When Supply Outpaces Demand the Dairy Landscape Changes
For decades, producers have grown their herds as an avenue to make more money. However, the days when more cows equaled more profit might be in the rearview mirror. Around the country producers are struggling to make ends meet with the milk price. At the same time, processing facilities are full, and dairy product manufacturers are swimming in excess supply. This paradigm of overproducing demand and expecting to stay profitable has to come crashing down at some point. We might be seeing the beginning of that.
This week, some producers in the Northeast were caught off guard when learning that the National Farmers Organization (NFO), a national cooperative with many members in the Northeast, and Dairy Farmers of America’s (DFA) Dairy Marketing Service (DMS) were parting ways. What’s ironic though, is that NFO was notified of the contract termination on November 21, 2016 and shared that information with their members. DFA gave NFO one year to figure out how and where to market patron’s milk and on December 1 of this year, NFO will be on their own.
According to Brad Keating of DFA, the landscape in the Northeast is changing.
“We’ve lost some markets that have closed their plant or sold it to other cooperatives,” he says. “As we lose the demand, we have noticed with some cooperatives that we don’t have the availability to market their milk based on the fact that we don’t have the sales to market them anymore.”
While NFO seems to be getting the most attention, it isn’t the only cooperative no longer part of DMS. Keating says other small cooperatives were notified that contracts would be terminated and are seeking other marketing opportunities.
“We’re trying to help people transition into new milk marketing realities,” he says.
Despite the rumor, DFA is not dissolving DMS. Keating says NFO and DFA parting ways is simply a function of supply exceeding demand. I anticipate we’ll see more of that across every state and in every cooperative in the months to come.