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Dean Foods bankruptcy highlights value of co-ops

Dairy organization says cooperatives will help ease impact of sector disruption.

“Disruption” is a present-day buzzword, and the dairy industry has had its share, according to the National Milk Producers Federation's (NMPF) latest “Dairy Defined” report. From the globalization of markets to the rise of plant- and cell-based competitors, NMPF said farmers are grappling with a shifting landscape, even as dairy farms themselves have changed.

Still, none of this is as personally disruptive as a missed milk check -- a disruption the report said some farmers have worried about in recent weeks following the Dean Foods bankruptcy announcement. “It’s one we, at [NMPF], have followed closely, and it’s one that forcefully reminds us of the value of the cooperatives we serve, from their farmer-owners to the consumers who depend on them,” NMPF said.

While cooperatives have played a crucial role in protecting their members’ economic interests for more than a century, the report relayed there has been much uncertainty surrounding what the processing landscape will look like post-Dean Foods.

As the fate of Dean Foods is determined, the report assured that finding markets for milk is what cooperatives do, “365 days a year,” regardless of disruptions that may develop.

“With the strength of the co-op backing them up, farmers know they have expertise and networks they can rely upon to help handle the unexpected. Even in temporary situations when milk deliveries exceed processing capacity, co-op members still have steady, predictable access to markets for their milk,” the report said.

Also, when processors struggle, co-ops help protect farmers and consumers, NMPF noted in the report. Co-ops additionally allow farmers to become processors themselves, giving them more opportunity to profit from the production and sale of dairy products and react to changing consumer tastes. For example, the report pointed out that as butter has become more popular, the number of cooperative-owned processing plants has risen 8% since 2012. The cooperative-created volume of popular dairy products such as butter is also rising, it added.

“This all comes down to the essence of what a cooperative is: a self-help organization in which farmers stick together in good times and bad – sharing in profits and navigating through difficulties,” NMPF reported.

Further, the report explained that protection against supply chain disruptions was one of the reasons cooperatives formed NMPF in 1916.

“Public desire to see farmers succeed pushed adoption of the Capper-Volstead Act of 1922, which allowed farmers to gain greater influence in their own markets,” the report explained. “That same collaborative spirit led NMPF in the 1930s to push for the Federal Milk Marketing Order system, which levels the playing field for farms of all sizes in all parts of the country, helping harmonize pay for producers, regardless of the end use of their milk, while stabilizing prices for consumers nationwide.”

Efforts continue today through initiatives such as Cooperatives Working Together, which helps boost U.S. dairy exports, as well as NMPF’s own collaborations with organizations like Dairy Management Inc., the U.S. Dairy Export Council, the National Council of Farmer Cooperatives, the International Dairy Foods Assn. and numerous other dairy groups that span states, regions and the globe.

Still, cooperatives can’t completely insulate anyone from disruption, according to the report, “but dairy is resilient, and cooperatives are fundamental to that resilience.”

Despite changing consumer tastes and never-ending, inaccurate campaigns against them, per capita U.S. consumption of dairy products last year was its highest since 1962, the report pointed out. Exports also continue to rise despite trade turbulence, and with potential new leadership at the U.S. Food & Drug Administration, NMPF is even more hopeful that a decades-long battle against milk imitators that inappropriately claim dairy product names will be resolved in the industry’s favor.

Yes, the Dean Foods bankruptcy is creating uncertainty for some producers, but seen from another angle, the report said it’s just another disruption the sector “will be able to withstand, due in no small measure to the strength of cooperatives and their dairy farmer-owners.”

That’s worth remembering, NMPF emphasized in the report, as disruption continues to challenge dairy.  “We’ve always been a much stronger industry when farmers have worked together. That’s true today, and it will remain true in the months and years to come.”

TAGS: Business
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