Seismic shifts in milk supply chain ahead: New Walmart plant triggers Dean’s cut of over 100 dairy farms in 8 states


By Sherry Bunting, from Farmshine, March 9, 2018

LEBANON, Pa. — He saw the mailman drive up and linger in the driveway, wondering if they were expecting a package. Moments later, his wife was standing there, holding a letter she had signed for.

The certified letter informed this Lancaster County dairy farm family that after 13 years of sending their milk to the Swiss Premium plant in Lebanon – along with decades of the farm’s milk in generations before them — the agreement with Dean Dairy Direct would end May 31, 2018.

The same story played out Friday among neighboring farms on the same hauling route to the same plant. And it was the same scene in driveways for approximately 120 dairy farms in eight states, including 42 in eastern and western Pennsylvania — around half of the Dean Dairy Direct shippers to three plants in the state.

Reace Smith, director of corporate communications for the Dallas, Texas-based Dean Foods, confirmed in a phone call Monday that against the backdrop of expanding raw milk production, and companies “asserting and expanding their presence in a market where consumers are drinking less milk (namely the Fort Wayne, Indiana Walmart plant where bottling begins this month) over 100 dairy farms in eight states received 90-day termination notices” from Dean Dairy Direct on Friday and Saturday, March 2 and 3 stating that their agreements will end May 31, 2018.

Smith confirmed that the over 100 affected dairy farms are in the states of Indiana, Ohio, Pennsylvania, New York, Kentucky, Tennessee, North Carolina and South Carolina.

“This affects all size herds and is not a large or small farm thing,” said Smith. While she was unable to supply specific information about the farms that were terminated, she said the widespread volume adjustments at multiple plants across four Federal Orders was necessary due to the new Class I plant (Walmart) coming online this month and the loss of a contract through a competitive bidding process (Food Lion).

Both market losses for Dean indicating structural change to the dairy industry as more retailers move into milk bottling in more centralized distribution models.

Sources in the various states confirm the affected farms range in size from less than 100 cows to over 1000 cows.

“This was an incredibly difficult decision. We tried very hard to avoid it and regret this decision had to be made,” said Smith. She indicated that Dean Dairy Direct field representatives are serving as resources to these producers and can provide a list of contacts for potential milk buyers. They are also offering counseling.

DeanFoodsMap.jpgWhile the company will not provide a list of affected plants or a state by state break down in the number of farms or volume of milk affected, they have indicated that the state that may be hardest hit on a volume basis is Indiana.

In fact, the volume of displaced milk in Indiana, alone, has been estimated at over 20 million pounds per month, representing the under 100 to over 1000 cow size range but most of them milking 300 to 1000.

The affected Indiana farms shipped milk to the Dean plant in Louisville, Kentucky, which also terminated 22 Kentucky dairy producers, ranging from 50 cows to 250, according to Maury Cox, executive director of the Kentucky Dairy Development Council.

In Tennessee, Julie Walker of Agri-Voice near Knoxville has confirmed nine (now 10 confirmed) affected producers ranging 60 cows to 300, and numbers in the Carolinas are unknown at this time.

From the standpoint of the farms affected, Pennsylvania is hardest hit, and while the number of New York farms is unknown at this time, some may have shipped to Dean plants in Pennsylvania.

According to Jayne Sebright, executive director of the Center for Dairy Excellence, 42 Pennsylvania dairy farms shipping to three Dean plants in eastern and western Pennsylvania received notices Friday – representing half of the Dean Dairy Direct shippers in the state. This includes 26 producers in eastern Pennsylvania, including Lebanon and Lancaster Counties, as well as 16 in western Pennsylvania, where the Dean plants in Sharpsville and Erie also ended agreements with Ohio farms. The number of Ohio farms affected is unknown at this time.

“The (Agriculture) Department and the Center have been reaching out to other markets to see what capacity is available, but at this point we do not know of any with available capacity,” said Sebright. “We are working to support the affected farms as best we can. We are very concerned both about the future of the farms and the well-being of the farm families.”

Sebright noted that the Center is making additional resources available and recommending use of their Dairy Decision Consultants Program to evaluate options — both within and outside of the dairy industry. “This is a difficult situation to be in and we are concerned.”

