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EMPOWERING PRODUCERS OF FOOD & FIBER Friday, May 1, 2020 Volume 93, Number 18 CapitalPress.com MILK EMPIRE $2.00 Dairy Farmers of America Melvin Medeiros Sr., a farmer-member of Dairy Farmers of America, with his Holstein dairy cows in Laton, Calif. Pending merger of bankrupt Dean Foods and the Dairy Farmers of America co-op could transform industry By SIERRA DAWN MCCLAIN Capital Press L ATON, Calif. — When Melvin Medeiros, son of first-generation dairy farmers, was 9, a bull killed his dad. His parents, immigrants from the Por- tuguese Azores Islands, had saved for a decade to buy a small herd of cows. Medeiros’ mom, determined not to let the dream die, too, bought 38 acres in dusty Laton, Calif. When Medeiros turned 18, he recalls his mom handing him the dairy, saying, “You are now the next in line. Make it work.” And he did. After about 20 years as an independent, Medeiros joined a small cooperative — a mem- ber-owned organization that helped farmers mar- ket their milk. Then an opportunity arose to join Dairy Farmers of Amer- ica, the nation’s largest dairy cooperative. After switching, Medeiros heard rumors DFA didn’t look Melvin out for its producer-members. Medeiros Sr. “I lay awake many nights and thought, ‘I made the worst mis- take of my life,’” said Medeiros. But gradually, the organization won him over. DFA representatives were always available, he said. Milk checks were bigger. DFA’s transpar- ency, he said, disarmed him. And he felt as though he had a voice. Around 2010, Medeiros became a board mem- ber of DFA’s Western Council. He now sits on the corporate board of directors and continues farming. Now, Medeiros says he’s in favor of DFA’s biggest move yet: buying most of the assets of bankrupt Dean Foods Co., the nation’s No. 1 milk bottler, in the largest acquisition in Ameri- can dairy history. In April, DFA made a bid of $433 million to acquire most of Dean Foods’ assets and assume some of its liabilities. Dean Foods spokesperson See Milk, Page 12 Dairy Farmers of America A merger between Dairy Farmers of America and Dean Foods could impact hundreds of thousands of dairy farmers across the U.S., experts say. Coronavirus changing the landscape By CAROL RYAN DUMAS Capital Press Capital Press File Economist Dave Kohl says the coro- navirus outbreak could have a lin- gering effect on the economy. The coronavirus pandemic and the resulting shutdowns have turned much of agriculture upside down. While some disruptions will eventually settle out, others will have a lasting effect, an econ- omist says. “This black swan is a dirty bird, no doubt about it,” David Kohl, professor emeritus of agri- cultural and applied economics at Virginia Polytechnic Institute and State University, said in a webinar hosted by Northwest Farm Credit Services. “Black swan” is a metaphor used to describe the dispropor- tionate role unusual events play in the economy. “We’re going to lose some businesses. This one’s going to be tough, there’s going to be some casualties,” he said. But there are also broader implications for trade and politi- cal and economic agendas in the U.S. and abroad. For four of five decades, the U.S. has been moving toward globalization. Now it’s going to be moving toward decoupling or selective globalization. It already had a dry run in that direction with tariffs and sanctions. But now it’s going to start evaluating the sup- ply chain and moving toward a national, regional or North Amer- ican focus, he said. There will also be a lot of dis- cussion on optimization and effi- ciency versus diversification and resiliency, he said. “I think this event is really going to be a paradigm shifter,” he said. That’s also going to play out in political and economic agendas, whether it’s in the U.S., Europe, Germany or China, he said. Unlike the temporary shock of the 2008-2009 recession, he’s expecting an elongated reces- sion. The previous recession was caused by flaws in the banking and shadow banking systems and affected residential and commer- cial real estate centered in the coastal and “sand states” such as California, Florida, Arizona and Nevada. This recession is hitting everyone and has changed behav- ioral economics, he said. “Central banks in the U.S. and abroad cannot solve this alone. It’s taking monetary and fiscal policy combining to be able to do it,” he said. While shocks to the economy happen about every 10 years, this one is a super shock, he said. Unemployment claims in the U.S. See Coronavirus, Page 12 Dairymen dump milk as demand, prices fall By CAROL RYAN DUMAS Capital Press With a severe downturn in demand in restaurant and foodservice channels, dairy farmers nationwide are see- ing the value of their milk plummet in a year that was supposed to bring recovery. Processors and coop- eratives are putting strict limits on milk production, but farmers are still hav- ing to dump their product. And no area of the coun- try or segment of the indus- try can escape the massive downturn. Idaho dairy farmers are “really, really nervous, anx- ious, stressed” facing tremen- dous losses, Rick Naerebout, CEO of Idaho Dairymen’s PAT SUTPHIN, TIMES-NEWS/TownNews.com Content Exchange Ricky Jones, operations manager at Magic Valley Quali- ty Milk Transport, opens up the valve of a milk bulk tank April 8. Association, said. “The reality is the indus- try is going to lose dairymen in this downturn. It’s going to be severe,” he said. Milk has been dumped in Idaho almost contin- uously for the past two weeks. IDA estimates 700,000 pounds to 1 mil- lion pounds a day are going down the drain, he said. But it’s bound to get worse with the spring flush just beginning. That typically brings a seasonal increase in milk production of 10% March through July, bumped by better weather and more ani- mals calving, he said. Most Idaho processors already have base pro- grams in place to limit production, and they’re enforcing those limitations with very strict financial penalties. Sorento sent let- ters to its producers saying it will reduce its milk pur- chases by 10% beginning in May, he said. In addition, lost restau- rant sales for butter are hav- ing a negative effect on the cream market, and han- dlers are asking dairymen to reduce their rations to lesson cream, he said. “If they’re not dumping now, they’re going to be. There’s no value in that mar- ket,” he said. In a matter of three to four weeks, milk prices went from about $16 a hundred- weight — about the aver- age breakeven in Idaho — to $11 for May and June on the futures market. That will probably mean $10 or less on a producer’s milk check, down from $18 or higher, he said. See Dairymen, Page 12