April 1 is date for pending Dairylea-DFA merger
By SHERRY BUNTING
Special for Farmshine
EPHRATA, Pa. – “Getting closer to the end product,” that’s how New York dairy producer David White, vice president of the Dairylea board, described the pending merger of Dairylea with DFA (Dairy Farmers of America) set to occur April 1 if passed by Dairylea membership Feb. 5.
White and Greg Wickham, CEO of DMS, talked about the merger at membership meetings held by Dairylea affiliate Mount Joy Farmers Cooperative this week in Lancaster and Perry counties, Pennsylvania.
At the meeting in Ephrata on Monday, Jan. 20, White said the merger is a good move for members because it brings brands, plants and end products back to Dairylea while maintaining the values, strategic goals and vision of the organization. White stressed that after “looking around the country at other options, a merger with DFA met all four criteria set forth by the Dairylea board to get closer to the consumer by merging. This merger makes sense because we share strategic goals, our values align, our missions are similar and our vision is the same.”
That’s no surprise, really, because Dairylea has been a partner with DFA – jointly operating DMS -- since 1999. Furthermore, the current CEO of DFA – Rick Smith – was the former CEO of Dairylea.
“We’ve maxed-out the synergy of our relationship,” said Wickham. “We identified goals to help our members participate in brands and plants and in the international dairy economy. Things are changing that require us to have a bigger critical mass or size to find the best ways to meet our goals.”
Wickham also talked about business cycles. “Dairylea / DMS is at the top of that cycle and at the point of needing to reinvent itself or run the risk of slipping. Our board voted to do this merger, and we think the mood of our membership will ratify it,” he said confidently noting that half the total membership has voted so far by mail-in ballot, but that the results will not be announced until Feb. 5 at the Dairylea membership meeting in Syracuse – when additional votes can be cast in person.
“Closer to the consumer is where we want to be, but it doesn’t come without risk,” White told the more than 200 Mount Joy members in Ephrata Monday. “It has been 30 years since Dairylea has had its own plants. We didn’t want to start that process from scratch. We believe this merger helps us maintain a strong dairy industry in the Northeast.”
Wickham answered additional questions after Monday’s meeting. In short, both White and Wickham noted that the merger would mold two voices lobbying in the nation’s capital into one.
But since DFA is a national cooperative with regional councils -- and the number of national board seats a region has is based on the number of pounds of production from DFA members in those regions -- one has to wonder how strong the Northeast dairy voice will be. Will the merger really give the Northeast a stronger voice once Dairylea and its three affiliated cooperatives (including Mount Joy) officially becoming part of the national DFA organization?
Mount Joy President Don Risser currently serves on the Dairylea board. If and when the merger with DFA is implemented, Risser would be on DFA’s Northeast Regional Council but not on the DFA national board.
“The DFA regional council and Dairylea board meet together now, so they know each other and have worked together,” explained Wickham. Dairylea currently has two people on the national DFA board. After the merger, Dairylea will have six on the board, increasing the Northeast region’s seats on the DFA board to 11 or 12 out of 48 to 55 – numbers Wickham admitted are not fully set for the long term.
Because Mount Joy, Oneida-Madison, and Courtland Bulk would still be affiliated co-ops and their member-farms would not be full members of DFA, their pounds of production would not count toward the pounds governed by the Northeast Regional Council, which then determines the number of board seats that region gets on the national DFA board.
Risser stated in his remarks that the Dairylea board has been working on this merger for three years. He also acknowledged that in a global marketplace, most companies are consolidating. He said the merger comes from the desire to follow the milk to the consumer and to participate in the global market.
Affiliated cooperatives, like Mount Joy, will continue to have access to DFA services, but DFA will not set their milk price to their members.
“It will work just like it does now with Dairylea. We set a pay price in Syracuse for our members. The affiliated co-ops negotiate a price with us and then they decide how to distribute those dollars to their members,” Wickham explained. “Those (affiliated co-op) members also do not have equity investments, but they will pay dues as they do now, and they will continue to have access to DFA services.”
In the voting process, the three affiliated co-ops each have one vote for their entire co-op out of the total 1210 Dairylea members that are eligible to vote. Individual members of affiliated co-ops do not have individual votes on the merger because they do not hold equity investment positions in Dairylea.
“This is a way for small co-ops like Mount Joy to have access to the services of a bigger organization, while still maintaining their own local identity,” he added.
Asked how the Dairylea board considered other merger options besides DFA, Wickham explained that the board felt a responsibility to “go through the motions” without actually submitting paperwork. “Yes, DFA is the logical choice, but we first envisioned how other choices would look,” said Wickham. “We went through the x-y-z process and did our best to model what it would look like.”
In the end, DFA’s equity program, concentration of cows in the region, DFA brands and plants as well as their farm services and governance gave the Dairylea board the green light to pursue their “logical choice” with whom they’ve partnered for over a decade.
“Consumers like to see farmer-owned brands,” said Wickham. “Their response to these brands is positive. Dairylea could not go that route without taking a long time starting from scratch. We decided to, instead, take our capital and put it with DFA in growing their plants.” He mentioned the global powder plant DFA is building in Nevada as an example, confirming it will begin processing sometime this year.