Dean Foods drops more than 100 dairy farmers

'The best thing consumers can do is enjoy dairy products'

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Dean Foods products
Dean Foods is cutting more than 100 dairy farmer contracts due to an oversupply of milk in the region. (Dean Foods photo)

(This story may be updated as more information is available)

SALEM, Ohio — More than 100 dairy farms in eight states received a letter from Dean Foods terminating their milk contracts with the company, effective May 31.

The farms affected are located in Indiana, Kentucky, Pennsylvania, Ohio, New York, Tennessee, North Carolina and South Carolina.

Letters

A letter, dated Feb. 26, from Brent Bunce, director of Dairy Direct Operations at Dean Foods, said “two indisputable dynamics” led to the decision to end these contracts.

The first, a retailer’s (Walmart) new Class I fluid milk processing plant coming online in the region will significantly decrease production at Dean’s own facility; and the second, the steady increase of raw milk production combined with the decrease of Class I fluid dairy consumption.

The Walmart facility is a 250,000-square-foot milk processing plant near Fort Wayne, Indiana. According to a Walmart news release, it will bottle Great Value and Member’s Mark white and chocolate milk for more than 600 Walmart stores and Sam’s Club locations in Indiana, Illinois, Michigan, Ohio and northern Kentucky. 

Most of those stores are currently supplied by Dean Foods, and one published source indicated the new plant will cost Dean between 90 and 100 million gallons of annual milk sales. Dean will continue to supply Walmart in other parts of the country.

“Quite simply, the dairy industry is producing more milk than people are consuming,” stated the letter.  Dean Foods also offered to provide assistance with finding potential new milk buyers.

Producers received similar letters last year from Dairy Farmers of America — which terminated approximately 225 independent milk producer contracts in the Mideast marketing order unless those producers became DFA members by Nov. 30, 2017 — and Progressive Dairyman reported last April that Grassland Dairy Inc., in Wisconsin, was terminating contracts with some of its producers by May 1, 2017.

Tough decisions

Joe Kelsay, a dairy farmer from Johnson County, Indiana, received his letter March 2. He and his brother Russ are the sixth generation to run the family farm and milk around 375 head.

“We really had a great relationship with (Dean Foods),” said Kelsay, noting they started marketed their milk with the company in the early ’90s.

“As unfortunate and sad and impactful as this is, we understand the tough business decision,” he said. 

Many are pointing fingers to a Walmart milk processing facility coming online in Fort Wayne, Indiana, for Dean Foods decision to cut over 100 dairy contracts. (Walmart photo)

Finding a market

He’s spoken to at least two other farmers who got the same letter. “I think their approach is similar to ours. Make some call and contacts to see if anyone is accepting milk.”

Kelsay has spent the week making calls to other milk processors, hoping someone will have an opening. “I have two meetings scheduled and a handful of no’s and a couple of maybe’s. That’s where we are at now,” he said.

One of those calls was to the new Walmart processing facility, but Kelsay was told they are not accepting any more milk at this time.

Jayne Sebright, executive director for Pennsylvania’s Center for Dairy Excellence, said they are using all their resources to help producers.

Of the 100 producers who received letters, 42 were from Pennsylvania, she said. “Deans is well-known for (contracting) excellent family farms. Many are young dairy families that have really invested in their farms.”

Sebright said the Center is reaching out to as many milk market outlets as they can to find out who can take on more producers, but has not received a lot of positive responses.

Resources

In the meantime, the center is offering its Dairy Decisions consulting services to affected farmers so they can evaluate their own individual options and “find a path forward,” said Sebright.

The Pennsylvania center has also put together some mental health and stress management resources for farmers. “We are very concerned about the well-being of the farmers affected,” she said. 

Bad timing

“It’s a very difficult situation and absolutely the worst time for this to happen. We are trying to get them all the help we can.”

This comes at a time when dairy producers are already fighting to stay afloat. 

“We are not seeing anything particularly encouraging in the marketplace,” said Dianne Shoemaker, Ohio State University Extension field specialist in dairy production economics.

Currently, there are too many cows and replacement heifers in the market, resulting in too much milk.

“Nothing good happens when there is more than 9 million cows in the U.S. and we are now at 9.4 million,” she said, with more than half that number in replacement heifers.

But the answer is not as simple as downsizing the herd. “Even if you know there is too much milk in the marketplace, you have to make enough milk to be a profitable business. That doesn’t translate into farms milking fewer cows,” said Shoemaker.

She added the quantity of milk coming out of Michigan isn’t going to stop. “Processors don’t need to pay a premium price for quality milk because it’s out there looking for a home,” she said.

Global

And the issues don’t stop with the U.S. market — the milk surplus is a global problem, according to Shoemaker.

The market is “impacted by the larger world price because there is too much milk on the world market and too many dairy products in reserves. Even if production goes down, the market knows there is still that much product out there,” she said.

“It’s not pretty and I think we are going to see more of this, unfortunately.”

Holstein cows
The worst thing consumers can do is stop drinking milk, said Indiana dairy farmer Joe Kelsay. (Farm and Dairy file photo)

Drink milk

Kelsay says he read some negative reactions from consumers and producers to some dairy brands and companies that consumers might choose to avoid or boycott certain brands of milk. He hopes that doesn’t happen.

“The worst thing we can do is choose not to drink milk.” While those reactions may be well intended, it may only cause a troubling dairy scenario to grow.

