Widespread milk dumping continues, small regional co-ops face extinction

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By Sherry Bunting, Farmshine, April 10, 2020

BROWNSTOWN, Pa. — As the dairy supply chain disruptions worsened this third week of COVID-19 pandemic stay-home orders in most states, large milk cooperatives continued rotating their milk dumping between members. For example, Dairy Farmers of America (DFA) — the nation’s largest cooperative — reports 12 to 15% less milk is needed under current conditions and wants to see the supply of milk they handle drop by 10% in the next several months to match the reduced demand for milk as processing and distribution capabilities have made seismic shifts amid the COVID-19 pandemic.

In this situation, small milk cooperatives and independent producers are finding themselves particularly vulnerable as a flurry of contract terminations fill voicemail and email, not to mention social media timelines.

This, from a family in Corry, Pennsylvania on their facebook page Monday (April 6): “Today we got it. The thing you know is possible but you just do not think it will be you. Not your farm. After all you have survived things for generations, it just cannot be you. But today it was.Today we got our letter, Rothenbühler Cheese Chalet canceled our contract. Today it all crashed down. Hope disappeared, and all our dreams vanished. We will be dumping our milk until we can figure it out how for 200-plus cows in the middle of a pandemic. No auctions, no sale barns, no options. It is heartbreaking to watch generations of work and dedication become meaningless. Wasted.”

The next day came the update that their 27-member cooperative in Northwest Pennsylvania has a few weeks to solve an abrupt concern, after previously being given three hours on a Friday afternoon — paperwork details that aren’t technically part of their milk contract that became effective March 1 with the Middlefield, Ohio cheese plant.

Farmers Union Milk Producers Association, based in Stoneboro, Pennsylvania, learned Tuesday (April 7) they have a few more weeks to address this paperwork request that had resulted in a contract termination email Friday (April 3) at 5:00 p.m. The cooperative has had a decades-long relationship with the Middlefield, Ohio cheese plant, but learned Friday at 2:00 p.m. that certain paperwork not detailed in their contract was required by 5 p.m.  that day to avoid termination.

“That’s three hours and not possible,” notes Lisa Royek. Her husband Walter is the current president of the cooperative.

Over the weekend, the co-op board went to work, received some legal advice, and asked the company for an opportunity to discuss the situation. Eventually, the company agreed to give Farmers Union until April 17 to meet this new request.

Even though it’s not in their current contract — signed last December and effective March 1 — Royek notes that, “We value this relationship and want to act in good faith in the hopes that the cheese plant will do the same.”

Despite this two week reprieve, some of the co-op’s members expressed concern Wednesday about milk sampling irregularities — leaving a few in jeopardy of their milk being excluded from pickup this week — and there were other questions about whether milk would be received from some of the member farms once it got to the plant.

But Farmers Union co-op is moving forward, doing what needs to be done, hoping to save their milk market with the plant they’ve done business with for as long as Royek can remember.

For producers in other small co-ops of northwest Pennsylvania and southwest and central New York, similar hurdles are being met.

Members of one small cooperative reported Wednesday that the cheese plant in Friendship, New York will no longer need their milk, indicating that Walmart had canceled orders.

While New York shippers for the Dean Foods bottling plant in Sharpsville, Pennsylvania often have their milk sent to the Friendship, N.Y. cheese plant, it is unclear whether a similar distribution status exists for the Middlefield, Ohio cheese plant in the Farmers Union cooperative situation.

The Dean Foods Sharpsville, Pa. bottling plant is one of 44 plants — nationwide — being purchased by DFA. Dean Foods receives a large share of its milk from DFA and this market accounts for a large share of the milk DFA ships. The 44-plant sale was approved by the court on Friday (April 3), pending final details before transition of assets after another hearing set for April 27.

Members of small co-ops shipping to the Middlefield, Ohio or Friendship, New York cheese plants were contacted for this report and did not know if their milk had ever been used to supply the Dean plant in Sharpsville or if these cheese plants ever supplied Class I markets in the Mideast Milk Marketing Order. Just the same, we called the plants and the Mideast Market Administrator to find out the pool status of these plants, and any recourse these producers might have. Our calls were not returned by either the plants or the Mideast Market Administrator.

Producers who are part of the small co-op cut off by the Saputo-owned Friendship, N.Y. plant, said the reason they were given was cancellation of orders by Walmart, Dollar General and others. Their members began dumping milk Wednesday (April 8) because there was no where for the milk to go.

Just one of many photos submitted April 8-11 showing a continued shortage of real butter at Walmart stores in Pennsylvania, New York and Ohio, except for small quantities of unsalted or “lite”, and plenty of imitations and margarine.

On the very same day, no less than 20 texts, emails, and messages came in from people throughout Pennsylvania, New York and Ohio reporting that their Walmart stores were low on milk and had zero butter, sour cream or shredded cheese. Walmart and Sam’s Club shoppers also reported being limited to one or two gallons of milk with limits on other dairy products as well. (These reports persisted with documentation of empty Walmart butter shelves and limited or absent sour cream and shredded cheese, along with either no milk or very little milk, especially whole milk at Walmarts in Pennsylvania, New York and Ohio as recently as April 8-11.)

