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Letters to the Editor: A note to DFA, current dairy crisis

Published on 14 May 2010

Tell us what you’re doing, DFA

Editor’s note: The following letter was sent to Progressive Dairyman as a carbon copy of a letter sent to DFA management by Gary Genske on behalf of California DFA members.

As your executives and field representatives have met with many producers recently, we are sure that much negative feedback has made it back to those of you involved in upper management of our marketing co-op.

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There is a real sense of urgency and grave concern among producers nationwide relating to milk pricing issues that threaten to destroy our industry. The tragic situation of producers being forced to accept milk prices below costs of production for extended time periods has literally financially destroyed many individual dairy producers and continues to threaten those of us who continue to hang on hoping for relief.

We do not believe that it has to be this way. As producers, we have encountered many management challenges in running our dairy businesses. We wish to address the low milk prices based upon our extensive study of the situation, along with consideration of our management experience in dealing with employees and “human nature.”

Waiting for the federal government to do something to alleviate the problem is not an option. That would only result in more losses of money and control. We still have some control over our own destiny, and that is what we must act upon, not some promise from some politician or bureaucrat for some vague relief in the future. There is no time for that approach. There is no bailout or program that does not carry a huge price tag in the form of lost options and lost liberty. We do, however, as co-op owners, have the right to direct your actions and provide input concerning your performance of your job duties as employees of DFA.

As your employers, we are requesting additional information about our co-op’s finances and transactions and we are providing some guidelines we want you to follow in the marketing of our milk.

1. We need to know how our co-op executives are paid. What is the complete compensation package of the top 25 DFA executives? Please include the basis and rationale for each compensation package. Please specify the exact figures paid out and include itemizations for health insurance, pension funds, co-op retains and bonuses. If bonuses are paid out, upon what parameters are they based? Are you receiving more compensation for more hundredweights moved?

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Do you receive any payments from any affiliates, subsidiaries or other organizations or individuals? In light of the serious breaches of financial trust in the past, we feel an acute need for complete transparency of all financial transactions of the co-op, and we believe that all records and any co-op business documents or statements of policy should be readily available to any member upon request at any time.

2. Based on our observations of your performance, we do not believe that you are being compensated in a way that works to increase milk prices to producer members but in a way that benefits each of you personally. We believe that until your compensation package reflects the goals of the producer members, we will not be able to consistently receive proper compensation for our milk. Has anyone in your organization taken any pay cuts reflective of the financial health of our producers?

We feel that any executive compensation package should be based on the long-term milk price received by the producer and in no way connected to hundredweights moved or marketed. Your performance to date would indicate that this is not currently the case. If many more of our DFA producers are forced out of business, or decide to leave the DFA co-op, many jobs will be lost, including many management level positions at DFA.

3. We believe that a huge opportunity exists, in a patriotic way, to promote and market wholesome dairy products produced in the USA, not only for dairy food safety reasons, but also with consideration for the high standards of cleanliness, sanitation and animal care that producers strive for in this country. Imported dairy products or milk protein concentrates or casein are produced under conditions outside our regulatory oversight and with very little scrutiny.

The incidence of adulteration or addition of a substance like melamine would be very unlikely to occur in this country. The risks posed to our domestic market by DFA or DFA’s joint venture affiliates or vendors importing of any dairy products or dairy-based proteins is unacceptable. Further, because of the supposed “oversupply” you refer to frequently, the idea of importing MPCs from China or any other countries, we find especially egregious.

If there is indeed demand for MPCs and various milk proteins, why aren’t we producing them here in this country? We believe that a huge marketing opportunity is being missed. Also, logically, we believe that our co-op should be involved in producing and marketing many of the specialty cheeses and other specialty dairy products that are currently being imported from other countries.

