As has been well-reported, Dean Foods filed for Chapter 11 bankruptcy on Nov. 12.
Should we be surprised? No. The writing on the wall has been there for a while. Should we be worried? Yes. The most worrying part is who the biggest player is looking to buy them out (or partially buy them out) — Dairy Farmers of America (DFA).
DFA is a member-owned cooperative that buys and processes their own milk. This means that DFA should be representing the best interests of their members.
However, being a processor also means that they need to make sure they show profits in that division of DFA. DFA has long been accused of keeping prices low to the producer and maximizing profits in processing. Recent reports have said DFA controls somewhere around 30% of the milk in the U.S.
DFA and Deans are in advanced talks about Deans being sold to DFA. This is an absolute worst-case scenario for milk producers all over the country.
If DFA is allowed to acquire Dean Foods, they will be securing the largest processor of dairy products in the U.S. What percent of the milk will they control then? Over the years, DFA has slowly been building their control of producers and processing plants by nothing less than “hostile takeovers." They started with small cooperatives that were in financial trouble, then moved on to larger cooperatives that marketed their milk through Dairy Marketing Services (a subsidiary of DFA), and now have moved on to larger processors.
DFA gets their “foot” in the door by giving these larger processors loans to keep running their day-to-day operations. Then, when they develop any issues, including bankruptcy, DFA moves in for the kill. This is exactly what happened with Dean Foods. It is reported that Deans owes DFA close to $173 million.
So, what does this mean for the dairy farmer? That question is still up in the air. The bankruptcy court has approved that Deans can pay essential customers (dairy farmers). Dairy farmers are getting paid, but their payments were about 4 days late. If DFA were to survive all the inquiries and lawsuits to buy Deans, those farmers would now be forced to sell their milk to DFA, or look for another means of selling their milk, if any other marketing option would even be available, or leave the industry.
It will be an interesting few months while this plays out. However, please continue to support your local farmer. These men and women are the backbone of America and deserve your respect and appreciation, especially in this time of uncertainty.
Former cooperative president and current general manager and member of Farm Women United