Fage Dairy USA, which operates its only American production plant for Greek yogurt in Fulton County, received some good news Monday and over the weekend.
On Monday, U.S. Sen. Charles Schumer, D-N.Y., said he is asking the federal Department of Agriculture to change regulations and make Greek yogurt a more affordable option for schools in New York.
“I want to milk the Greek yogurt boom for all it’s worth,” he said.
Schumer made the announcement at Fage’s production facility in Fulton County. Fage opened the $200 million, 220,000-square-foot plant in 2008 in the Johnstown Industrial Park. It plans to spend another $120 million to construct an 188,000-square-foot addition to the plant, allowing it to double the plant’s capacity to 160,000 tons annually. The company has yet to break ground on the project.
Schumer said a change in federal guidelines for school lunch and breakfast programs would spur increased demand for Greek yogurt, much of which is produced in New York. Along with Fage, there is the Argo Farma plant south of Utica that produces Chobani Greek yogurt.
Steve Ammerman of the New York Farm Bureau said Schumer’s proposal would be great news for bureau members. “It does a couple of different things. It adds stability for what is a difficult economic situation for our members and it widens the market for our members,” he said.
He said no one has estimated how much more yogurt would be produced in New York under the guideline change. “We don’t really know, but right now school districts do not buy Greek yogurt because it is more expensive,” he said.
Under the rule change, districts could buy a smaller serving size but offer the same nutritional value, as Greek yogurt has more protein than regular yogurt, Ammerman said. Greek yogurt requires more milk than regular yogurt to produce.
Schumer said in New York, Greek yogurt isn’t widely available under the school lunch program, regulated by the U.S. Department of Agriculture, because the current nutrition standards treat it no differently from regular yogurt despite its higher nutritional value. He said by changing the regulations to better reflect the protein content of Greek yogurt, the USDA “could provide schoolchildren with another healthy option while creating massive benefits to both New York dairy farmers and Greek yogurt producers, like Fage.”
Fage officials were not available for comment Monday.
The company is placing high hopes on the Fulton County plant’s ability to meet growing demand for its product, but first it must weather the political and economic crisis in its home country of Greece.
Fage has substantial debt with Greek banks. Its debt prompted both Moody’s Investors Service and Standard & Poor’s to issue alerts about the parent company’s stability, based on the possibility Greek voters would reject a European bailout package or exit the eurozone.
The alerts were issued prior to Sunday’s vote in Greece. The financial services may change their views following Sunday’s victory of a pro-bailout political party.
Moody’s downgraded Fage’s rating from stable to negative in early June. Moody’s tempered the outlook by saying Fage is expecting strong growth of sales in the U.S. market.
Also in early June, Standard & Poor’s put Fage’s “B” long-term corporate credit and issue ratings on CreditWatch negative. “In our view, Greece-based dairy processor Fage Dairy Industry S.A. could suffer from a fall in demand and disruption to its operations if Greece exits the eurozone,” it said.
Greece still has to make substantial cuts in its budget by the end of June to be considered “compliant” with the terms of its bailout program, according to published reports. If it fails to do so, analysts say the European Central Bank could cut off funding to Greek banks, which have already been drained of cash as deposits flee the country, the report said. This may prompt banks to call in loans from companies such as Fage, and that could affect the company’s liquidity.
Fage is the fourth-largest producer of Greek yogurt in the United States, with a 5 percent share of the U.S. yogurt market and sales totaling $141.7 million as of Dec. 31, according to Specialty Food magazine.