International Dairy Foods Association (IDFA) and National ...



The following information is meant to provide you context about topics that will likely arise at the USDA/DOJ workshop on dairy. Allegations publically levied against DFA are largely by a vocal minority of anti-DFA producers and self-proclaimed farm advocates. Our industry peers and members like you support us. To help you in your defense of your cooperative, we believe it is important that you understand how your Cooperative answers the claims against us. Of course, you will want to use this information to present your story in your own words.

About DFA:

1. DFA is a milk marketing cooperative created by and operating for dairy farmers of all sizes. We are more than 9,500 family farms, the majority of which are dairies under 100 cows, some of which are multi-thousand cow dairies … nearly all are family farms.

2. A grassroots structure ensures the voices of DFA member-owners are heard and that the cooperative is guided by its member-owners.

3. DFA is national in scope, which makes it the largest milk marketing cooperative in the country. However, in marketing just 33 percent of the milk in the nation, DFA does not control the market.

4. The Capper-Volstead Act serves a critical function for DFA’s dairy farmer members, and this protection needs to be afforded to cooperatives of all sizes.

Owned and Operated by Dairy Farmers

➢ DFA is a national milk marketing cooperative with a grassroots structure that provides for member representation from a local district level to a 51-member dairy producer Board. These leaders are elected by members from each of DFA’s seven Areas and are responsible for guiding management and establishing the policies and business direction of the Cooperative. This governance structure ensures grassroots representation and leadership by the dairy farmer owner-members of the organization.

➢ Our stakeholders are not on Wall Street. They are family farms across America that are diverse, ranging in size and scope from small, 25-cow Amish dairies in Lancaster, Pa., to multi-thousand cow family farms in California.

o Nearly 17,000 dairy farmers across the entire United States have chosen to become members of DFA – in the state of Wisconsin, DFA has more than 1,000 members milking more than 125,000 cows. This means they invest in this Cooperative, make decisions for the Cooperative and benefit from the Cooperative’s success.

➢ Dairy farmers belong to cooperatives for a number of reasons, but at the core they believe that by going to market together, as opposed to individually, they are able to gain market access and, thus, financial security. This is the core of DFA’s mission (just like the mission of our fellow cooperatives).

Cooperative Choices

➢ There are approximately 55,000 dairy farms in this country. Of these, approximately 80 percent belong to a dairy cooperative. DFA is one of many milk marketing cooperatives. In this state and across the upper Midwest, farmers can choose from a number of cooperatives, including Land O’ Lakes, Associated Milk Producers, Inc. and Foremost Farms. There are many more cooperatives throughout the United States (AgriMark; Maryland-Virginia Milk Producers Cooperative Association; Southeast Milk, Inc.; Michigan Milk Producers Association; Select Milk Producers, Inc.; California Dairies, Inc.), which means there are many choices for farmers.

➢ We respect the right of dairy farmers to not join DFA or any other cooperative. All farmers should have the right to market their products as they see fit — whether individually or in groups through cooperatives. The cooperative model, including DFA’s, is based on voluntary membership and shared objectives.

National Footprint

➢ Most cooperatives are regional. DFA is national in scope and has nearly 17,000 voting members on 9,500 farms. This makes DFA the largest milk marketing cooperative in the United States.

➢ DFA members produce just 20 percent of the milk marketed in this nation. In total, when counting the milk of independent farmers, DFA markets 33 percent of this nation’s milk.

➢ The U.S. dairy industry operates in a global marketplace, where we compete against cooperatives such as New Zealand’s Fonterra, which enjoys a 96 percent market share.

➢ In many of the nation’s top producing dairy states, DFA member production represents a fraction of the milk in that state. DFA is not the leading marketer in any of the top five states:

State Market Share Rank

California 14 percent 2

New York 8 percent 4

Pennsylvania 14 percent 2

Vermont 16 percent 3

Wisconsin 10 percent 3

➢ Our scope and our strength in numbers does not make us any less focused on our member-owners. In fact, now, more so than ever, DFA is focused on its member-owners — and has been fighting relentlessly to assist them during this troubling time in the industry.

