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The dairy supply chain pushed consolidation

Maggie Filles, Kansas Dairy Farmer

May 20, 2021

It’s a push that has occurred up and down the chain. It has been driven by national and international brands that have been on the search to find more global suppliers.

“Consolidation has certainly had its impact on the dairy markets. You may remember when we began to see Suiza and Dean’s Foods begin to gobble up plants and ultimately merge into a single organization of Dean’s, and now that’s part of Dairy Farmers of America (DFA),” the University of Wisconsin-Madison’s Mark Stephenson commented during the May 19 Hoard’s Dairyman DairyLivestream. “They were motivated to do that because they saw the consolidation occurring in the retail segment.

“So, they felt the need to become bigger bottlers and processors. Of course, then you had co-ops looking at that and thinking, ‘If we’re going to be supplying milk to these processors, we need to have milk suppliers across the country as well,’” he continued.

The consolidation has aligned with changes on dairies as well. In particular, farms that have had the opportunity to embrace economies of scale and grow have done so as well.

Does that change co-op effectiveness? As farms have grown and changed it has spurred the question, do co-ops still matter? FarmFirst’s Jeff Lyon would argue that while their role has changed in some cases, they are still very much relevant.

“Part of it is a person’s thoughts and beliefs in cooperative business regardless of the changes in the sizes of operations,” he explained. “I come from a strong background of cooperative business and belief in it. It’s part of farmers working together to get stuff done. In our case, it’s supplying different people and processors, with milk.”

For Lyon, that cooperative mindset extends beyond the size of the farm to what the co-op can do to help each type optimize their markets and succeed.

“It’s a belief in the cooperative business model as being a successful model, and it’s proven to be very successful regardless of the size of operation,” he concluded.



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