Dairy merger gives farmers new hope
ST. ALBANS — A large group of local dairy farmers who voted to merge their Vermont milk marketing and processing cooperative with a national competitor are now waiting to see if the move will pay off.
Their hope is that the bigger operation will enable Vermont farms to send more dairy products into the international markets to create greater stability for co-op members after years of depressed bulk milk prices.
Representatives of the St. Albans Cooperative Creamery’s roughly 360 member farms late last month voted to authorize a merger between the independent cooperative and Dairy Farmers of America (DFA), which represents more than 8,500 dairy farms in 48 states. The merger closed on Aug. 1.
“The number one goal with the merger was to protect the equity our members have invested in our cooperative and we’ve done that,” said Harold Howrigan Jr., who served on the St. Albans Co-op board for 10 years and oversaw the deal as St. Albans Co-op board president at the time of the transaction.
Of the St. Albans Co-op’s 307 voting members, 108 participated in the merger election. The motion passed, 99-9.
Of the 102 dairy farms the University of Vermont Extension listed in Addison County as of July, 62 were members of either DFA or St. Albans Cooperative Creamery.
The merger comes after five years of low milk prices across the Northeast. According to the most recent USDA Census for Agriculture, the number of working dairy farms in Addison County declined from 140 in 2012.
According to Howrigan, the cooperative had been seeking to partner with a larger company for some time.
“We were looking for a partner that had a larger market presence and also a presence in the export market, which is so important to dairy and all of agriculture today.”
The cooperative, which celebrated its 100th year of operation in 2019, had been a cooperative member of DFA since 2003. Through that relationship it enjoyed marketing services through the company’s Dairy Marketing Services program but maintained complete control over its St. Albans processing facilities and the marketing and sale of its milk products.
According to data from the U.S. Dairy Export Council, exports accounted for approximately 15.8 percent of the liquid milk produced domestically in 2018, a $5.59 billion value. It’s the cooperative’s hope, says Howrigan, that DFA’s robust international marketing reach will allow it to better move Vermont farmers’ milk into those export markets than the co-op could alone.
Tariffs imposed over the last two years by foreign markets in response to actions by the Trump Administration have had a big negative effect on Vermont dairy farmers, according to Howrigan.
“Here in Vermont, we’re all in a global dairy economy now. We are being hit hard with this tariff business and the last four to five years have been very tough,” he said. “When global trade is disrupted, it affects all of us very quickly. When that perishable product backs up, we feel it very quickly on the farm level.”
To safeguard against such backups, the St. Albans Cooperative Creamery invested early in infrastructure that processes cream and skim condensed milk and that dries milk into powder at its St. Albans plant. According to data from the U.S. Dairy Export Council, 67 percent of the powdered milk produced in the United States was exported in 2018, with the biggest market being Mexico.
Howrigan said that, as a small regional creamery, the St. Albans Cooperative at times struggled to accommodate all of the milk its members produced at its plant.
“If a winter storm shuts down the highway, that milk has to come home. Customers may shut down, but producers keep producing. I think we were like many of the milk plants in the Northeast in that we pretty much run at capacity,” said Howrigan, whose Sheldon dairy farm has been a member of the St. Albans Cooperative since 1973.
Expansions and efficiencies were identified to accommodate the roughly 3 million pounds of milk the co-op markets to customers across the Northeast each day, but, with milk prices consistently low, the company’s resources were not sufficient to make the needed investments to expand its market reach and to process and deliver milk more efficiently.
Howrigan and co-op leadership are hopeful that access to DFA’s 46 plants nationwide will help the organization move Vermont milk into the market more quickly, maximizing pay for farmers. “They’ve invested in fluid plants in the Northeast and elsewhere over the last six years and are constantly innovating when it comes to class I, II and III — things we didn’t have the resources to invest in,” Howrigan said.
According to Vermont Secretary of Agriculture Anson Tebbetts, DFA has already committed to investing $30 million in the cooperative’s creamery facility in St. Albans. Tebbetts says DFA leadership plans to invest another $5 million in McDermotts Trucking, the St. Albans Cooperative’s milk hauling and delivery arm.
“Under the old scenario, the cooperative could not go back to dairy farmers to ask for such an investment. I think that’s a strong indication that they are committed to Vermont. It signals to the dairy industry that they think it’s viable and relevant,” Tebbetts said this week.
Howrigan described the cooperative as in the midst of a 16-month transition period. The cooperative’s seven former board members are working with DFA to streamline cooperative programs with the new company’s policies “in a way that gets the most advantageous outcome for the farmer.”
DFA uses a regional governance structure to give local decision-making power to its 8,500 member farms nationwide. The former St. Albans Cooperative member farms will now be part of the Vermont district within DFA’s Northeast Council, a body of about 25 elected representatives from the Council’s 15 districts, who meet in Albany, N.Y. Currently, the seven former members of the St. Albans Cooperative Creamery board serve on the council, and two have voting power. Once the transition period is over in fall 2020, member elections will be held for those voting positions.
“Vermont will have at least three representatives on the council,” Howrigan said.
In the past, Dairy Farmers of America has faced legal scrutiny for its pricing practices. In late August 2018, DFA paid an average of $4,000 to nearly 9,000 farms across the Northeast to settle a 2009 class action lawsuit that accused the marketing group of trying to drive down milk prices, according to the Associated Press.
Howrigan said the lawsuit didn’t weigh heavily in the co-op’s decision to merge with DFA, adding, “That was a sad case there of farmers suing farmers.”
Tebbetts said farmers are fully aware of the issues of this case.
“People in public policy will continue to monitor the new situation and make sure that farmers are protected,” he said.
Former St. Albans Co-op member Jonathan Connor of Addison says he hopes DFA will continue St. Albans Cooperative Creamery’s legacy of listening to and prioritizing the needs of its small member farms.
“They were really fair to us… Unlike a lot of other cooperatives, they really seemed to work for all of the members and not just the large farms,” said Connor, who sold his 100-cow dairy herd this past February.
So far, the county has lost five farms in 2019, according to data from the University of Vermont Extension.
“As a dairy farmer, our family’s been milking cows a long time,” Howrigan said. “We have a generation behind my brothers and I and this gives us a sense of market security going forward. I think we’re fortunate to be partnering with a larger cooperative with more brands, reach and resources.”
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