Dean-Cows.jpgIn fact, the farm this reporter visited in Lancaster County Tuesday was already working to call every available market and neighbors who also lost their contracts were looking at everything they could think of. Four or five trucks go through the county picking up milk every day so they wonder if each one can find a market or if they are better off pulling their milk together to find a single-haul market.

The producer was thankful, at least, for being part of a dairy producer discussion group and thankful for folks like Dr. Charlie Gardner with the Center who leads the group.

Not only were the Pennsylvania dairy farms shocked to receive the letters, veterinarians, nutritionists, feed company and equipment maintenance folks are facing this loss with their farm customers as the news spread this week throughout farm communities and the greater dairy community.

In Indiana, where estimates are that over 20 million pounds of milk per month has been displaced, producers had already been on edge as the Walmart plant took shape in their state and they contemplated its milk sourcing.

“We are working with producers and contacting cooperatives and potential markets to try to work together to get through this thing,” said Doug Leman, executive director of the Indiana Dairy Producers. He has been in contact with affected producers, the Indiana Department of Agriculture, and the plants and cooperatives that provide markets for milk in the region.

“I’ve had calls not just from the affected producers, but from many other Indiana dairy producers sharing their concern and asking if there is anything they can do,” said Leman. “I’m encouraged by that, and I am encouraging our producers to keep their chins up through this difficult time in their lives, families and businesses in the hopes that we can work through this together.”

Leman said he does not want to blame Walmart because, wherever the first Walmart plant would have been located, this was coming. Indeed, Walmart has entered a trend among retailers to move toward bottling their own private label store brands (Great Value and Sam’s Club Member’s Mark) rather than contracting with Dean Foods.

“Walmart was coming to Ohio, Michigan or Indiana, and I still believe it is better to have the plant in Indiana because it offers opportunities,” said Leman.

While fluid milk consumption is on the decline for 15 years — although stabilizing with more consumption of whole milk last year — retailers notice that nearly every shopping basket going through their stores includes milk. They seek their own store brand loyalty as loyalty to their store and some of the retail price wars happening in states without loss-leader protection are evidence of this. As is the ability to pull premiums away from states that have loss-leader protection or a minimum retail price as in Pennsylvania, to “fund” price wars in other surrounding states without any loss-leader protection.

The dichotomy points to a need, perhaps, for a federal loss-leader threshold versus random state programs that can fuel the picking of winners and losers in today’s times of seismic structural change to the dairy industry from retail all the way through the supply-chain.

In short, the region would likely have been affected by Walmart’s decision to vertically integrate its Great Value and Member’s Mark milk brand for its stores in the region — no matter which state the plant had been located.

In fact, sources indicate potential sites to the south are being eyed for a second Walmart plant in the future, revealing a corridor strategy to this vertical integration of single-source, full-traceability, each-truck-one-farm model.

The Dean Dairy Direct letters of termination to dairy producers in the region were dated February 26, 2018, which was the same day as Dean’s 2017 earnings call where the company projected its strategy in brand and private label supply and to “right size” its milk volume and consolidate its supply chain to achieve a “flatter, leaner and more agile” company into 2019.

According to Smith, there are no official announcements of any plant closures at this time and none of the plants involved have released all of their shippers. Still, there remains concern that some of the plants that have released a larger portion of their farms are vulnerable.

“We still have a commitment to local milk,” said Smith about the volume adjustments. “There are many factors that impacted this decision. We are seeing surplus raw milk when the public is consuming less fluid milk, and we see companies asserting and expanding their presence in a market where consumers are drinking three gallons less annually, per capita, since 2010 while the U.S. dairy industry is producing 350 million gallons more milk annually than the year before.”

In addition to the overall imbalance Smith said that, “The introduction of new plants when there is an industrywide surplus forced us into the position of further adjusting our milk supply according to demand.”

As vertical integration of milk at the retail level leads to consolidation by the nation’s largest milk bottler – Dean Foods – the company has diversified into soft dairy product brands that are just starting out of the gate and were discussed in the Dean earnings call as well.

Specifically, the letter received by Indiana and Kentucky dairy producers shipping to the Louisville plant stated “two indisputable dynamics led to this difficult decision. First and foremost, a retailer’s new Class I fluid processing plant is coming online in the region, significantly decreasing our production as milk volume is moved away from our facility to this new plant.

