therefore the control years for the 2016 Milkmaster bonus. Virtually all the currently active dairy farmers were audited for the year 2016 in the first audit period.

Farms which have not yet been audited for the Milkmaster bonus will be given special audits in 2019. Almost all of these involve dairy farmers who are no longer active with DMK, because they have either given up their farms or switched dairy companies.

Audits for the bonus year 2017 will be completed by the end of 2019. The audits for the bonus years 2018 and 2019 are to be performed by the end of 2019 and 2020 respectively.

Around 80 auditors had therefore already completed more than 8,000 Milkmaster bonus audits for the bonus year 2016 and part of 2017 between the start of the audit process and the end of 2018.

Focus on animal welfare

The topic of animal welfare is of central importance to dairy farmers, since only healthy and contented cows give a good milk yield. Against this background, the goals of the DMK 2020 strategy also include improving animal welfare. For this purpose, DMK records a number of ratios from the Milkmaster Report internally in an animal welfare index and reviews progress.

DMK has laid down the various aspects of animal welfare in the Milkmaster Programme under the keywords cow comfort, animal health, feed cultivation and feeding. For example, within the topic of cow comfort the company asks farmers for information on space, cleanliness, pasture grazing, housing systems and other housing conditions. The topic of milk quality (QM Milk) which is also integrated in Milkmaster benefits animal welfare as well, since, for example, the somatic cell counts recorded provide information about udder health, a key indicator of milk quality.

DMK also supports animal health by specifically advocating preventive veterinary care on the farms at least twice a year, with documentation in a herd care report. DMK works closely with the veterinary surgeons as important contacts for the dairy farms.

Sweeping changes in the Milkmaster Programme

After its initial years in operation, DMK has been reviewing the Milkmaster Programme since 2017 with the aim of retaining elements that are a proven success and working out useful simplification measures without losing sight of the programme’s objectives. For this purpose, a number of working groups and coordination rounds were put into operation in 2017. Their results were presented to the dairy farmers at the District Assemblies and then approved by the executive bodies.

In the year under review, the company implemented the simplified approaches developed in dialogue with the dairy farmers in the amendment to the Milkmaster Programme which has been in force since January 2018. As part of the measures in this process, DMK reduced the number of criteria in the checklist for the Milkmaster Bonus from 17 to 13. DMK also simplified the Milkmaster Programme system and introduced a monthly advance on the bonus of 0.65 cents per kilo, which will be offset against the individual farm bonus at the end of the year. Essentially, the Milkmaster bonus system provides a cash premium as a reward for the work of dairy farmers who perform exceptionally well in the five areas of cow comfort, animal health, feed cultivation, feeding and milk quality.

This procedure has been changed for the following year (2019) and the advance payment on the Milkmaster Bonus was converted to an individual payment for all farms entitled to the bonus. For this purpose, the total of bonus points according to the Milkmaster Bonus audit in 2016 is converted on the basis of the individual criteria of the Milkmaster criteria catalogue as from 1 January 2018. In the second step, this result will be compared to the 2019 self-assessment. The lower amount then applies to the actual level of the advance payment.

Dairy farms which have not yet had a 2016 audit, e.g. because they were not participants in the Milkmaster Bonus Programme in 2016 or only became members in subsequent years, will be classified on the basis of group figures in order to measure their advance payment correctly. Six different size categories based on annual milk volume were created, to which the available audit results for 2016 were assigned. In a second step, the applicable group figure will be compared to the results of their self-assessment in 2019. The lower amount then applies to the actual level of the advance payment.

 

34.8mn euros in Milkmaster bonus according to self-assessment

In the 2018 bonus period, every dairy farmer who participated in the self-assessment was able to earn bonus points in these areas, from which the amount of the bonus payment is calculated. This enables Milkmaster to promote the further development of the dairy farms in relation to socially relevant topics in an efficient and targeted fashion. Examples are loose housing systems with a specific area for calving or the isolation of sick cows in the area of cow comfort, threshold values for somatic cell counts and lifetime yields in animal health, and the use of tank guards in milk quality.

Virtually all farms which took part in the self-assessment received a Milkmaster bonus in the period under review. In total, the Milkmaster bonus for the year 2018 came to 42.7 million euros. This sum is based on the data provided in the dairy farmers’ self-assessments. The actual total amount of the bonus cannot be determined until after the audits are completed.

Deutschen Milchkontor eG’s dairy farmers and DMK GmbH’s contract suppliers, excluding DOC Kaas, delivered a total of 5.6 billion kilos of milk in 2018, of which 4.9 billion kilos of milk were entitled to the bonus. Therefore, 34.8 million euros were paid out on the basis of the self-assessment. In the bonus year 2017, which consisted of 15 months (1 October 2016 to 31 December 2017), the Milkmaster bonus totalled around 42.7 million euros. When the Bonus Programme was introduced in 2016, the total bonus for the bonus year (1 January 2016 to 30 September 2016) was around 33.6 million euros.

High acceptance with customers

In the past years, the market’s demands with regard to animal welfare and sustainability have risen steadily. This applies not only to food retailers and end consumers, but also to DMK customers from the food manufacturing industry. DMK is well positioned here with the early introduction of Milkmaster. For example, the company has undergone benchmarking with its customers’ programmes several times in past years and received high accolades. In the year under review, customers once more confirmed that Milkmaster satisfied their in-house standards. Unilever has awarded DMK the status of “Sustainable Supplier” for the third time in succession. The Milkmaster Programme’s acceptance has an impact on the Business Units Industry and Private Label in particular.

Practical application presented

It is important to DMK to promote internal and external dialogue about the Milkmaster Programme and to demonstrate how the programme works in practical application. Since 2015, selected target groups such as customers, politicians and DMK employees have been shown what DMK daily farmers achieve on a daily basis on two Milkmaster Farms. Both farms have professionally equipped meeting rooms for this purpose and offer the possibility of a specific Milkmaster farm tour or individual farm tours.

In the year under review, a good 200 guests took up the opportunity offered by the two Milkmaster farms. These individually conducted guests also included DMK customers and DMK top managers. The Scholten-Meilink Milkmaster farm has been honoured as Lower Saxony’s best milk producer for the second time by Landesvereinigung der Milchwirtschaft Niedersachsen e. V. (LVN, the Lower Saxony association for the dairy industry). The award was presented in February 2019.

 

Looking forward: Milkmaster 3.0

In the autumn of 2018, DMK started to develop the revamp of the Milkmaster Programme which is planned for 1 January 2020. The company audited the status quo, performed environment analyses and worked out a strategic positioning for Milkmaster 3.0 together with the elected officers. The company has been preparing the detailed planning and the discussion and agreement with the dairy farmers since the beginning of 2019, with a view to launching communication with the dairy farmers and the implementation of the new Milkmaster Programme in the second half of the year.

With Milkmaster 3.0, DMK aims to give the company a more successful stance, with new focal points for the current and future requirements of the business units in the market, and at the same time to keep the time and effort as low as possible for the dairy farmers. The new version will also integrate the Dutch company DOC Kaas, with which DMK merged in 2015, and its MELKkompas system, with the aim of creating a common programme for the cooperatives in Germany and the Netherlands.

More chapter topics

Dairy farming