It is unclear what role Walmart’s Midwest supply chain via Prairie Farms, Great Lakes and Foremost — play in the Mideast Milk Marketing Order supply chain disruptions that are leaving small regional co-ops facing complete termination while at the same time the Walmart stores in the region show a stark lack of dairy products and depleted milk supplies for shoppers.

Walmart stores throughout the region, like this one in Kittanning, Pennsylvania on April 7, continue plowing through milk supplies rapidly. Meanwhile farms in the region continue to be forced to dump their milk or face the complete loss of their milk contracts. They are told it is because of a drop in dairy demand due to schools and restaurants closing and exports stalling. They are also told that retailers — like Walmart — are not increasing their orders, and are canceling some orders, despite the surge in consumer demand for real milk and dairy products.

The Dean Foods Sharpsville plant in western Pennsylvania is part of the USDA Mideast Milk Marketing Order that regulates Class I fluid milk in the western half of Pennsylvania, all of Ohio, all of Michigan, three-quarters of Indiana, most of West Virginia, and the northernmost part of Kentucky.

Pennsylvania also has a state-regulated milk marketing system. For the past three years, Walmart has been an approved ‘milk dealer/handler’ — not just a retailer in the Pennsylvania system, where the Milk Marketing Board (PMMB) sets minimum retail and wholesale prices for beverage milk that include an over-order premium intended by law for dairy farmers.

The state’s accounting system through PMMB only follows the over-order premium back to the farm level when the retail milk meets three specific criteria: produced, processed and sold in Pennsylvania. However, consumers pay this premium on all milk they buy in Pennsylvania — no matter what state it was produced in or processed, and no matter which side of the state border the wholesale warehouse transaction occurs.

These are all complicating factors of milk’s classified pricing system and large chunks of consolidating, centralized milk supply chain.

The Northeast Milk Marketing Order is having its share of problems also, and the Walmart stores in the Northeast are equally lacking in dairy products.

Reports surfaced this week from Central New York dairy producers that a small co-op downstate has been abruptly terminated by their milk processor in Menands, N.Y. until further notice.

In addition, Jefferson Bulk, a small upstate New York cooperative, had been able to market every drop of their milk since losing their contract with Kraft Cheese effective  January 1.

Jefferson Bulk’s marketing options in the region are now non-existent or very difficult to achieve amid the COVID-19 pandemic foodservice contract losses and as retailers — especially Walmart — are not providing enough milk, butter and other dairy products in their stores to keep up with surging consumer retail demand to feed their families at home.

As a national footprint cooperative with regional councils, the nation’s largest cooperative — DFA — answered questions last week about their assessment of the situation in the Northeast in comparison to the West in an email response to Farmshine Wednesday: “Like the coronavirus, this situation is not limited to one area of the country and is changing daily. At this time, we have requested that less than 10% of our members dispose of milk, as an absolute last resort. Primarily, disposal is happening in areas where a plant has reduced its schedule or has even shutdown, which forces us to try and quickly find a new home for our members’ milk.”

The explanation went on to say that, “There are times when there is no economical location to deliver milk, so in some regions, where there is no viable market for milk right now, we’ve had to ask some farms to dispose of raw milk, as a last resort.”

DFA also indicates that payments for the milk “will vary by region, as the marketing of milk is a very localized activity, DFA has provisions in place to compensate members for the milk that’s being disposed. Ultimately, an individual does not bear the cost of the disposal themselves, when they’re member of a cooperative, like DFA.”

Meanwhile, the widespread shortage of butter in supermarkets, especially Walmart stores, is going on three weeks now, so we turned to Land O’Lakes customer service for our inquiry due to the sheer number of consumer reports about these shortages of butter and limits on butter purchases.

Land O’Lakes is also a national footprint dairy cooperative with its famous butter brand and a significant butter/powder production plant in Carlisle, Pennsylvania.

Land O’Lakes has a base program that penalizes its farmer-members if they produce more than their base milk production amount. This program is being strictly enforced in the Northeast since early March. Some Land O’Lakes members in the Northeast also reported being forced to dump their milk last week. One farm was able to find another processor to take the milk strictly to make products for food banks.

By contrast, no base penalties have been reported by Land O’Lakes members in Minnesota, and dairy leaders in Minnesota report no milk has been dumped in their state, where Land O’Lakes is headquartered.

In fact, Farmshine could only verify one milk dumping occurrence west of the Mississippi in states where milk production has grown by leaps and bounds in recent years.

We asked Land O’Lakes customer service: Why are we seeing widespread butter shortages even though farmers are being penalized and forced to dump milk and even though USDA’s March 1 Cold Storage report pegged U.S. butter inventories to be 25% above year ago?

The answer we received in writing was this:

“We’re so sorry that you’re having difficulty finding our butter,” a Land O’Lakes customer service representative responded in a message. “Our whole co-op is working hard to make sure that your favorite products continue to be well-stocked, despite the business challenges posed by the COVID-19 outbreak. While our online product locator is helpful in finding stores that have recently sold our products, we know that supplies at the store shelf may vary over the next few weeks/months. We appreciate your patience and support during this trying time and wish the best to you and your family.”

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Dollar stores and pharmacies like this Rite Aid in Crawford County, Pa. April 10. Not only are dairy farms being forced to dump milk, small co-ops in the region face termination as milk suppliers.