“The second reason is bigger than all of us. The steady increase of raw milk production combined with the decrease of Class I fluid dairy consumption…” the letter stated.

Letters received by producers in the southern market as well as eastern Pennsylvania did not specifically reference the new Class I fluid processing plant built by a retailer (Walmart) as had the letter to Kentucky and Indiana producers serving the Louisville plant and western Pennsylvania and Ohio producers serving the Sharpsville plant.

Those letters received by farms further to the east and the south indicated the plants had “lost a portion of customer fluid milk volume to a competitor through a customer-bid process.” Sources indicate this may include both the Food Lion private label store brand and the Walmart Great Value private label in these areas as well.

The letters received by producers said further that Dean was “unable to lock-in enough new customer volume to offset this loss.” This is a function of the overall decline in fluid milk consumption and the new milk via large multi-owner, multi-site farms in surplus regions of the Mideast and Midwest.

One thing is also clear in speaking with producers, veterinarians, organizations and others in the industry, the farms that are facing this difficulty are largely well-managed and producing high quality milk. Many of them are young families representing the next generation. Many are progressive, with updated facilities and technologies as well as utilizing the resources available to them for continued improvement in all that they do to supply their communities with milk.

In these states affected, whole transportation routes were terminated, presenting both challenges and opportunities for a collective effort in dealing with these market losses.

Walmart will not reveal the farms they have secured to supply the plant, but it is widely known that some of the milk will come from the north, some from within Indiana, and that a processor in Wisconsin is handling contracts and in a position to balance the Walmart plant’s fluid needs that may or may not have involvement by cooperatives.

As in Indiana and other states, Cox said of Kentucky: “We, are contacting other potential markets for our producers and would like to meet with Dean Foods to see what more we can do for these producers and to have a better understanding about the future of the Louisville plant” (where both the affected Kentucky and Indiana producers shipped their milk.)

Some state dairy organizations, state departments of agriculture and other industry leaders indicate they want to let the dust settle and allow options to emerge as they adopt a patient mindset to look at potential options for their respective state’s producers.

In the meantime, all are reaching out to producers and urging producers to reach out to them, and to each other. In fact, right now, more than ever, the dairy community needs to be reaching out and talking about its future to higher levels of relationships beyond what has occurred in the past.

“We want to survive,” said the dairyman this reporter visited 15 minutes from my home in Lancaster County, Pennsylvania, just four days after receiving the letter.

Like others this reporter has spoken to, they have done everything the industry suggests to make their farm competitive. While a small farm whose milk shipped for generations to the Lebanon Swiss plant serving local stores and consumers, this young farm family had invested in the latest technology, produces milk with very high components and very low somatic cell counts.

But here they are, facing what 120 of all sizes face throughout eight states as vertical integration from Walmart and other retailers sends a ripple effect and seismic shifts throughout the supply chain.



Looking back… and forward: Troxel dairy herd dispersal 10/20 at 10:20 at farm.

By Sherry Bunting (portions reprinted from Farmers Exchange 10/14/16 and portions reprinted from Farmshine 10/14/16)

HANNA, Ind. — Amid the difficult economics of dairy and beef production these days, many farm families are going through tough decisions about the future — along with uncertainty about the interest or ability their next generation may have for continuing the business. America’s dairy and livestock farms have raised generations of cattle that nourish our bodies, our rural economies and the land… not to mention raising generations of young people with the skills, work ethics and passion that take them far in their on-and-off-farm pursuits.

Herd dispersals are on the rise among family farms of all sizes. And while it is sad to see some of these farms mark an end to an era, there is reason for hope. The largest obstacle, in my view, is the current pricing systems and the concentration of power in a more vertically-integrated marketplace for both milk and beef. Consumers can help change this direction by caring where their food comes from and asking their grocers to identify country of origin as is done with fruits and vegetables — but that is a story for another day.

Today, I want readers to know about the Troxel Dairy Farm and their upcoming herd dispersal sale on Thursday, October 20th at 10:20 a.m. (10/20 and 10:20!) taking place at their farm at 17808 S 600 W, Hanna, Indiana.

