MISSOURI The dairy industry is feeling the squeeze of today’s tough economic times.
This past Sunday Borden Dairy entered into bankruptcy protection. Founded in 1857, they have around 3,300 employees. Loan debt, pensions, and a changing market were cited as primary financial concerns.
The United States largest dairy producer, Dean Foods, filed bankruptcy this past November. Ironically, the two largest dairy producers filed for Chapter 11 protection just a couple months apart. The high costs of doing big business coupled with a changing market has created challenging times for these two top producers.
Missouri dairy producer Alex Peterson from Peterson Dairy, Inc. is a second generation dairy farmer. Peterson said the way people are consuming their dairy is changing.
Peterson’s dairy farm has 130 cows near Trenton, Missouri. Peterson said people are getting their diary from other means outside of drinking milk. Peterson said dairy consumption is there, just not in liquid milk form.
Bankruptcies are not an indication of the dairy industry, but just rather where the fluid milk sector is now, according to Chris Galen of the National Milk Producers Federation. Galen’s statement was published in the National Association of Farm Broadcasters website.
“I think what’s not concerning is the fact that, overall, dairy consumption continues to grow. In fact, that’s really reassuring, not concerning. What’s happened with Dean’s and now with Borden, I think, is more isolated cases of companies that are in the fluid milk business which, as we know, not just for years, but for decades, has seen per-capita declines in consumption and its effected their business models.”
Borden CEO Tony Sarsam stressed that it will be business as usual after filing chapter 11. Sarsam stated they will continue to work with creditors, employees, and customers, but need time and resources to restructure.
“Despite our numerous achievements during the past 18 months, the Company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry,” Sarsam explained. “Ultimately, we determined that the best way to protect the Company, for the benefit of all stakeholders, is to reorganize through this court-supervised process.”
Borden also cited a lot of pension liability that put them behind financially. Advertising, marketing research, and spending money on innovation is costly. Big business means bigger costs, and weakened returns on the dollar has spilled some milk.
Peterson said restructuring and catering to the way consumers are buying their dairy will determine the success of these two top producers.
Tomorrow in (Part 2) of “Dairy industry feeling the squeeze”, we will talk with Peterson on where the dairy industry goes from here. How do the top producers navigate their way ahead of the trending tides.