Cooperative Consolidation: Why Dairy Farmers of America Should Not Be Allowed to Purchase Dean Foods

Share

By Bobbi Wilson, Wisconsin Farmers Union

The looming threat of a milk monopoly is making headlines as the nation’s largest dairy cooperative, Dairy Farmers of America, negotiates the purchase of Dean Foods following its bankruptcy announcement. If the deal is approved, DFA would achieve near total control over regional fluid milk markets in New England and the Midwest. The news comes on the heels of a Government Accountability Office report showing reduced farmer earnings and power imbalances result from dairy co-op consolidation.

Meanwhile, the staff of National Milk Producers Federation (NMPF) put out an opinion piece celebrating cooperative strength in light of the Dean Foods bankruptcy:

“…a missed milk check – the interruption of the cash flow that’s necessary to keep a dairy operating. That’s the disruption some farmers have worried about in recent weeks, following the Dean Foods bankruptcy announcement. It’s one we at National Milk have followed closely, and it’s one that forcefully reminds us of the value of the cooperatives we serve.”

Perhaps this is simply a message of comfort in light of economic uncertainty. Or perhaps it’s meant to assuage growing concerns over the proposed merger. After all, NMPF has a stake in the DFA milk monopoly: DFA is its largest cooperative member, holding a third of the seats on their 53-member board of directors.

The article capitalizes on farmers’ fear of losing their market and their milk check, reinforcing the familiar message that having a home for your milk is the most important thing. The worry of plant closures sets DFA up to look like the hero on a white horse, scooping up Dean’s failing facilities. As long as you have a home for your milk, don’t worry about the long-term financial risk of giving DFA ultimate control over your milk price.

Cooperatives certainly play an important role in the agricultural economy, and they are largely why the dairy industry has not suffered the same level of consolidation as the poultry or beef industries. However, DFA has a long pattern of behavior to acquire competitors and drive out competition in the dairy-processing sector. Keep in mind that consolidation was a major cause of Dean’s financial demise after it spent years buying out competing dairy businesses. The remedy to its anticompetitive business practices is not to be gobbled up by another milk giant, cooperative or not.

The prospect of a merger is still up in the air, and it seems that antitrust enforcers and even Dean Foods bondholders are exploring alternatives. If Dean’s assets are broken up, regional buyers will almost certainly emerge to operate the plants. The Dean Foods debacle could be an opportunity to break up growing consolidation in the dairy processing sector, rather than perpetuating the march toward monopoly that puts farmer livelihoods at risk.

Written by 

Leave a Reply