Having known Dr. Tom and LuAnn Troxel for several years and having benefited from their hospitality through all seasons of the year on trips West, I am always in awe of the morning pace at their farm, which is also homebase for Dr. Tom’s South County large animal veterinary practice. And I admire the joy they have that rises above these tough decisions.


Mornings here have always kept me stepping as I would be out and about with my camera while Dr. Tom was busy in the milkhouse and cleaning pens or putting fresh bedding and feed out for the cows, LuAnn would be back and forth tending calves, answering vet calls, taking second rounds of coffee out to the barn, keeping a breakfast skillet moving forward… and so much more.

Busy mornings are to be expected when two busy people love what they do and when what they do is dairy farming alongside a large animal veterinary practice. Both can be demanding 24/7 jobs, and for 33 years of marriage, Dr. Tom Troxel has pulled double duty — wife LuAnn right there with him in the trenches and taking time to advocate for agriculture.


On this particular sunny autumn morning last week as we talked about the upcoming dispersal, veterinary customers stopped by for supplies, the milk truck backed into the lane for what will soon be the last daily pickup, workers made sale preparations, cows curiously spectated, while the resident peacocks strutted their stuff, adding their own brilliance to the splashes of color in LuAnn’s gardens that frame the cow pens, milk house and calf hutches.tom-troxel-dvm

LuAnn says she is thankful that after next week, Dr. Tom will have only one job to do.

The cows will be gone, but the South County Veterinary practice continues.

“Dairy isn’t something you just do, it is something that defines you,” said LuAnn during my visit last Monday morning, as she and Tom and son Rudy were finishing chores and preparing for the Oct. 20 complete dispersal of the milking and registered herd.

Her easy smile hid the uncertainty of the transition ahead. “Part of me is really sad, and part of me wonders about new opportunities we’ll find in this next phase.”

Tom confessed: “We’ll miss it. I’m kind of a workaholic so I’ll have to rethink things and find things to do that are more valuable than work.”


The sale plans were set into motion a year ago, when Tom and LuAnn knew that of their four sons — Rudy, Ned, Josh and Jackson — there would be no next generation to take the reins.

Rather than sell the herd immediately, they waited to calve-in some of the genetic progress Rudy made in his work with the herd over the past four years. This way they are able to sell animals of known value with genomic testing behind them and see some two-year-olds freshen and milk to get a glimpse of what would have been a great foundation herd for the future, that Rudy had developed — before passing the animals on to their new homes.

The Troxel Dairy herd dispersal is slated for 10:20 a.m. CDT on Thursday, October 20 at the farm. About 215 cattle will sell, including 113 cataloged cow and heifer lots, plus half-lot calves and embryos. Many are registered Holsteins, with solid genomic numbers, especially for productive life (PL), daughter pregnancy rate (DPR), somatic cell count (SCC), and milk components.

In fact, this milking herd of 140 cows produces high quality milk with somatic cell count consistently under 100,000. The current average is 75,000! Healthy animals and high quality milk have always been high priorities here.


The sale includes a unique range: predominantly registered Holstein cattle of all ages, including Polled, dominant/variant Red and Outcross genetics, as well as over a dozen Jerseys of all ages, some type Holsteins and 100 commercial grade milking cows and springing heifers.

“The genetic improvement has been quite something, considering that four years ago we had just one registered Holstein, and today we have 130 that are registered,” said Dr. Tom, crediting son Rudy’s skill and zeal for genetics. “With good genomic tests, these animals would have been a good foundation for the future, but now they can be a benefit to someone else.”

Rudy’s philosophy in transitioning the herd from grade to registered dovetailed with his parents’ longstanding emphasis on healthy cattle and preventive care. He bred not for show, but for working cattle “to exemplify the true working Holstein,” he explained the science-driven approach to breeding a true commercial cow. “We have rarely bred a cow under 1 or 2 in their DPR, and we have cattle at 5, 6, 7, even over 8 in productive life.”


While Rudy finds some satisfaction in having built a young herd with a few cow families that hold a lot of promise, he noted that around 30 of the registered animals are milking and over 75 are “the best that was yet to come.”

