Jacoby’s 75th Anniversary: Part 1 – Dive into our history

The Milk Check

A lot has changed in the dairy industry in the 75 years since Ted Jacoby, Sr. founded TC Jacoby & Company in 1949.

Today, we share Part 1 of a special two-part episode celebrating TC Jacoby & Co’s 75 wonderful years in the U.S. dairy industry. From picking up 10-gallon milk cans on the farm in the 40s to shipping internationally, we’ve come a long way. Join Ted Jacoby II, Gus Jacoby, and Ted Jacoby III for part 1 of a special 2-part episode as we discuss:

1. How tank trucks fundamentally changed the U.S. milk supply
2. Consolidation in the dairy industry
3. When computers came for milk

Plus, Ted Jacoby II shares his eyewitness account of the introduction of ultrafiltration (UF) milk. It all began with a coffee break.

Join us for a walk down the milk memory lane in our 75^th-anniversary episode, Part 1: Dive into our history.

Ted Jacoby III (T3): Welcome and enjoy the show.

Episode Intro: Welcome to the Milk Check, a podcast from TC Jacob and Company, where we share market insights and analysis with dairy farmers in mind.

T3: Hello, everybody, and welcome to the Mouth Check. Today, we have a special edition of our monthly podcast because this year, 2024, TC Jacob and Company celebrates 75 years of servicing the dairy industry. In honor of this special anniversary, we are publishing a two-episode edition where, in the first part, my father, my brother Gus, and I discuss and, in my father’s case, share tales of the first 50 years of our history. In part two, we share the more recent 25 years of our history and our thoughts on the future of this great industry we work in. Dad, I’ll ask you: when Grandpa started the company in 1949, we still picked up milk in 10-gallon milk cans on the farm. So what was it like those first 10, 15 years of the company

Ted Jacoby II (T2): When my dad, your grandfather, got out of the Navy in 1945, I think he and two other fellas bought a dairy in Highland, Illinois, and you’re right, they had milk coming into that dairy in cans. He and his partners operated that dairy for a couple of years. They sold the dairy to Midwest dairies. Midwest Dairies was then taken over by a company called City Corp. And City Corp, and Midwest Dairies had consolidated almost all the dairies in southern Illinois. All these dairies were consolidated, then spun off to Prairie Farms, and Fletcher Gorley took over Prairie Farms and turned them into one of the premier co-ops in the United States. After they sold the dairy, he booked office space in St. Louis on the ninth floor of what was the commerce building. So he would act as a broker of barrels of this and drums of that and set up shop as a middleman for mostly dairy ingredients.

There was a relationship that developed between us and Prairie Farms that has extended over all these years. We know each other quite well. The relationship has been strong for a long, long time. In the 40 years between the sixties and the nineties, pardon me, 30 years, you had several things occur. First of all, the consolidation people were picking up milk and bringing it to receiving stations, and then you could go from the receiving station to your regular market, or you could go somewhere else. There were receiving stations, called bump overs, which would consolidate the milk from many small farms and put it in a position to take it somewhere. You didn’t have any dairies that shipped truckload quantities in the nineties in the Midwest. And then gradually, over that period of 30 years, you had large dairies that shipped truckload quantities, and that all occurred in the nineties and two thousand.

T3: Once those bulk tank trucks became common, when we started seeing milk move to the southeast in the fall when milk got tight,

T2: When tank trucks came in, it was about 1953 to 55, somewhere in that area, and the tank trucks were relatively small. 3,500 gallons was a big truck in those days, and when it became practical to move milk, it came from places like Jim Falls and Bloomer and Turtle Lake down to Florida, and Florida set up an inspection point. Remember, it’s very political. The states in those days were very protective of their agriculture, and the federal orders sort of helped them do it. They were structured to take care of the local producers basically, but if the milk supply ran short, they didn’t know what the hell to do. The Kirkoff family of Peevley Dairy needed someone to balance their milk supply. They had jumped all over that. He balanced Peevley’s milk supply and moved tank trucks during shard periods down to places like Shreveport, Nashville, Louisiana, New Orleans, and so on.

That’s where the balancing came in. So our job was to get milk in there and to navigate the difficulties in doing so, and we did. So Lake City had an inspection point set up in Florida, and anybody who went into Florida with any sort of agricultural product, including milk, had to go through that inspection point, and that was a bit of a minefield. But anyway, we got the milk into the users in Florida. Then, of course, the Southeast also managed to consolidate their milk supply to where they were beginning to move their milk out of southern Georgia, down to Florida, and so on. And so the industry down there matured to the point where the inspection ports weren’t necessary because they were regular supplies in that market. Anyway, by the time you reached 1965, the average tank truck was 5,000 gallons.

