Dairylea announces proposed merger with DFA

Dairylea Cooperative, Inc.’s Board of Directors has voted to merge with Dairy Farmers of America (DFA). The merger proposal – presented to members at Dairylea’s Annual Meeting, Oct. 16, in Syracuse, N.Y. – requires approval by Dairylea’s members, who will be asked to vote during a special meeting in February 2014.

A series of member informational sessions will be held between Nov. 19 and Dec. 5, 2013, throughout the Northeast and will provide members with a comprehensive overview of the proposed merger and a more detailed explanation of how voting will be conducted. Members of the Dairylea Board and management team will be in attendance to help answer questions.

Dairylea members may cast their vote one of two ways: 

• By attending the special meeting of members on Feb. 5, 2014; or 

• By completing and returning a proxy card. In order for a vote by proxy to count, the completed proxy must be received no later than 5 p.m. on Feb. 5, 2014. 

“Today’s dairy industry is undergoing unprecedented change,” said Greg Wickham, Dairylea’s chief executive officer, in announcing the proposal. “From consolidation in the marketplace and changing farm demographics to a movement toward a global dairy industry, this change presents both challenges and opportunities.” 

Dairylea’s producer board spent the past three years in a comprehensive examination of how to best position Dairylea’s members for the future. This effort involved soliciting member input and guidance from the “2020 Group,” a committee formed in 2010 to gather ideas on generating value beyond the traditional cooperative structure. Among many topics, the group explored how to create market opportunities for its members that peer cooperatives with investments in processing are attaining.

The group concluded that while Dairylea enjoys a strong balance sheet and many stable milk marketing contracts, the success that peer cooperatives have achieved through commercial investments is not realized through Dairylea’s traditional cooperative structure. To generate greater returns for Dairylea members in today’s environment, provide more tools and options designed to help farms increase productivity and returns, and further insulate them from the direct impact of price volatility, the group recommended a number of options.

Among these options were recommendations for Dairylea to invest in its own commercial businesses or to partner with an entity already deriving value from these investments. When considering a future for Dairylea, the Board of Directors and management team identified a clear option: seek a national partner that can complement Dairylea’s capabilities and resources in a way that provides the most flexibility and value for its members.

DFA is a national cooperative with a global footprint and expanding commercial investments in processing. The merger provides Dairylea members the immediate opportunity to invest in plants, brands and the processing side of the business that generates value for farms. Additionally, the diversity of DFA in its commercial business and throughout the dairy chain enables Dairylea members to participate in the value chain closer to the consumer, which serves many business purposes. 

“Ultimately, the Board determined merging with DFA, already a longtime partner in Dairy Marketing Services, would best complement Dairylea’s capabilities and resources, while securing flexibility and increasing value for our members,” Wickham said. 

Since 2002, Dairylea has been a member cooperative of DFA, a national cooperative with a global footprint and expanding commercial investments in processing built around the same core values as Dairylea. Although this relationship has enabled both cooperatives to achieve efficiencies in the assembly, transportation and marketing of milk, this status has not allowed Dairylea’s members to share in DFA’s profits.

According to background information provided by Dairylea and DFA, the merger will provide Dairylea members immediate access to growing national and international milk markets, as well as immediate investment in a national cooperative with a strong network of plants and brands that generate ongoing patronage dividends, tax benefits and other benefits.

Current milk marketing agreements members have with Dairylea will automatically be assumed by DFA, and no significant changes are expected for the milk check process.

The same suite of Farm Services, such as insurance, lending, milk price and margin risk management services, business planning and consulting, purchasing programs and information management, will continue to be available, and these will continue to gain momentum as a result of combined resources.

Field representatives and other support staff specifically focused on the Northeast will continue to be based in Syracuse, N.Y., as they have been.

Hauling will continue unchanged.

As members of DFA, current Dairylea members will continue to have access to more than 50 different milk marketing options in the Northeast (depending where they live), as well as the national and international network of a global cooperative. For this reason, it is anticipated that the merger will create more opportunities to bring members’ milk to a competitive marketplace. 

Current member organizations such as Cortland Bulk, Mt. Joy and Oneida Madison will each have an option of marketing their milk through DFA as a non-patronage member of DFA, or through a marketing agreement with DFA or Dairy Marketing Services (DMS).

While the ownership structure of DMS will change (DMS is currently a joint venture among Dairylea, DFA and St. Albans Cooperative Creamery, Inc.; Dairylea’s one-third ownership will be assumed by DFA), DMS will continue to bring together milk marketing and transportation logistics for members throughout the region as it has in the past. 

The merger provides DFA members with long-standing customer relationships in the Northeast marketplace, enhanced Farm Services and expanded access to capital to facilitate strategic growth. 

If approved, six seats will be added to DFA’s Board of Directors to represent expanded membership in the Northeast, and DFA’s Northeast Area Council will maintain local governance and a grassroots structure familiar to Dairylea members.

“In many ways, a merger with DFA is simply a continuation of the working relationship that Dairylea has forged with DFA during the past 12 years,” said Rick Smith, DFA president and chief executive officer. 

 

About Dairylea

Dairylea Cooperative Inc. is a farmer-owned agricultural marketing and service organization with more than 1,200 member farms across the Northeast. Dairylea is a premier milk marketing organization based in the region, selling more than 6 billion pounds of raw milk annually through an extensive milk marketing network. Its goal is to maximize net returns at the farm by preserving and enhancing milk markets and milk marketing relationships, and by providing services and programs that create real value for its members.

 

About DFA

Dairy Farmers of America (DFA) is a national dairy marketing cooperative that serves and is owned by more than 13,000 members on more than 8,000 farms in 48 states. DFA also is one of the country’s most diversified manufacturers of dairy products, food components and ingredients, and is a leader in formulating and packaging shelf-stable dairy products. For more information, call 

1-888-DFA-MILK (332-6455) or visit www.dfamilk.com