What will become of, us?

sunsetbarn.jpgGovernment’s cozy relationship with dairy lobby is problem no. 1

By Sherry Bunting, reprinted from Farmshine, October 19, 2018

These are tough times. The strain of a fourth year of flat-lined milk prices is wearing thin on dairy farmers and those who serve them.

And the folks inside the Beltway don’t get it.

Wait, maybe they do.

The Farm Bill has yet to be passed, the mid-term elections are over… and the question continues to be asked: What can be done about the fact that family dairy farms are dropping like flies?

This question has been asked and answered for the better part of three years and the whole decade before that… and still we find ourselves repeating the same words falling on the same deaf ears, pleasant nods, and ‘sincere’ handshakes.

Where does Washington go for the answers? The dairy lobby. In fact, members of Congress will say that nothing gets done without getting National Milk Producers Federation on board.

What’s the deal for the future? A better ‘welfare’ program for small farms to window-dress the rapid and deliberate consolidation that is running rough-shod over their markets and using the Federal Order and other regulated pricing mechanisms to do it.

For years, a decade or more, grassroots dairy farmers have told their legislators to please work on repairing the damage government has already done to dairy farming.

They’ve pleaded with those inside the Beltway to heed the truth on the decades of flawed dietary guidelines and to right the wrongs in our nation’s school lunch program and other institutional feeding programs that are forced to follow these flawed guidelines.

But alas, instead of real change, we get more of the same, while the dairy lobby cheers and applauds over a tiny change allowing schools to serve 1% lowfat flavored milk instead of the prior Obama-era mandate of fat-free.

Meanwhile, nothing changes for regular milk in schools. It’s been fat-free and 1% for a decade now, and we have lost a generation of milk drinkers and stand to lose even more, and all the while our school kids fight increased obesity and diabetes rates, and we wonder, why?

Heck, you can’t even sell whole milk as a fundraiser during school hours, and you can’t give it away to schoolchildren during school hours due to these dietary rules that –according to those who have done a decade of scientific investigation of the research –show are actually not healthy rules for our children in the first place.

Plus, we have the FDA, having looked the other way for more than 10 years, now talking about milk’s standard of identity within a greater framework of “modernizing” standards of identity to “accomplish nutritional goals” — goals that are guided by flawed government dietary guidelines.

Instead of acknowledging the past wrong and immediately setting it right, the FDA adds comment period after comment period to try to read the minds of consumers. They want to know if consumers understand what they are buying when they buy fake milk.

The short answer? survey after survey shows that an overwhelming majority of consumers are, in fact, confused about the nutritional differences between real milk and the imposters — some consumers even believe there is milk in the not-milk ‘milk’.

Meanwhile, more time passes. Farmers are asked to wait. Be patient, while more damage is done by counterfeit claims that steal market share from dairy milk’s rightful place.

And then there’s the regulated milk pricing. What are the odds that any member of Congress will heed the past 10 years of requests for a national hearing now that California has enthusiastically joined the Federal Orders? That was the death nell of more of the same.

“It’s a free market,” say the legislators, regulators and market pundits.

“It’s a global market,” they add further.

No folks. It is a regulated market, and believe me when I tell you, the USDA and the major national footprint cooperatives operate this regulated market in lockstep.

Processors can’t access the administrative hearing process, unless they are cooperative-owned processors.

Farmers can’t access the administrative hearing process, except through their cooperatives.

Ditto on the above when it comes to voting. Bloc voting on behalf of farmers by their cooperative leadership seals every deal.

At a meeting a few months ago in the Southeast with USDA administrators that was intended to talk about multiple component pricing, farmers brought forward their grievances about bloc voting and their concerns about how milk is qualified on their Orders to share in their pool dollars.

What was USDA’s official response? The same response we hear over and over from legislators. “You vote for your co-op boards and they vote for Federal Orders.”

The Federal Orders were implemented in the 1930’s to keep milk available to consumers, to keep producers from being run-over. Today, these Orders are used to move milk from expanding consolidation areas to regions that have small and mid-sized family and multi-generational dairy farms located near consumer populations and competitive markets.

This is not a size thing. This is not small vs. big thing. This is structural change thing that is happening in the dairy industry at an increasingly rapid rate while the lifeblood is sucked right out of our culture of dairy farming.

troxel-sale-2The storm is brewing. Since the beginning of this year, the financial experts have told us that one-third of producers are selling out or contemplating an exit from dairy, that another one-third are not sure where they even stand, and that another one-third are moving forward with plans for expansion within consolidating industry structures.