Today, it’s closer to six, but 5,000 gallons was a big tank truck in those days. And then, of course, balancing was still required because the suppliers had dedicated supplies pooled in St. Louis, and they had to move that milk. Then, often, milk would be moved from one place to another up in Minnesota, Iowa, and Wisconsin. And so we became very familiar with the options in that area. So then Gary Hammond prevailed upon the Kirkoff family to take over the Peevley dairy milk producers and turn them over to square deal milk producers that took care of Dad’s balancing operation with Peeley dairy. But that got the whole thing started concerning tank trucks and so on. With regard to the St. Louis market,

T3: When did TC Jacobin company start trading cream? Were we trading cream back in the very beginning, or was it something that we started doing a little bit later in our history?

T2: Well, we started, in the beginning, we were selling Zare in the fifties; for example, there used to be a tank on a railroad car that went from Bloomer to Abbotts in Philadelphia with cream. You can see that tank at the Museum of Railways in St. Louis on Barrett Station Road, and that tank used to move fresh sweet cream from Bloomer to Abbott’s, which was the big buyer of cream back in those days in the northeast. I remember the old pros time to tell us how we’re supposed to test cream in a can. They had a special tool that looked like a plumber’s helper that they used in the can to agitate the can, and you had to do it so many times to get a good test. It was primitive in the way it was handled. That’s why those 10-gallon cans are in museums today or used for people’s umbrella stands.

T3: That’s funny.

T2: We got it done. They used to have to wire the lids when you were shipping milk across the mountains; they’d wire the lids shut to keep it from exploding. It was very primitive technology developed cooling technology, 45 degrees on the farm. That was a big deal. Now, 33 degrees on the farm is a big deal, but it used to be 45 and eventually reached the point where if you got to the dairy at anything over 45, it was rejected, but it took them 20 years to get there.

T3: So back when milk went into those 10-gallon cans that were not refrigerated, was the milk picked up on the farm every single day?

T2: No, Those deals were made with the hauler. These haulers were a breed into themselves. You wouldn’t want to tan with them. Most of those haulers had covered trucks with doors on the bed. You could insert these cans in. Some haulers would pick up one of those 10-gallon cans with each hand and put them on the truck bed. Now, they’d run their route, and they’d wind up with a hundred of those cans. They were tough gizmos. So it was a tough crowd, those milk haulers, but a well-respected crowd because those haulers were responsible. They showed up on time, and they protected their customers.

T3: So, Dad, you joined the business in 1966. What was going on in the industry at that time? What were some of the significant trends? I know consolidation was one. Wasn’t that still a time when there were a lot of receiving stations that would collect the local milk before shipping it to a plant?

T2: Well, that was it. By then, the milk had been consolidated in truckload volumes somewhere other than the destination, a receiving station, a plant, wherever. Now, you could get your hands around a truckload of milk. So if the cheese plant or customer or milk plant was short, or if it was long, we dealt in the long and short positions and moved milk from where they had too much to where they didn’t have enough. So we’re on the phone all day, determining long and sharp positions in fluid milk and cream, condensed milk, and so on. And that’s basically what we were doing. And we had, I don’t know whether you recall, but we had a spindle in the middle of the table where we kept track of the schedule’s longhand.

T3: Oh, I remember that. In that office downtown, in the Marquette building,

T2: The computer system that occurred in the eighties. That’s very critical, not only for us but also for everybody else, in the way that they can keep track of their milk.

T3: Was it the eighties, or was it more the nineties?

T2: They had some computerization in the eighties, but they didn’t have it to the extent that they have it today, where they know where the last drop goes and how it was utilized.

Gus Jacoby: Dad, in the eighties, computers came in, and I assume that’s what took over as your primary scheduling communication tool. Right?

T2: The scheduling and the fact that it would give us the ability to share those schedules because one guy’s on the phone and you’re yelling on one phone, somebody else yelling on another, and you got a loud room and all that, and nobody knows what the other one’s doing

That solved that problem. Looking at it today, they were primitive, but in those days, they were state-of-the-art. We worked on a deal to develop software to solve the problems we described. So we would put in confirmations of the sale with the schedule and all that, and we would generate the confirmation of the sale to the customer, both the buyer and the seller. A printer in 1979 was the size of a Sub-Zero refrigerator, so we developed the prototype to print the confirmation and so on, and then we’re going to run a benchmark to trial to see how it goes. The only place to put the printer was in Dad’s office, your grandfather’s office. So we entered all the confirmations and got everything in there. Okay, let’s print. And I’ll never forget this damn thing erupted like a volcano, and paper is shooting out of it and bouncing off the ceiling. It was so loud. I mean, you could hear it three floors away, and Dad, I thought he would pass out on the spot. I mean, this thing was to make it all of a racket. And then, a year later, we came back with an HP 3000 model 3000, which supported a database management system.

