Dean Foods bankruptcy could lead to milk monopoly

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The ongoing bankruptcy of U.S.-based fluid milk processor Dean Foods is raising some concerns in the dairy industry.

With one suitor being Dairy Farmers of America (DFA), there are worries of a monopoly being created that would violate American antitrust legislation.

Well-respected dairy journalist Pete Hardin, editor of the Milkweed in Wisconsin whose monthly publication supports itself through subscriptions, has raised specific concerns backed by hard data.

The “hurry up and shut up” approach by DFA lawyers in the Houston courts to turn over Dean Foods assets to them has potential ramifications, said Hardin to Ontario Farmer.

In a recent posting to his subscribers Hardin pointed out that combining DFA’s present marketshare with Dean’s means that over 80 per cent of the milk bought in southern New England would be DFA milk.

The percentage under DFA control would also be 65 to 70 per cent in Chicago and partway into Wisconsin, and 80 per cent in the Minnesota area, said Hardin.

Yes, Canadian farmers are in a total monopoly and are happy about it, agreed Hardin. “But the Canadian model separates the marketing boards buying the milk and your big three processors,” he said. “At least you have three and the marketing boards don’t own bricks and mortar plants processing milk.”

One has to understand and follow American farm banking to know the real reason for the rush by DFA to get all this settled, said Hardin.

A late 2018 banking report by American Farm Credit showed Dean Food’s had borrowed money from 17 different financial institutions, with seven of the major ones being under America Farm Credit, said Hardin.

The Farm Credit system also has huge loans to DFA and to individual farmers, he pointed out. These Farm Credit dollars “have been lent out three times as collateral for the same milk,” said Hardin.

“When I was in the infantry they told us not to bunch up, but it seems that agriculture lending, especially dairy, has done so,” he said.

Added to that, the second biggest ag lender in America, Rabobank, has come up with emergency funds for Dean Foods to keep operating in the short term, said Hardin.

“Is it any wonder that all concerned want to sweep this pile of debt under DFA’s rug, and then pray?” asked Hardin.

Also on the Farm Credit front, there are major weather-related stressors in cash cropping and beef, such as wet corn being harvested in Wisconsin and through the Corn Belt, he said. The overall result is “we’re going to see a shortage of milk and so far higher milk prices to farmers,” he predicted.

Of the 60 or so Dean plants operating today, some are profitable money-makers, “and some are real dogs,” said Hardin.

Dairy processing in the United States is going through some major restructuring with even “Agropur making enquiries to sell their American cheese operations, and there are some very interesting, potential buyers,” said Hardin.