The thought occurs to me: When the other two-thirds of producers are gone, what will become of that one-third that is still moving forward expanding, undeterred? What will become of the fabric from which their progress emerged? What will become of the next generation with hands-on experience, passion and love of dairy? Who will be raised on a dairy farm in the future? What contributions will be lost when dairy becomes only a business and no longer a business that is also a lifestyle? Who will be the support businesses? How will our communities change? Will all of our dairies in the future be academically run? What will become of our cow sense, our deep roots, our sense of community?

What will become of, us?

GL 4736For years we have heard “there’s a place for every size dairy in this industry.” That phrase is how we get small and mid-sized farms to advocate with consumers about modern farming so they will accept a more consolidated dairy farming picture.

Now that we are reaching this point, will we hear the large consolidating integrators say the same in reverse? Will they slow down, push pause, and realize there IS a place for the diversity of farms that make this industry the shining star it is and could be?

While at World Dairy Expo in Madison, Wisconsin in October, the strain of now a fourth year of low prices was evident. Attendance “felt” lower even if the official numbers don’t totally reflect it.

Show entries were down. Traffic among trade show exhibitors was interesting and steady, but ‘off’ and ‘different.’

Dairy farmers are struggling. Large, small, and in between, these times are tough, and clear answers are elusive.

Dairy farmers remain paralyzed by three things:

1) the inability to have an effect on their circumstances or seat at the decision table;

2) lack of understanding of an incredibly complex regulated market; and

3) the innate desire to trust the establishment that handles their milk because they are too busy milking, managing and caring for cows, not to mention the land, to handle the milk marketing themselves.

Just think about this for a moment. In the past four years, National Milk Producers Federation has created and implemented the F.A.R.M. program where someone can come in and put you on a list for a subjective heifer bedding evaluation, where more is being not asked, but demanded, while at the same time, the pay price from which to do more is declining.

The milk checkoff programs continue to focus on partnerships. All kinds of efforts emerge to give away milk and dairy, and meanwhile supermarket wars by large integrating retailers push milk further into a commodity corner from which all imposters can brand their ‘more than’ and ‘less than’ marketing claims.

What we learned at some of the seminars at World Dairy Expo is that nothing will change in the milk pricing system, that it’s a free market, a global market, and that the best Congress can do is improve the margin protection program and other insurance options so farmers have the tools to deal with it.

I’m here to tell you that as long as this remains true, no farmer should be ashamed to use these tools even if it means receiving taxpayer dollars because it is the government’s actions and inaction over a decade or more that have created the problems in milk pricing and marketing today, and furthermore, the government shows no sign of wanting to let go of its stranglehold on dietary guidelines, how it enforces dairy’s standard of identity in fraudulent labeling, nor how it conspires with the dairy lobby — made up of the nation’s largest cooperatives — to regulate pricing in a way that further consolidates the dairy industry.

And by the way, all of the rhetoric on trade and NAFTA and Canada’s supply management system and Class 7 pricing has been nothing more than a smokescreen.

wGDC18-Day1-56Trade is important, but again, we have reached a point where 2018 is seeing the demise of dairy farms at rapid rates while exports continue to set new records. As of Oct. 5, 2018, U.S. dairy exports for the first 8 months of the year (Jan-Aug) accounted for a record-setting 16.6% of milk production on a solids basis. That’s the largest ever percentage of the largest ever milk production total – more of the more – in the history of the U.S. dairy industry’s recordkeeping.

In fact, traders will be the first to tell you that “more exports” don’t translate into “better farm milk prices” because the export markets are largely commodity clearing markets and they are fueling expansion of commodity processing in areas of the U.S. where it is easiest to export to Asia and Mexico. A global supply-chain is in the works.

The exports, in fact, are diluting the Federal Order pricing at the same rapid rate as declines in consumer fluid milk consumption, putting severe pressure on eastern markets in particular.

Meanwhile, the eastern milk markets are extremely tight on milk. This information is sourced to cooperative managers and the independent USDA Dairy Market News. Plants are seeking milk and not receiving it. Trucker shortages are complicating the problem. State regulated pricing mechanisms, such as in Pennsylvania, still interfere, making milk cheaper to bring in than to use what is here. In some Federal Orders to the south, this is also the case because of how their pools are administrated.

