On Board With The Chairman - August 2025

Dear Member-Owners,

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The Board of Directors held its monthly meeting at the Visalia office on Tuesday, with a full agenda.

Brad Anderson led off the meeting and provided an update on current markets and trends as we look towards the end of the year. For those who follow these markets daily, you know that it’s a very up and down market, depending on the day and what news breaks. Strong production, both in the U.S. and around the globe, is certainly weighing on dairy markets and futures in the coming months. Brad provided an update on how the team is attempting to mitigate those issues in both the powder and butter markets.

Brad then invited Michael Johnson, our SVP of Corporate Services, and Bill Hendrickson, our Director of Environmental Affairs, to give the board an update on wastewater management, an issue that often doesn’t get much attention but is of significant importance to any processing business, and even more for a business that removes high volumes of water from milk every single day. Bill and Michael, along with their teams, have been implementing new initiatives aimed at reducing or avoiding costs in this area, and were able to share some of those wins with the board. Out-of-the-box thinking, hard negotiations with regulators, and strategic partnerships have resulted in some meaningful improvements in this area, and the board thanks them for their continued efforts.

Jason Allen was next to present and updated the board on July and year-to-date financial performance. The July results fell short of where we expected, largely driven by a one-time, unbudgeted item and California’s regulatory structure, slowing the ramp-up in running more milk through our Bakersfield fluid plant. Management and the Board continue to focus on executing our plan for the remainder of the year, regardless of any market volatility or regulatory hurdles are thrown our way.

Michael Burdeny then gave the board a commercial update. Inventory levels for both powder and butter are in good spots. The lactoferrin plant that was installed at Turlock North continues to perform well, producing an exceptional product that will command a premium in the market. We have had a lot of interest in this area, and potential customers are going through onboarding and product testing processes. This product differs significantly from our commodity powder business and requires extensive testing before a new commercial relationship can be established; however, we are starting to sell some initial orders. Michael also gave an update on Valley Natural Beverages (VNB), our Bakersfield fluid processing facility. As referenced earlier, some regulatory issues specific to California have slowed the ramp-up in milk volumes that we can run through that plant. However, in the meantime, we have seen some recent success in moving additional volumes internationally through our Extended Shelf Life (ESL) line. As I write this, milk packaged under the Challenge brand is being produced and shipped to Mexico and overseas. We have also secured additional co-packed volumes domestically, which will start production in the weeks to come. Meanwhile, our team continues to work hard towards obtaining full regulatory approval for all lines in the near term.

Panna Agrawal gave his first update as the Chief Operating Officer on our manufacturing network. It was great to hear more about how Panna leads his team and what he sees as opportunities for the plants. It’s safe to say that Panna is still getting the feel for CDI and our complex manufacturing network, but his impact on the team is already showing.

Rob was the last to present on the day, providing an initial look at what the 2026 spring milk flows could look like. The simple summary is that milk production in the early months of 2026 is expected to be quite strong. We expect to see internal growth from some of our member farms, according to the survey sent out earlier this summer, and we have seen fewer retiring farms than in years past. To those of you who took the time to complete the survey, thank you. It greatly helps as staff attempt to plan for adequate capacity to pick up and process our member milk. The closure of a mid-sized processing plant at the end of the year is also expected to generally impact all milk handlers, even if we don’t directly supply that plant – that milk ends up going somewhere. Of course, a lot can change in the months between now and the 2026 flush, but it’s always best to plan as much as possible, which was the intent of this month’s discussion.

In closing, I’d like to thank those who have reached out to individual board members and given your support over the last couple of months. This year hasn’t been what we planned, and the board knows that the decisions we make impact all members, their families, and the team members associated with those farms. This isn’t something we take lightly, and we will continue to work our hardest for the best interests of our member-owners. We’ve also had tough discussions with members, and we hear your frustrations as well. We understand the passion we all have for this industry.

I pray that God will continue to watch over you and your families, and that we turn to Him during the good times but also lean into His word during times of need. We pray that our Lord will shine brightly in our communities and in this world, and that we may continue to witness to those in need.

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All the best,

Cory Vanderham

Chairman of the Board

Vanderham West Dairy

Lazy V Farms

559-269-9618

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