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Merger sparks organic milk competition worries

Mateusz Perkowski

Capital Press

Published on August 15, 2016 11:10AM

Capital Press File
Holstein cows are seen in this file photo.The proposed merger of two large dairy companies has some on the organic dairy industry worried.

Capital Press File Holstein cows are seen in this file photo.The proposed merger of two large dairy companies has some on the organic dairy industry worried.

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A proposed merger between two major dairy processors has sparked concerns of reduced competition for organic milk, potentially reducing prices paid to farmers.

The planned takeover of Colorado-based Whitewave Foods for $12.5 billion by Danone, a global corporation based in France, would likely shrink the number of buyers for organic milk in many markets, according to the Cornucopia Institute, an organic industry watchdog group.

“It could have a profound impact on the options that organic dairy producers have,” said Mark Kastel, the nonprofit’s co-founder.

Danone and Whitewave are currently competing in the organic dairy industry with CROPP, a farmers’ cooperative that owns the Organic Valley line of products.

Significantly, CROPP supplies milk for the Stonyfield Farm brand of yogurts, which is owned by Danone, and licenses to sell fluid milk under the Stonyfield Farm label.

With the proposed merger, however, Danone would have Whitewave’s milk production under its control, probably eliminating its need to buy from CROPP, said Kastel.

“It would be counterintuitive that those relationships would continue,” he said.

Capital Press was unable to reach representatives of Danone or Whitewave as of press time.

Organic Valley said that the organic dairy industry remains robust, which is underscored by Danone’s investment in Whitewave.

“We are a favored vendor of Stonyfield and we have pioneered the organic industry together,” Organic Valley said in a statement. “We plan to continue our collaboration and to serve their organic fluid milk needs.”

Whitewave traditionally buys from large “concentrated animal feeding operations,” or CAFOs, while Organic Valley is oriented toward family-scale farms, said Kastel.

With a bigger economy of scale, the combined Danone-Whitewave could depress organic milk premiums and possibly weaken Organic Valley’s position in the market, he said.

“If we end up with an imbalance of power, it could bring the wholesale price down for everybody,” Kastel said.

Cornucopia Institute has asked the U.S. Department of Justice and the Federal Trade Commission to investigate the merger for anti-competitive effects.

Peter Carstensen, a law professor specializing in agricultural antitrust at the University of Wisconsin, said the group’s request has merit.

“It’s the kind of transaction that ought to be looked at very seriously,” he said.

It’s possible that Danone-Whitewave wouldn’t mind reducing milk prices and putting dairy farmers out of business in the short term, because over the long term, a smaller milk supply could justify higher prices, Carstensen said.

“There’s an opportunity here for strategic behavior,” he said.

A representative of the Federal Trade Commission said the agency “does not confirm the existence of or comment on investigations” but would make any findings public if a lawsuit was brought to block the merger.

Capital Press was unable to reach a representative of the Department of Justice as of press time.


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