We are seeing the vicious circle of self-fulfilling prophecies. Producers who want to operate 50 cow, 100 cow, 300 cow, 500 cow, 1000 cow, 1500 cow dairy farms in the eastern U.S. within a day’s drive of the largest population are in jeopardy. They have lost their location advantage but continue to deal with the disadvantages. As milk tightens they are not seeing their premiums return, instead some farmers report getting docked by their co-ops for not making enough milk, or they are socked with incredible hauling rates because their milk was hauled out while other milk was hauled in.

What can Congress do? Hold that national hearing on milk pricing. Give farmers a seat at the table apart from the company-store. Learn what is happening. See government’s role in it.

Dear Congress, if you really want to know what to do, look in the mirror.

Before it’s too late, please right the fundamental wrongs government has done to our dairy consumers and dairy farmers as it controls what fat level of milk kids are permitted to drink at school, how milk is priced, how milk is marketed and how milk is allowed to be advertised and promoted with farmers’ own money – while at the same time still turning a blind eye and deaf ear to loss-leading supermarket wars that operate off the backs of farmers and the processing industry’s pillaging of milk’s market share with nondairy imposters.

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ReplyForward

PMMB responds to Pa. Dept. of Ag with hearings May 2 and 16

Public comment must be pre-submitted by Apr. 30 and May 11 to speak at the hearings on May 2 and 16. Separate from the PMMB hearings, the Pa. Dept. of Ag is seeking public comment to improve the market for dairy in the state and invites the public and industry to provide suggestions or comments online to be considered moving forward.

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By Sherry Bunting, @agmoos

HARRISBURG, Pa. — In responding to Pennsylvania Secretary of Agriculture Russell Redding’s petition for hearings and review, the Pennsylvania Milk Marketing Board (PMMB) announced April 18 that it will conduct the first of two public hearings on May 2 with an expedited process requiring testimony to be provided in advance by noon on April 30.

The first hearing is set for May 2, 2018 at 9:00 a.m. in Room 309 of the Agriculture Building across from the Farm Show Complex on North Cameron Street, Harrisburg.

A second hearing is set for May 16, 2018 at 9:00 a.m. in the Monongahela Room of the Pennsylvania Farm Show Complex. The second hearing was announced this week, and like the first hearing, stipulates pre-registration with copy of comments provided in advance by noon on May 11.

PMMB states that the purpose of the first hearing on May 2 is to receive testimony and comments regarding the specific “Recommendations for Statutory Changes” found in the Ag Department’s April 5 petition.

The hearing will occur before the PMMB Sunshine Meeting already scheduled on that day, which sources indicate will address another portion of the PDA petition — asking PMMB to amend regulatory provisions dealing with termination of dealer-producer contracts. Since this portion of the petition involves a board-level action rather than a statutory change, steps to begin the regulatory review process will begin during the Sunshine Meeting that follows the public hearing on May 2.

(Author’s note: As you read on, please keep in mind that most Pennsylvania dairy farmers I speak with want transparency. They are not seeking a more complex system. They are seeking truth and a level playing field from which to compete. Pennsylvania is unique in having this lawyered-up state-level milk pricing system cohabitating with two Federal Order milk pricing systems. The state system (PMMB) sets a minimum retail milk price and minimum wholesale milk price for 6 regions of Pennsylvania, and the farm premium built into it only passes back to the farm IF the milk is audited to have met three specific criteria: produced, processed and sold in PA. However, the money is collected from all Pennsylvania consumers on ALL milk sold in Pennsylvania no matter where it came from or what pathway of logistics it utilized in getting to a PA store shelf. In turn, the very high per-gallon minimum price creates an uneven playing field for PA-produced milk as the state has become a magnet for increasing numbers of out-of-state dealer licenses as well as out-of-state milk usage, as well as out-of-state distribution warehouses and companies that specialize in logistics while the nation is overcome by supermarket loss-leading and price wars for customer acquisition).

In Wednesday’s hearing (May 2), PMMB will receive testimony on the following statutory items specifically mentioned in the Ag Department’s petition, many of which were suggested by PMMB staff as far back as 2009, but were never moved on, nor implemented!

LICENSING OF RETAILERS

In its petition, the Pa. Dept. of Ag mentions a recommendation by PMMB staff back in 2009 that was never implemented. It would have enabled the Board to require retailer reporting of volumes of fluid milk purchased and volumes sold in Pennsylvania “to track the amount of fluid milk sold at retail, the amount of consumer dollars being generated by the various components that make up the minimum retail price, and to identify the wholesalers and other sources of all fluid milk sold in Pennsylvania.”

