Uncertainty Looms For Some Dairy Farms Ending Contract With Dean Foods

May 29, 2018

At the end of this month, 27 Indiana dairy farms – some small, some big – are nearing the end of a 90-day notice that their contracts with national distributor Dean Foods will be terminated.

Purdue University dairy extension specialist Jackie Boerman says the dairy industry is facing tough times across the nation.

“The price that dairy producers are receiving is typically lower than the cost of production,” Boerman says. “So dairy farmers are losing money for every 100 pounds of milk that they produce.”

The contracts were canceled, in part, because Dean Foods lost a deal with Walmart, which means it doesn’t need to buy as much milk from producers.

While some of the farms have found new contracts, those farmers will still have challenges going forward.

“A lot of them will be receiving a price that is lower than what they were receiving with Dean’s,” Boerman says. “That’s unfortunate but that’s kind of how it worked out because Dean was paying a premium for the milk they were getting from farms.”

And the length of the contract is also a concern.

“Even if they have a contract, it may not be guaranteed, it may be for a shorter amount of time so then they have to go through this process again,” Boerman says. “And it’s also making those farms really evaluate if they can stay in business at this lower milk price.”

She says some of the 27 farms might have to shut down if they can’t sell their milk. For some that might not be noticeable.

“If the farm goes out of business, it’s probably not going to affect your local milk price in the store,” Boerman says.

But it would affect the surrounding communities.

“It will impact all these jobs that are affiliated with dairy farming that you may not think of,” Boerman says. “So it could be a hardware store; it could be a feed mill, or it could be these other industries associated with dairy farming.”  

She says it’s just one example of a bigger issue that needs to be addressed.

“If we’re going to have vibrant dairy community in the state of Indiana and across the country, we need to really think about being innovative to increase dairy consumption, to really make sure that we are supporting the dairy industry in every way possible,” Boerman says.

Indiana is at a historic low, with fewer than 1,000 dairy farms in the state.