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We should offer domestically produced items in every category to compete with imports and use up any “extra” milk on the market that drags down our price. We absolutely cannot continue to produce and sell cheap surplus milk! Please disclose, in writing, any reason or justification for the importation of any dairy products or proteins by a co-op as big and as diverse as DFA. Please divulge any personal gain that any executive may receive for such transactions or import agreements or contracts.

4. We question the wisdom of selling off bottling facilities to foreign companies, as has occurred recently with the sale of DFA assets to the Mexican company, LALA, and we question the shutting down of DFA cheese plants. We believe that this reduced our ability to handle fluid milk and to deal with surplus. We also missed opportunities for record profits from bottling and cheesemaking.

We believe that such strategic assets, instrumental in successful marketing of a highly perishable product, should not be liquidated. What dairyman would sell off adjacent farmland, an enormous asset, which makes him more efficient, resilient and profitable, to a foreign company? We would like a complete explanation and financial disclosure of all aspects of the LALA transaction.

5. We are aware of predicted impending shortages of raw milk in our region for the fall season. In light of this, we want to know why you would be making long-term contracts for milk when you don’t even know how many of us will still be in business by then? How will these low-price contracts be fulfilled? Who benefits from these types of transactions?

6. As our co-op executives, you should be advocating for milk prices to producers that are at least sustainable for the industry and reflective of all the recent financial drain and ever increasing costs of production. Co-op executives should never be advocating expansion in any region during a time of supposed oversupply and low prices!

We would appreciate a prompt written reply to our questions and concerns and a prompt disclosure of the financial information we have requested. We also request a timely plan of action! DFA markets almost a third of the nation’s milk and a few basic changes in the attitudes, goals and system of rewards to executives could result in new ways of doing business. This could have a huge economic impact for producers. Also, please be aware of the fact that if requested information is not provided and effective changes do not take place, the loss of large numbers of DFA members will certainly occur. We need positive incentives to justify continued support for this organization.

From Gary Genske on behalf of California producers

Support sensible solutions

Many of us dairy farmers traveled to Washington, D.C., on April 13 with the Progressive Agriculture Organization (Pro Ag) in an attempt to obtain some immediate help for all dairy farmers.

In most part the reception was good. We appreciate the efforts that Sen. Arlen Specter (D-PA) is putting forth for the dairy farmers. However, for the most part, our elected officials just don’t get it.

Congress can and must adjust the support price on milk manufactured products to at least $17-18 per hundredweight, or a floor price of at least $18 per hundredweight must be placed under all manufactured milk products.

The only sensible, realistic solution to the dairy farms woes is the Federal Milk Marketing Improvement Act of 2009 (S -1645). We are totally against any form of insurance programs to be imposed on dairy farmers. It’s time dairy farmers receive a fair stable price for our milk, and an insurance program is not the answer. Lets save our remaining dairy farms before it is to late.

From Linda Broyan, Columbia County, Pennsylvania

No Congressmen on the call

On April 27, 2010, there was a phone conference to discuss the dairy crisis in our country. I personally called every Congressman and Senator’s office in both New York state and Pennsylvania to personally invite them to be on to hear what is going on with our farmers all over the country. I figured that this way none of the offices could use the old “If we knew about it we would have attended” excuse.

Two offices told me that they could not make the call for sure, but again all had the information.

The night of the call it was asked if any of the Congress and Senators were on the call so they could be acknowledged. The ones who said they were in attendance were Adam Tarr from Sen. Specter‘s office; Jenna Smith and Kathryn Tanner for Sen. Gillibrand’s office; Sarah Blood, from Sen. Aubertine’s office; and Lauren Tribble from Sen. Sanders’ office from Vermont, not one congressman’s office was represented.

I don’t know about you but to me that is a pretty clear message that says: We don’t care about the farmers of our country.

I am sure tired of hearing that they are doing all they can for us and they understand. Nothing is being done to help this crisis short term or long term.

Let the farmers decide what we want to be passed, not these men and women sitting in an office that have no clue how to farm and what we need to survive. PD

From Robin Fitch, West Winfield, New York

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