T3: And if I remember correctly, that HP 3000, we were the first one to have one in the Midwest, and that became the first mass-produced server database server in the country.

T2: I think you’re right.

T3: So the business computerized, we probably had developed without realizing it, one of the first CRMs in the dairy industry, just so we could keep track of our milk schedules, right?

T2: That’s about right. And also to print the confirmations and send them to both the buyer and the seller. It worked out very well, and we were, what, 15 years ahead of the curve, something like that as far as our business was concerned as dealing in long and short positions. We were probably about there.

Gus Jacoby: Hey, Dad, in the eighties, we had California, I know, had some large dairies, but was it reasonably commonplace in other parts of the country to have full-load shippers at that point

T2: In the eighties? No, there weren’t any. They were very much the exception.

T3: So, really, the nineties is when it started to become more commonplace elsewhere, and we had many other things going on then, too. Right?

T2: Well, the hotspot of the nineties other than California was New Mexico, the Pecos Valley, which is where we got together with our partners and worked on developing UF milk and the cow, the large dairies, I’m going to say 95, 94, when we made those contacts, there were 2100 cow dairies, dry lot dairies, beautiful dairies.

T3: Well, I know I worked on one of those.

T2: So there were a few in Texas, I believe, at that point, but that particular group was a close-knit group out of California, so they stayed together in the same area. I think there were other dairies. The Chino Valley was a typical spot in California where the land values had reached the point that people were buying up the land for big bucks, and the dairy industry was being forced out. So they took the money and moved to New Mexico, and some of them also went to Texas.

T2: And not only did the industry kind of change a lot in the nineties, so obviously we had an office. We started in Mexico when NAFTA kicked in, and then we also had the Teddy. I think that’s when risk management started becoming a lot more commonplace in our industry.

T3: The nineties was a busy time. You had nafta. We opened up an office in Mexico. We started exporting. We had North American milk products, which was our joint venture, which started the single pass UF milk, where we put those systems on a lot of those dairy farms extensively to save the hauling costs. But what we found out was cheese plants loved it because it increased their throughput through their whole plant. And then we had risk management. We had the CME starting Dairy Futures and restaurants beginning to reach out to cheese companies, asking how they could stabilize their cheese and butter prices. And yeah, that started a lot of different things for TC Jacoby and Company that led to some of the things that we’re doing today. If you’re a dairy producer or a cooperative looking for a better market for your milk or food manufacturer hoping to strengthen your dairy procurement or risk management strategy, please contact TC Jacoby and Company. We’ve been building worldwide relationships with all sides of the dairy supply chain for over 75 years. Tap into our expertise for unlimited free consultive support, and we’ll develop a sales or procurement strategy that hits all your targets. Please visit us [e-mail] to get started. Thanks for listening to the milk check back to the show.

Let’s talk a little bit about UF milk, and let’s talk about how that whole program started in those relationships. That’s just really a great story. Yeah, it is.

T2: Well, it started at the A DPI or the Dairy Forum, one of the two with a cup of coffee. Dave Hibbard grabbed me by the scruff of the neck. Dave was membrane systems; as the name implies, he sold membrane filtration systems, and he said, I understand you all ship milk all over. I said, well, you might say that, so I’ll buy you a cup of coffee. I said okay. We sat down, and he said, why don’t we explore filtering the milk and taking the water out of it rather than shipping it with all that water? I thought about that. Well, it wouldn’t be a bad idea, but I don’t know how we will do it. There are a lot of complexities between removing the water, and that’s all we thought about was removing the water at that time. So anyway, Joe Hilton, who we knew well, had good relationships down in New Mexico, and Joe took me down and introduced us to the Select Milk Producer Group down in Pecos Valley in Artesia, New Mexico.

