March 14, 2018
The Dairy Alliance, formerly known as the Southeast United Dairy Industry Assn., held its Global Dairy Summit this week, convening state agriculture officials, industry stakeholders and thought leaders from across the Southeast to rally around a plan to reverse the dire economic circumstances facing the 2,000 family-owned farms in the region.
According to the Dairy Alliance, the future for local dairy farm families looks grim. Since 2010, the U.S. has lost nearly a quarter of its dairy farms nationwide, and the situation is even worse in the Southeast, which shows a 33% loss.
“This decline threatens the economic prospects of the 38,000 individuals employed by the dairy industry in the region as well, and it's unfortunate for the public, because drinking fresh milk is a source of nourishment and enjoyment and supports the family farms of the Southeast,” Dairy Alliance said.
Unfortunately, the losses may continue to rise, as more than 100 dairy farmers located in eight different states in the eastern region were recently notified by Dean Foods that their contract supply agreement will be terminated on May 31. In a letter to the producers, Dean Foods cited increased competition, declining dairy demand and an oversupply of milk as the main reasons for the decision.
“As can happen in a highly competitive business of fluid milk processing, we recently lost a portion of customer fluid milk volume to a competitor through our customer-bid process,” Brent Bunce, director of Dairy Direct operations for Dean Foods, explained. “We are unable to lock in enough new customer volume to offset this loss. The decision to end your Dairy Direct agreements was incredibly difficult, and please know we explored all options to avoid this outcome.”
The increased competition Bunce references in the letter is a new milk processing owned by Walmart and located in Ft. Wayne, Ind. The more than 250,000 sq. ft. milk processing plant is one of the largest in the industry.
However, Bunce said this is about more than just increased competition, explaining, “Unfortunately, the situation is bigger than all of us. As an industry, we are producing more milk than people are drinking.”
Despite the ongoing challenges, Doug Ackerman, chief executive officer of The Dairy Alliance, said the Global Dairy Summit is the stake in the ground for changing the trajectory of the dairy industry in the Southeast. "It's a chance for us to unite the industry around common goals. We need to act aggressively and decisively if the dairy industry is going to survive in the Southeast," Ackerman said.
At the summit, Tom Vilsack CEO and president of the U.S. Dairy Export Council (USDEC), provided some hope for the dairy industry, introducing USDEC's "Next 5% Plan" that seeks to turn the economic tide for dairy farmers by 2025.
"For dairy farm families to have the chance to pass their farms onto their kids, the shift to a global marketplace focus holds the key," Vilsack said. "The Next 5% Plan will advance the dairy industry in the Southeast, providing a viable dairy industry in the Southeast for years to come."
The largest goal for the Next 5% Plan is to increase U.S. dairy exports from 15% to 20% by 2025. However, the plan also seeks to combat domestic challenges, such as a U.S. milk surplus and low milk prices. As part of the plan, USDEC aims to educate the American public about the importance of dairy exports to their lives, to the U.S. economy and to the nearly 100,000 jobs created by dairy exports.
The harsh reality of the situation, however, is that the 5% growth may not happen quickly enough, especially since other top dairy-producing countries have also been increasing their output. Combined with increasing U.S. feed costs, competition from plant-based dairy alternatives in the marketplace and the supply and demand situation, they may only spell more trouble for the already struggling industry.
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