The PDA petition notes that this is “a noted absence of data which prevented Drs. Novakovic, Stephenson and Nicholson’s study from being more conclusive on PMMB pricing’s impact on retail prices and Pennsylvania processing volumes. Such data is necessary for the continuation of credible, industry-supported and publicly-supported, PMMB pricing.”

TITLE TO MILK

Regarding Title to Milk, the PDA petition cites another amendment suggested by the PMMB staff in 2009, but never implemented, “to declare by statute, for the purposes of producer pricing only, that title to milk transfers to a milk dealer at the farm pick-up.”

In its petition, PDA notes that, “This (amendment) enables the Board to account for milk transported for out-of-state processing and to track that milk if it comes back in-state via wholesale or, coupled with the above, by a retailer.”

RETURN ABOVE COST OF PRODUCTION

The PDA petition also cites portions of the statute that result in “a return above the cost of production must always be guaranteed in the wholesale and retail price but not in the producer price.”

The petition recognizes that while the producer price under Section 801 must be, according to statute, “cost of production and a reasonable profit to the producer,” there is this exception stating that ‘the market for Pennsylvania-produced milk is threatened,’ which has “so permanently swallowed the rule that increasingly producers question the legitimacy of the entire PMMB pricing system,” PDA states in its petition.

“This is a major problem that must be addressed with transparency and clarity. This petition specifically requests that the PMMB staff be charged with investigating and recommending options to the Board for a statutory revision that has industry acceptance and equitably allocates the impact of market conditions across producers, milk dealers and retailers. If that is not deemed advisable, consideration of a statutory amendment nevertheless remains necessary to replace the existing language,” the petition states.

(Author’s Note: In other words, in times when the minimum price must be lowered to protect the market, the “pain” should be allocated to the other sectors and not taken on solely at the farm level. For example, when supermarkets loss-lead and get into price wars to acquire customers, should they not calculate that cost to their business rather than pass it back through the chain to the farm? It’s the retailer’s decision to use the price on a staple to acquire customers. It’s the processor’s decision to negotiate for large contracts. In the same sense, farmers cooperatives have admitted (in at least one civil proceeding) to doing the same by “sharing” profits gained by collective distribution efficiencies in the form of rebates to processors that are then passed on to retailers. Meanwhile, farmers are told the efficiencies of these collective distribution efforts are meant to reduce the cost of the hauling that is passed on to the farmer and that cost been steadily rising.)

RETURN OF BENEFIT TO PRODUCERS

Finally, the May 2 hearing will receive testimony on the point in paragraph 18 of the Pa. Ag Department’s petition concerning the return to producers of the benefit of minimum wholesale pricing.

The PDA petition explains it this way: “Much has been said over the years about the language of Section 805 of the Milk Marketing Law and whether the price increase built into the minimum wholesale price for payment of the over-order premium is being ‘given to producers’ as required.

“The allowed exception (‘ … necessary in order lawfully to maintain proper milk markets and outlets for producers and consumers’) has, again, permanently swallowed the rule. As with Section 801 producer pricing, consideration should be given to amending Section 805 to clarify the intended result. This is another area where positive perception of PMMB pricing appears to have been eroded by a perceived lack of clarity and transparency, the petition explains.

The PMMB hearing announcement states that intent to present testimony, and a written copy must be provided by noon on April 30, 2018 either electronically at  deberly@pa.gov or by filing at the PMMB office, Rm 110, Agriculture Building, 2301 North Cameron Street, Harrisburg, PA 17110.

For the May 16 hearing, the purpose is to solicit and consider suggestions for statutory changes to the Milk Marketing Law as requested by the PDA in its petition.

Those wanting to give testimony or comments on May 16 must provide notification and a written copy in advance to the PMMB by noon on May 11 either electronically at ra-pmmb@pa.gov or by filing at the PMMB office, Rm 110, Ag Building, 2301 North Cameron St., Harrisburg, PA 17110.

Announcements for the May 2 and May 16 public hearings indicate that both will be listening sessions with no examination or cross examination by interested parties.

A copy of the Pennsylvania Department of Agriculture Petition can be found at the Board’s website and drafts of the proposed amendments may be obtained on the Board’s website at http://www.mmb.pa.gov/Legal/Documents/Petition%20for%20Hearing%20MMB.pdf.

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

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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.

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