DFA’s Formation

➢ DFA was formed 12 years ago by four regional cooperatives whose farmer-leaders realized that to effectively compete in a world where retailers and processors were consolidating, so too should dairy farmers.

➢ It was believed, and we still believe today, that there is enormous potential realized for farmers when working together. By combining assets and resources under one name and vision, more efficient and dynamic opportunities could be realized for farmers.

Business Model

➢ Market milk, pay a competitive price for that milk and deliver value. That’s what dairy farmers expect when they join a cooperative. And we do that, but it’s not enough. So, we do more.

o We assemble and market milk in the most efficient manner possible. From comingling milk and working to decrease the production costs associated with this commodity product, to securing supply contracts that assure a secure market and competitive price, we work hard to bring the maximum price for milk to our member-owners. And we work to ensure dairy policy works for, not against, America’s dairy farmers.

o We invest in plants and products that bring returns to our members. Farmers (not just dairy farmers) have long recognized that they can financially benefit if they not only produce on the farm but also participate in the process that manufactures and delivers product closer to the ultimate consumer. Some widely recognized examples of success in vertical integration includes beet growers making sugar; cranberry and organic growers making juice (Ocean Spray, Florida Natural); and almond growers selling their products (Blue Diamond).

o In dairy, Land O’ Lakes makes butter; AgriMark makes cheese and butter; Darigold makes cheese, butter and powder, etc. DFA makes cheese and dairy ingredients, and has investments in bottling operations. Having downstream processing participation requires capital. To make sure no one farmer has exorbitant capital tied up, a cooperative made up of many members can afford to pool funds and limit risk at the individual farm level, but still move its product closer to the consumers.

o We offer programs and services that help to enhance profit margins on the farm. In addition to field services and communications designed to assist members in their daily decision making, DFA offers members the ability to maximize their profit margins through its Farm Services Division. We offer producers health insurance and workers’ compensation, farm inputs and supplies at discounted rates, loans and lease programs for cattle, feed and equipment, price risk management programs and energy audits, among other services.

o We provide a legislative voice. There are a number of instances where dairy farmers are asked to weigh in on various aspects of dairy policy, e.g., how Federal Milk Market Orders are administered. Cooperatives can and do provide a forum for discussion and consensus on these issues.

Customer Agreements

➢ Full supply contracts are smart business. If a processor wants to build a plant, they want to be sure they have a supply of raw material readily available. As a milk marketer, we want to be sure we have secure markets for our members’ milk and that our members are guaranteed a competitive price for that milk.

Capper-Volstead Act

➢ The ability to join and operate as a cooperative is afforded to dairy farmers by the Capper-Volstead Act, also known as the Cooperative Marketing Associations Act, adopted by Congress in 1922.

➢ It provides limited anti-trust protection to farmers across the nation and allows them to come together with a shared mission to market, price and sell products through cooperatives, which is invaluable to the success of the dairy industry.

➢ Today, Capper-Volstead continues to serve a critical function for dairy farmers. By working together, producers not only create cost-saving efficiencies, they also have a united voice that speaks for the greater good of the industry.

➢ Put simply, without the protection of Capper-Volstead, individual farmers could not compete in an increasingly consolidating business world — they lack the bargaining power necessary to do so.

➢ As DFA members, farmers retain personal ownership by operating their farms individually – but through the Cooperative they are able to take advantage of services designed to create cost-saving efficiencies and maximize profit opportunities.

➢ DFA urges continued support for the right of producers to join cooperatives. Members of Congress should contact the DOJ and USDA to voice their support of the cooperative structure and the producers who benefit from it.

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CONFIDENTIAL

FINAL

06/16/10 – 3:30 p.m.

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