And in the course of conversation with Mike McCluskey and also the rest of the board, maybe that’s something we ought to take a look at. So I got together with Dave Hibbard and with Mike McCluskey, and we talked about, what would you call it, a benchmark or an investigation of how this filtration would work with regard to milk. And so Mike brought in Jimmy Caller, the head of the veterinary medicine department at UC Davis. So we prevailed on Jimmy to run an experiment where we put one filter on a little trailer equipped with a pump, and we filtered the milk. It captured the ate, which would be the milk protein and fat. The rest was water and lactose. So anyway, my job was the marketing. So we can’t very well develop this without spots to go. So I hooked up with Alzo at Kraft and talked about how we would concentrate the protein and the fat and what a good item would be for the cheese industry.

And he agreed. And so Mike went ahead and based on the markets, which we had set up a room with the filtration equipment on county line two, the deal was with Joe Schmucker of FDA, and his name was Ricketts, who was in charge of IMS. In those days, they had to approve it, and the system had to run under 45 degrees. That was the grade a standard in those days, so you couldn’t have anything in the system coming out at over 45 degrees. So this was a big deal. There was a lot of cooling equipment that had to go in to make sure that the raw milk going in there was cool. And then, of course, the alternative would be to pasteurize it and try to filter. I lobbied against that, as cold doesn’t denature the protein. A pasteurized product is of limited use to be pasteurized only once.

So do we want to do it hot or cold? Well, we want to do it cold. That was a decision that I made, and Mike and Dave bought into it, and so we cooled it down, and we ran it through, and of course, my rationale was the protein; the actual reason it worked out so well cold was that the butter fat went through there with almost no butter fat loss. If you picture the butter fat, it’s little water balloons, mini water balloons in the milk, and when it’s that cold, those water balloons are tough to fracture. So they just go right through and are rejected by the filter, and the water and the lactose go right through it because it’s all dissolved. That turned out to be an old single pass. The vision was to have the system hanging on the wall of the milk house.

Well, we began to realize that there’s more technology involved than you want to have the hired hand and the milking parlor dealing with. So, it was a separate room rather than a milk house system, and FDA and IMS were much more comfortable with that. The next hurdle was getting the product approved for use and cheese. We had a benchmark down in Artesia at Mike Starry, and Ricketts and Joe Schmucker were there, and Mike, Dave, and I were there, and we had a tank of melt in the receiving room, and we’re going to filter it, and load a tank truck. We’re going to do this experiment to prove to Dave Ricketts and Joe Schmucker that we’re not going to go above 45 degrees. Anyway, we got it running, and we got everything going perfectly, and then, okay, let’s turn off the refrigeration and let the temperature go up. Okay, so we threw the switch, turned off the refrigeration, and were all sitting there. There were five of us sitting there watching the temperature chart going up and up and up and up, and it was like a shotgun going off. When you hit 45 degrees, it would boom, and there’s milk flying all over the receiving room on the floor, but Joe Schmucker and Dave Rickett said, well, that pretty well proves it. You could keep it under 45 degrees. Well, then it should be fine with us.

The next hurdle was using it in cheese and ensuring we were not adulterating the cheese at the FDA. She agreed that this could be used in cheese on a trial basis, on a limited basis, and not have to label it, but it was a temporary permit. Okay? Twenty-five years later, they made it permanent, but it was a temporary permit. And so we got that done. We got a letter on that, and it was approved.

And so I said, “Okay, where do you want to go with this? You want to go to Melrose?”

And he said, “Oh, no, we’re not going to Kraft.”

I said, “Whoa, what do you mean?”

“Well, we’re not your Guinea pig,” he said. “We can’t do it.”

So we worked out a deal to go to the Bonguards, and they loved it. Suddenly, instead of getting a 10 yield on their milk, they were getting 12 or 14, depending on how far they wanted to go and what quality they needed in the finished product. It was terrific. So anyway, that’s where it came from. And then, of course, over the years, Mike continued developing designer milks, and that’s where Fairlife came from.

T3: Yeah, I like to tell the story that we were there initially helping them develop the technology. We told them that we would handle the industrial marketing side, and if they wanted to explore something on the retail side, they were welcome to do it. Little did we know what we were giving up so we could focus on the industrial side.

T2: We did all right in our industrial side. Yeah,

T3: I tease when I say it, but we’ve benefited wonderfully from that association and what UF milk has become today, so we’re very proud to be a part of that. Thank you, everyone, for joining us on this journey. Don’t forget to tune into part two, where we share some of our more recent history and our thoughts on the future of this great industry we work in.

Episode Exit: We welcome your participation in the milk check. If you have comments to share or questions you want answered, email [e-mail]. Our theme music is composed and performed by Phil Kagy. The Milk Check is a production of TC Jacoby and Company.