“I don’t think there is any bogeymen here. There’s no evil plan here. It’s a hard business reality and companies have to react and respond for their own well being,” he said.

“The best thing (consumers) can do is enjoy dairy products.”

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14 COMMENTS

  1. Walmart is not content with putting the small Mom and Pop places out of business, now they are putting whole farms under! They should be ashamed of themselves!

    • AMEN! Miss Bonnie.

      GREED & POWER seem to be today’s only Two Commandments.

      Only way to fight back: limit or don’t let Sam’s Club or Wally World get your hard-earned cash.

  2. This story leads me to think that these farms need to consolidate get their milk bottled and sold as independent farms along with Chicken farmers and put a stamp on their products. Locally owned and operated by your neighbors. Put the stores together like small flea markets do selling milk and all dairy products be the owners, invests and sellers of what they make. Same with chicken farms selling chicks eggs and the bi products from their business. I’d invest in a store that did milk, I remember when Ramsey’s was here in Butler and I’d go and buy our milk 3 gal at a time. Put a small store front in a mall area n operate on your own with just coolers, for your products and keep the prices down below the big guys

  3. We buy our milk at Aldi’s Walmart milk is always more expensive. I would hope that raw milk would become popular since I would really like to make butter etc. Barring having my own cow I and many others would support our local milkers. I would hope that the milkers could explore cheese making and yogurt making and hope that that would help them in the long run. I drink milk at 57 and enjoy it greatly only wish I could have raw milk I grew up on. I wish all the milkers much luck and hope they are around for a long long time.

    • Extreme government regulations prohibit the sale of raw milk. Extreme government over-regulation also makes the cost of farmers being able to process and market their own milk prohibitive-the cost of getting a government approved small farm processing/bottling facility even using used equipment exceeds $1 Million. Large dairy processors-including Dean Foods and their vile henchmen DMS/DFA take great initiative to lobby legislatures to prohibit the sale of raw milk.

  4. The ramifications of so many small and medium family dairies closing are far reaching. It is a gut wrenching decision to sell a farm you have put all your blood, sweat, tears, money and life into for decades. I grew up on a dairy farm and my husband and I own an “average” size herd of 240. We’ve been through some bad times but four years of low prices is something you can’t recover from.

  5. No one needs euphemistic blather from these “experts” with their university degrees (the author included). Why don’t you just come out and say that we’ll see hundreds of dairy farms shuttered this year?
    And there is a nefarious “plan” behind all this: ramp up all agriculture to hyper-industrial scale like the mega farm near Chicago with 32,000 head of cows. Much easier to control with contracts.
    I empathize with my farming brethren. Kris Oluich

  6. Dean Foods is just as guilty as Walmart for destroying dairy farmers. They have put even MORE small dairy farms out of business than Walmart has. As a huge $8 BILLION/yr corporation, they have bought up countless small dairy plants and tricked loyal customers into thinking they were helping local farms then completely destroyed the same small farms people thought they were helping. There has been 2 multi-million $$ class-action lawsuits against Dean Foods and their evil cohorts. Another one is needed, as well as anti-monopoly regulation/government action against ALL food monopolies-including Walmart. Be prepared for future food shortages and extreme food prices if something is not done to stop this carnage on ALL small farms!!

  7. I am a Feild Rep from a Marketer of Milk and have contacted Dean Foods to get a list of Producers involved and I was told they would list us as a contact but refused to provide me with a list. That is not trying to help them. I will reach out and do all can do to help them find a market.

  8. Why doesn’t anyone tell itlike it is . Milk is its way out . Consumers have been brainwashed for decades .Furthermore milk is not healthy , cows are not raised as they were intended .They are pumped with hormones,then injected with antibiotics.so How does this affect the milk .This is not a healthy way to go .

    • You have been COMPLETELY brainwashed. Your comment is COMPLETELY FALSE. Aside from your LIE, milk is the most nutritious food there is. STOP SPREADING LIES!!!!

  9. The article sums it up perfectly. To much milk. Farmers are afriad to cull cows and lower levels. They are now slaves to the buyers/processors, rather than being the other way round.
    I disagree with the article that simply culling cows to cut milk quantity is not the answer. Well then I failed in my college business classes. One way to earn more for your product is to limit it. Guess the Arabs with oil didn’t learn that either in the 1970s with the oil crisis!
    Farmers you need to quit being frightened of culling cows and do it NOW or put the farm up for sale. Those are you’re 2 best choices right now.

  10. Not a farmer/dairy operator, just a consumer. When Walmart came to your small towns, did you go out there to buy towels made in China for $6 instead paying a little more at a local store (that went out of business?) Were you willing to look at the tag and pay a little more for clothing items made in the USA instead of a slightly cheaper one made in a pretty much slave labor, environment polluting country? When the chain drive-in/restaurant came to town and you could get a burger and fries for a dollar less than at the local diner, did you help put it out of business? Were you willing to pay a little more for the washing machine made in the USA or did you go to the big box store and buy the least expensive? I was willing to pay a little more for all these items and have never set foot in a Walmart. I do wish you well and will be supportive wherever I can, but we all needed to support each other, and too many consumers haven’t cared about any business but their own.

  11. Duvall great comment the same people complaining about Wal-Mart dairy are in the stores buying other items but only care about how it effects them.

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