Member numbers (% of total): 22,000 Member milk (% of total): 32.5 billion Corporate board members: 36

It's with a predictably positive spin that the new mega-milk co-op, Dairy Farmers of America (DFA) starts business this year. The combination of Associated Milk Producers (AMPI), Mid-America Dairymen (Mid-Am), Milk Marketing, Inc., (MMI) and Western Dairymen Cooperative, Inc. (WDCI), has created a new stage for marketing milk.

First is sheer size: 22,000 milk producer members in 42 states, 32.5 billion pounds of annual milk production, and more than 80 facilities nationwide. This size is seen as a positive factor by Gary Hanman, CEO of the new DFA.

"Our customers are of-ten large companies. With the consolidation, we're still not as large as Kraft in the cheese market," Hanman observes "Consolidation can help us achieve economies of scale and give us the financial strength to invest in value-added product development and manufacturing that can increase returns to dairy producers."

The boards of the four co-ops approved the merger by substantial margins Now DFA is dividing the nation into area councils, formed roughly along the lines of the former co-ops.

There is to be a 36-person board with representation from the councils. Officials hope to create a governing structure "...small in the country, even though we have a large presence in the marketplace."

"With this organization, we have unlimited opportunity," notes Herman Brubaker, now chairman of the board of DFA from West Alexandria, Ohio. "In the past, we've done a lot of talking about improving milk prices. Now, we're in a position to do something about them."

Brubaker states that DFA, which now markets 21% of the nation's milk supply, has become all the more necessary with the merging and eventual phasing out of federal milk orders. While the chaotic situation over the Class I differential continues, he predicts DFA is now better positioned to be a stronger, more competitive marketing organization.

It takes money to move milk. Collectively, "we now have more producer assets to collectively work with. While we will have more debt, the larger equity base will allow us to do more innovative financing," adds Brubaker. But he also stresses, "We still have to be profitable. DFA deserves the right as much as any other company to work in the best interest of it's stockholders."

Competing with the likes of Land O'Lakes, "it still comes down to having enough producer assets to be able to fund expansion and put more effort in to new product development and marketing."

More producer services? Brubaker doubts the new cooperative will follow the lead of other coops in getting into offering expansion advice, construction loans and cattle leasing contracts. "I don't think we intend to at this point. We can affiliate with others who do it without having the financial burden."

Brubaker is pessimistic about prospects for artificially high milk prices set by regional compacts. "Ultimately, the only reason processors are anywhere is that they can make a profit. When 85% to 90% of a processor's cost is raw product, they have to look at where they can make the most. Long term, that doesn't bode well for process-ing within compact states."

This section was compiled by Margo Souza

Return to DairyBiz Archive Contents

©2002 MooMilk.com a California corporation. 
Designed and built by Tommy Dew Design, Inc.