Already the largest dairy cooperative in the U.S., leaders of Dairy Farmers of America (DFA) said the organization has higher aspirations.
“DFA aspires to be a global food company owned by and connected to dairy farmers,” said Randy Mooney, DFA chairman and dairy farmer from Rogersville, Missouri. “We want to build a cooperative that can address the challenges of the future, not just manage the challenges of the past.”
DFA, a national dairy marketing cooperative owned by more than 14,500 members on nearly 8,000 farms in 48 states, held its 20th annual meeting, March 20-22, in Kansas City, Missouri. The theme for this year’s meeting was “Real People, Real Dairy,” and DFA not only celebrated 20 years as a co-op, but also called attention to the current financial challenges facing many dairy farmers, including the loss of markets.
“While it’s too early to predict how 2018 will unfold, there’s more evidence to suggest it will be a very tough year than to suggest it will be a year where dairy farmers talk about profits. Milk prices are under pressure, milk premiums are disappearing and costs for fuel, labor and interest rates are all rising,” Mooney said. “Dairy farmers around the country continue to lose their markets, a situation that is worsening as we move into 2018.”
Twenty years of growth
Since the merger of four U.S. dairy cooperatives 20 years ago, DFA has grown to become the largest supplier of milk in the world. With 42 wholly owned dairy plants and financial interest in 34 others, it is also the fourth-largest global dairy foods company.
“DFA was created in 1998, with equal parts defense and offense,” Mooney said in his annual chairman’s report to more than 1,600 members and guests participated. “Defensively, we were reacting to threats of a changing business environment, and offensively, we were preparing for the opportunities emerging out of that new business environment.”
Mooney said some of the challenges facing dairy farmers 20 years ago remain, while new ones have emerged: fewer and larger farms; larger and more powerful customers placing production management, milk supply contract, market access, price and payment term demands on producers; globalization; regulations impacting food safety, labor, animal care and environmental management, all adding complexity, risk and cost; and market volatility.
Consolidation necessary
Mooney said these and other challenges are disruptive on a global stage. To thrive and remain relevant in that environment, Mooney repeated a theme he breached at last year’s meeting: The need for consolidation within the dairy industry, similar to the four-co-op merger that created DFA 20 years ago.
“Any realistic plan for our future relevance is that a dairy-farmer-controlled cooperative embracing what triggered our past success; the U.S. dairy industry needs to consolidate,” Mooney said. “Consolidation is necessary to catch up, keep up and be a leader among other global food companies. That will require more resources, plants, brands, people and capital to pursue bigger and bolder commercial investments.”
Currently, he said, many cooperatives are under the same financial pressures as their dairy farmer members. Consolidation isn’t just about mergers, but also going beyond “soft” cooperative models that crumble when times are tough.
He called for stronger commercial partnerships, putting aside old grievances. It will also mean aligning even more closely with Dairy Management Inc., the U.S. Dairy Export Council and National Milk Producers Federation (NMPF), said Mooney, who also serves as NMPF chairman.
“We can no longer be patient and wait for everyone to be 100 percent comfortable,” Mooney said. “The cost of inaction has been too high, a cost that has often been paid at the farm … at our kitchen tables by our dairy-farming families.”
Rick Smith, DFA president and chief executive officer, echoed Mooney’s remarks and tone regarding dairy cooperative consolidation, as well as consolidation and partnerships within the industry. DFA’s current and future commercial investment will be evaluated.
“We’re not wedded to things that don’t make sense going forward, so there could be assets we divest of, but we’re going to be a buyer with emphasis on growth,” Smith said. “We continually strive to remain competitive in our core business of marketing members’ milk, while also looking to grow and expand our commercial investments, which not only deliver profits to our farmer-owners, but also help ensure DFA remains financially secure.”
Commercial investments ongoing
DFA continued to grow its commercial investments in 2017, acquiring Cumberland Dairy, a family-owned processor of ultrapasteurized dairy products located in Bridgeton, New Jersey. Additionally, DFA expanded several facilities, including its plant in Middlebury Center, Pennsylvania, and its Dairy Maid Dairy plant in Frederick, Maryland, which resulted in a total capacity increase for the two plants of 650,000 pounds of milk per day.
DFA celebrated the opening of a new dairy ingredients plant in Garden City, Kansas. A partnership between DFA and 12 member farms in southwest Kansas, at full capacity the plant will receive about 4 million pounds of milk per day.
Additionally, DFA announced a joint venture partnership with Glanbia plc and Select Milk Producers Inc. to build, supply and operate a large-scale cheese and whey production facility in Michigan.
Progress continues on the second phase of a western New York premium cheddar cheese facility, a joint venture with Denmark-based Arla Foods and eight DFA farmer-owners in the local area.
To gain a stronger toehold in global markets, DFA is opening a satellite office in Singapore, a move that may eventually lead to an innovation and application lab to work with international customers in the region.
Year in review
DFA officials reported net income of $127.4 million for 2017, based on net sales of $14.7 billion for 2017, compared to $13.5 billion in 2016. The increase is due to unit sales growth, as well as higher milk prices compared to 2016.
In 2017, DFA directed the marketing of 50.2 billion pounds of member milk and 64.4 billion pounds of milk for both members and others, representing about 30 percent of the total U.S. milk production. Both volume and the percentage of U.S. milk were up from the year before. The number of member farms increased from 7,938 in 2016 to 8,551 in 2017.
The U.S. annual average all-milk price was $17.63 per hundredweight (cwt) in 2017, compared with $16.30 per cwt in 2016. The average 2017 price DFA paid to members was $17.57 per cwt, compared with $16.22 per cwt in 2016.
Moving forward, DFA’s leaders said the co-op’s diverse membership gives the organization flexibility, resilience and strength. By quartile, about 25 percent of DFA milk supply comes from each of four distinct groups by herd size:
• 115 herds with 3,491 cows or more
• 232 herds with 1,764 to 3,490 cows
• 604 herds with 478 to 1,763 cows
• 7,448 herds with 20 to 477 cows
Other presentations
The annual meeting stage was shared by several DFA partners:
• Siobhán Talbot, group managing director at Glanbia plc, discussed the company’s global strategies, including joint ventures with DFA.
• Tim Brown, president and chief operating officer at Chobani, providing insights into the brand’s commitment to providing better food for more people.
• An overview of the latest dairy promotion activities was presented by Tom Gallagher, DMI chief executive officer.
2018 Members of Distinction
Dairy farm families in each of DFA’s seven regions were recognized as 2018 Members of Distinction. They included:
• Central: Styer family, Alfalawn Farm – Menomonie, Wisconsin
• Mideast: Gibson family, Ky Bluegrass Genetics – Eminence, Kentucky
• Mountain: Bateman family, Bateman’s Mosida Farms – Elberta, Utah
• Northeast: DiNitto family, DiNitto Farms – Marcy, New York
• Southeast: van Dieden family, Van Dieden Dairy – Winnsboro, Texas
• Southwest: Wood family, Sherwyn Wood Dairy – Stephenville, Texas
• Western: Perazzo family, Perazzo Brothers Dairy – Fallon, Nevada
Finally, the cooperative named 45 recipients of DFA Cares Foundation Scholarships totaling $57,000. Scholarship selection criteria included a commitment and passion for a career in the dairy industry, extracurricular activities, awards and work experience, and academic achievement. 
PHOTO 1: DFA chairman and dairy farmer Randy Mooney spoke at DFA's 20th annual meeting, March 20-22, in Kansas City, Missouri.
PHOTO 2: Rick Smith, DFA president and chief executive officer, also spoke at the annual meeting. Photos courtesy of DFA.
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Dave Natzke
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