A proposed settlement in an antitrust class action lawsuit between northeast dairy farmers and Dean Foods has run into legal objections. Dairy Profit Weekly Editor Dave Natzke reported that the lawsuit announced last December involved dairy farmers against major dairy co-ops and processors in the Northeast and called for Dean Foods, the nation’s largest fluid milk processor, to pay $30 million into a fund for dairy farmers.

It also required Dean’s to buy milk from sources other than the co-defendants in the suit, Dairy Farmers of America (DFA) and Dairy Marketing Services (DMS), a milk marketing joint venture between three northeast dairy co-ops (DFA, Dairylea, and St. Alban’s).

Two objections to the proposed settlement were filed in the U.S. District Court of Vermont this week. One was filed by a group of about two dozen individual dairy farmers, and the second was filed by DFA and DMS, who charge the proposed settlement pits dairy farmer members of their organizations against other dairy farmers, imposes damages on their members, and could work to lower milk prices paid to all Northeast dairy farmers.

While the settlement has been portrayed as a win for Northeast dairy farmers, DFA/DMS contend that $10 million of the $30 million settlement will go to attorneys, sharply reducing payments for farmers, Natzke reported.
Of greater concern is the potential impact on future milk prices, according to the co-ops. Under terms of the settlement, Dean’s must purchase up to 1.8 billion pounds of milk over a 30-month period from sources other than DFA/DMS.
The co-ops contend they are better able to negotiate higher milk prices for farmers, and are able to save milk transportation and handling costs, returning more money to farmers through over-order premiums. The co-ops allege Dean’s could negotiate lower prices for milk it buys from less efficient milk suppliers, and then use those lower prices to leverage even lower prices for DFA/DMS milk.

According to DFA/DMS estimates, under terms of the settlement, the average payment to dairy farmers would be about $1,500. They contend a nickel decline in the milk price as a result of the settlement would reduce income for a farmer with 300 cows by about $3,400.

Any final approval to the settlement is likely months away, according to Natzke. In the meantime, DFA and DMS remain defendants in the antitrust lawsuit, and they say they will continue fighting it in court, he said.

USDA drafts new school nutrition requirements
The U.S. Department of Agriculture (USDA) has drafted regulations to update requirements for school feeding programs and they could impact dairy products used. National Milk’s Chris Galen said in Thursday’s broadcast that “this is why the process of developing dietary guidelines is so important because they do have consequences in the real world,” and the school lunch line is a prime example.

One of the stipulations is that schools only offer low-fat or fat-free milk and the real kicker, according to Galen, is that if they serve flavored milk, which is primarily chocolate milk but can be others like strawberry, it can only be fat free.

The Federation has some concern that USDA may kick out flavored milk, something that has already happened in some local school districts. That is not being proposed right now, he admitted, but USDA is saying that, flavored milk must be fat free and no milk can be higher than 1 percent fat.

National Milk is closely monitoring this issue Galen said, because “we don’t want to throw the proverbial baby out with the bath water and have kids not consume needed milk products because they don’t like the fat content.
The guidelines also attempt to reduce overall fat and sodium levels and that could impact the amount of cheese and pizza served to kids. Pizza is a very popular food for kids and Galen said we have to watch what the impact of this might be on cheese consumption.

Efforts by the U.S. Dairy export Council (USDEC) and dairy industry suppliers to boost commercial sales through food aid are bearing fruit. Margaret Speich, of the U.S. Dairy Export Council, reported in Monday’s “DMI Update” that a draft report commissioned by the U.S. Agency for International Development (USAID) recommended adding dairy, specifically whey protein concentrate 80 (WPC-80% protein), to fortified foods that are made for children suffering from malnutrition.

USDA will also buy ready-to-eat meal replacements fortified with U.S.-produced nonfat dry milk and WPC-80 for the first time. These products will be used in international food aid administered by USDA, the Foreign Agricultural Service, and USAID.

“These two developments show expanded use of our high value dairy ingredients in what is essentially a new commercial channel for the U.S. dairy industry,” Speich said.

This follow’s last summer’s breakthrough for dairy ingredient use in food aid, when the Office of Food for Peace approved WPC-80 and WPC-34 to be used in programs administered by USAID, change petitioned by USDEC.
A couple of U.S. companies and USDEC members have been very active on their own in this field, she said, and have developed capacity over the past year to meet the emerging demand of this channel.

U.S. milk production up 2.8 percent
U.S. milk production continues to run above a year ago. The U.S. Department of Agriculture (USDA) reported that preliminary data put December output in the 23 major states at 15 billion pounds, up 2.8 percent from December 2009. The 50 state output totaled 16.2 billion, up 2.5 percent. Revisions added 8 million pounds to the November estimate, raising it to 14.4 billion, up 3.1 percent from November 2009. 

The preliminary 2010 total for the 50 states amounted to 192.7 billion pounds, up 3.4 billion pounds, or 1.8 percent from 2009. Cow numbers totaled 9.1 million head, down from 9.2 million from a year ago. Output per cow averaged 21,148 pounds, up from 20,576 a year ago.

December cow numbers in the 23 states totaled 8.39 million head, up 15,000 from November, and 74,000 head more than a year ago. Production per cow averaged 1,794 pounds for December, 33 pounds above December 2009.
California production was up 2.7 percent from a year ago, despite 14,000 fewer cows, however, output per cow gained 65 pounds. Wisconsin was up just 0.7 percent on 6,000 more cows and output per cow being up 5 pounds. New York was up 4.6 percent, on a 75 pound gain per cow and 1,000 more cows. Idaho was up 4.9 percent, on 24,000 more cows and a 10 pound gain per cow. Pennsylvania was up 1.8 percent. Cow numbers were up 3,000 and output per cow was up 20 pounds. Minnesota was unchanged across the board.

The biggest increase was in Colorado, up 10.9 percent. Arizona and Oregon shared the second biggest increase, up 8.1 percent. Missouri saw the biggest decline, down 7.9 percent, due to 8,000 fewer cows. Iowa was next, down 2.4 percent with 8,000 fewer cows, but output per cow was up 25 pounds. Illinois had the third lowest, down 0.6 percent. 

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.