He points out the Ross cow they purchased from Clear Echo at the Summer Event Sale in Wisconsin in 2012. She is lot 13, with over 20 direct descendants selling, plus additional calves. The Dreamar cow is another he identifies as he thumbs through the catalog. She has nine direct descendents selling right along, plus embryos.

“Rudy took the (genetics) ball and ran with it,” said Tom with a smile.

With sale day fast approaching, LuAnn reflects on the decision to discontinue the dairy. “It was something that took weeks, even months to accept,” she said.

“We’ve ridden these cycles up and down for over 30 years,” the couple agreed. “We haven’t invested in new facilities. The dairy needs infrastructure and improvements. Our next generation made their family decisions not to buy the dairy farm.”

“We weren’t ready for the next generation,” Tom interjected. “Look around. We have lean to’s, not a new 21st Century building.”

Together they wondered, aloud, if investing in new facilities years ago may have produced a different outcome.

“We were so busy working and raising a family that we didn’t really take the time to plan that,” said LuAnn when asked what advice she might have for other farm families with next-generation uncertainty. “We always wanted our sons to make their own decisions on this. We love our four boys, their wives and their families and respect their decision to do what is best for their families.”


Planning for the next-generation is a challenge, “but I would recommend long term planning, not waiting like we did when it was too late for the planning to help,” she says.

Rudy, who graduated from Purdue with a degree in ag education, has taken an area sales manager position with Genex-CRI to follow the genetics path, which was seeded in junior high with his poultry projects and blossomed with his hand in the dairy herd over the past four years.

“This farm has been going since 1949 and has raised two families,” said Tom. His parents, Phil and Mary Troxel, started farming here almost 70 years ago. His mother was raised on a dairy farm and ahead of her time as a “dairy girl,” taking predominant care of the herd. Tom, one of eight children, was immersed in the farm early after his father suffered a stroke while he was still in high school.

Tom and LuAnn eventually took over the dairy after they married, and have operated both the dairy and Tom’s large animal practice here ever since.


Standing in the October sunshine discussing the upcoming sale, the curious cows walk right up and LuAnn reflects on the bond between a dairy producer and the cows. “I fed every one of these individually as calves,” she said, noting that while they can seem like children or grandchildren at times, “there’s a difference.”


“But you do spend more time with the cattle than the grandkids,” Tom interrupted, grinning at the reality of daily cattle care.

For years, the dairy has hosted media, consumer events, school field trips and trainings for vet tech students. (Below: On the left, LuAnn is constantly promoting and advocating for the dairy industry. Two years ago she snapped a photo of twin Jersey x Holstein heifers. Both heifers calved this past July. They and their calves will be sold in the Oct. 20 dispersal. On the right, Rudy shares information about dairy cows with local schoolchildren during a tour at the farm last fall. He will miss the farm and the cows, but is excited to get more involved in genetics as he takes a position with Genex-CRI.)

Both Dr. Tom and LuAnn have served on numerous boards over the years. In addition to serving as a past president of Indiana Dairy Producers (IDP) and currently on the board of the Dairy Girl Network (DGN), LuAnn also serves on the American Dairy Association-Indiana board — a position that will end when the milking ends, as has Tom’s former position on the Foremost Farms cooperative board.

While there may be fewer opportunities to be involved in organizations that promote dairy, the Troxels want to be involved wherever they can in the dairy industry they love. “The people in this industry are special. With few exceptions, dairy producers are honest, hardworking people who care about things other than themselves,” LuAnn points out.

“People say ‘it’s in your blood,’ and I guess that’s because dairying is systemic. It will be a little challenging to define who I am because everything from family relationships to daily routines to friendships and service have been within the context of the dairy farm. I’m not sure what it will be like, but I think it will be fine.”

The Oct. 20 dispersal is managed by Courtney Sales. The Troxels’ church will provide a delicious lunch, prepared with love, for a free will offering to benefit the Harvest Call Haiti Dairy Program.

All are welcome. For more information about the sale and the farm, and to see a catalog, visit


The Troxel family from left Jackson and Paige, Dr. Tom and LuAnn holding Olivia, Maryana, Rudy (holding Nolan) and Rosario, Nathan, Ned and Alyssa, Josh (holding Declan) and Chelsie. Photo by Chelsie Troxel