DFA to halt marketing milk for independent producers

Dairy Farmers of America’s Dairy Marketing Service sent a letter to dairies in the Mideast this week announcing they will put a halt to marketing milk from independent producers. Their focus will instead turn solely to cooperative members.

The move comes as a result of a saturated milk market and burdensome costs assessed only to co-op members, resulting in the cut of independent farms, according to DFA. Organic producers are exempt from the action.

“The letters were sent to all DMS Mideast Dairy independent producers who serve the conventional market. Organic producers were not included in this action. This letter advised them of our intent to terminate the milk marketing arrangement with DMS Mideast producers effective at the end of November,” said Heather McCann, communications manager for Dairy Farmers of America. “They will have until Nov. 30 to procure another market or if they choose not to or are unable to, DFA will offer membership to those DMS producers.”

Tensions are high within the dairy industry due to pressure on farms from multiple levels. The core challenge is that there is simply too much milk and not enough demand.

“There is a lot of milk in the market, particularly in this part of the country. We have too much milk out there,” McCann said. “We are not seeing a commensurate increase in demand to take up that milk so all of that excess milk results in increased balancing costs, increased transportation costs and the premiums available to help pay producers are also reduced.”

Here’s the letter DFA sent to independent producers:

“As you are undoubtedly aware, our region has experienced unprecedented growth in our milk supply over the past several years. Currently, supply continues to grow at an overall rate of 2 percent per year, ahead of the national average, with increases of over 4 percent in some states. This has resulted in a supply-demand imbalance that has placed the entire milk marketing system in the eastern United States under severe stress. The costs incurred in balancing surplus milk have skyrocketed while premiums received from customers have fallen and consumer demand, particularly for fluid milk products, has softened appreciably. We expect these trends to continue through 2017 and well into 2018.

“As an independent producer marketing your milk through Dairy Marketing Services (DMS), there is no practical method available under Federal Order regulations for the sharing of marketing costs and revenue fairly and equitably among all producers in the marketplace, independents and cooperative members alike. As a result, we are unable to continue marketing your milk under the current DMS arrangement.

“Within the next few days, we will be sending you a six-month notice of termination. During this period, we encourage you to find another milk market in the Mideast Area. If you do not wish to or cannot find another market, Dairy Farmers of America, Inc. (DFA) will offer you membership and continue to market your milk. As a one-time accommodation and benefit to you, DFA will offer two special terms for the first year of membership. First, for the first year of membership, you will have the option to not pay a capital retain (equity). Second, for the first year, DFA will allow you to terminate your membership at any time, with 30 days’ prior written notice.

“Furthermore, as part of DFA, you will be entitled to access all member programs and services including insurance, buying/farm inputs, risk management and lending programs. These programs are designed to bring value to you by helping you operate your dairy more economically and efficiently.

“We have sincerely appreciated our relationship with you, and will continue to work hard every day to help support Mideast Area dairy producers and our industry.”

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