cows in field

Leave Organic or Leave DFA, Says DFA to Member-Owners shipping to Horizon Organic

By Ed Maltby, NODPA Executive Director

In a March 26th, 2024 letter sent to its members who sell to Horizon Organic, Dairy Farmers of America DFA) said, “DFA has decided to end its supply relationship with Horizon Organic,” and, “Effective on your anniversary date, DFA will no longer be managing the relationship between your farm and Horizon Organic.” The sentence of the letter which worried many organic producers who are members of DFA was “We do not intend to transfer current dual membership to another organic marketer.”

This is a complete reversal of DFA’s long term position in the Northeast of encouraging organic dairy farms to have a dual membership and long-term relationship with DFA. DFA supplies member services (which vary from customer to customer) on behalf of organic brands like Horizon Organic, Lactalis/Stonyfield, CROPP/Organic Valley, and Maple Hill, that includes writing the checks for producers. DFA has also provided a conventional market for those organic producers who are either forced out of organic production for economic reasons or lose their market. This was significant for some Northeast producers when they were dumped by Horizon when it was owned by Danone in 2021, and when HP Hood decided to leave the organic market in 2009.

Why was there a reversal of decades-long policy on organic by DFA management? What does this mean for other organic brands? The relationship between Horizon and DFA has been strained for many years. In the past, DFA charged Horizon producers directly for their services on top of any other payments, because they could not reach a satisfactory agreement with Horizon Organic on paying for DFA services. In a conversation with DFA’s Bryan Stokes (Senior Director, Membership), he explained DFA’s current position as a change in their business relationship with Horizon Organic. The ending of dual agreements would only impact those producer members of DFA who ship to Horizon Organic. At this time, there would be no change in relationships with any of the other organic brands they currently work with.

orizon Organic shippers who are DFA members would have a minimum of 60 days and up to a year, depending on their anniversary date, to become either an independent Horizon Organic Farm, switch to another cooperative, for example National Farmers Organization (NFO), or leave organic and stay with DFA as a conventional producer. Bryan Stokes said that DFA would not impose any penalties on Horizon Organic producers who wanted to leave DFA before their anniversary date. If producers wanted to switch to Organic Valley or Maple Hill, they would lose their dual agreement with DFA and end their relationship with DFA if they continued shipping organic milk. DFA will continue their policy of not taking on any new members. If any DFA members wanted to transition from conventional to organic production, they would have to leave DFA. Byron Stokes said that DFA is always evaluating these policies to meet different situations. He did not have any details about who or what would provide the necessary services to a now independent Horizon producer except to say that there are other companies that can provide the needed services. Horizon Organic has not returned any calls asking for clarification of what services an ‘independent’ Horizon Organic producer would receive.

According to information received, NODPA understands that currently there are 52 Horizon, 108 CROPP Cooperative, 54 Maple Hill, and 18 Lactalis/Stonyfield organic shippers in DFA’s Northeast region who are members of DFA with dual agreements.

I’ve asked the various brands and cooperatives that have a presence in the Northeast (even though this affects the whole of Horizon’s direct supply) for any comment on the situation. The National Farmers Organization (NFO) is one of the alternative coops that organic producers are currently using. They played a dominant role in the formation and initial growth of CROPP in the Midwest, but since the dissolution of Dairy Marketing Services, LLC in 2017, and DFA’s refusal to allow NFO to join DFA, they have had to struggle to rebuild their organization and conventional milk markets. In a conversation with Regional Director, Don Harnish at 814-386-3880, , he said that they would welcome any organic producers, and NFO already has agreements with CROPP, Lactalis, Maple Hill and Horizon Organic. Producers should contact him directly for more details. The challenge will be in providing cost-effective services and available trucking routes. Agri-Mark has repeatedly said they have no interest in providing member services to organic farm members.

Maple Hill responded with the following from Mitch Clark (Senior Vice President for supply chain): “Maple Hill and DFA have had a strong relationship for 8+ years; a fair amount of our producers are DFA members. We have been intentional about being a good partner to them and they have reciprocated that to Maple Hill. We have always maintained consistent communication with them, and in recent weeks they have assured us that they have no intention of ending our arrangement.”

I have contacted Organic Valley/CROP Executive Vice President of Membership, Shawna Nelson, Horizon Organic representative Gillian Armstrong and Horizon Organic new owners, Platinum Equity but, at this time, have had no reply as to how they view the situation, what measures they are putting in place to safeguard their producers, and how to assist any DFA producers who want to transition to organic production.

There are so many consequences of this action by DFA. Currently, there is no public knowledge or transparency of what Horizon will be offering as an alternative to DFA. It is relatively easy for brands to set up their own software systems for managing payments to producers but more complicated to provide the other necessary systems and services. Generally, brands do not provide those services and other programs because of the expense of attracting experienced staff to administer them, and deep resources to finance them. DFA, as the number one dairy company for milk sales in the US in 2023, owner of multiple brands, processing facilities and milk haulage companies, can supply many services to its members, for example, insurance, buying/farm inputs, risk management and lending programs that are difficult to replicate.

For those farms looking for a safety net in returning to conventional production, Upstate and DFA have been the only way that could easily happen in the Northeast. DFA has now blocked that opportunity for their member owners. Since the consolidation of the dairy industry, with the merger of Dairylea and DFA in 2014, and the dissolution of Dairy Marketing Services LLC in 2017, there are few alternatives in the Northeast, apart from NFO or small cooperatives like Middlebury Cooperative Milk Producers.

For those organic dairies that are allowed by their buyer to market some of their milk themselves, either as a value-added product or to other value-added dairy producers, there will always be the problem of balancing. The domination of DFA on the dairy supply and manufacturing side, and their recent purchase of a milk hauling company, makes any balancing for small scale value-added production more problematic.

The increase in the cost of trucking and the loss of independent milk hauling has led companies to charge farms more for their share of the trucking costs; to impose a higher minimum volume for each farm pick-up; and to impose a requirement on smaller operations to have storage for at least 2 days of milk to avoid everyday pick-up. This is an added problem for any farm wanting to diversify its income into their own dairy products, become a seasonal dairy, or downsize their dairy herd to move into selling other farm products or services since they must maintain a certain volume of milk and have the infrastructure to keep it chilled to the appropriate temperature, losing some of the benefit of downsizing or restricting what they can do on the value-added enterprise.

This move by DFA does restrict organic dairies who are members of DFA from being able to use their last option to improve their pay price - move to another buyer. For DFA members, any move, even to CROPP, Lactalis or Maple Hill, would mean ending their relationship with DFA with all its long-term benefits. For new entrants into organic production, especially those transitioning from conventional production, their choices of a cooperative handler would be limited and tied to their buyer. Any DFA member who wants to transition to organic would have to leave DFA. DFA holds a monopoly on the conventional supply and processing side of dairy so any re-entry into the conventional market will be difficult.

The recent actions by DFA with Horizon Organic producers and, effectively, all organic dairy producers who are members of DFA, reflects the established and continuing consolidation of the dairy industry at the expense of the small to mid-size dairies, both organic and conventional. There needs to be financial support for those cooperatives and processors who can still operate relatively independently, increased financial support for regional infrastructure initiatives, and greater federal support by state and federal programs for small to mid-size dairy farms because of their importance to the rural economy and the future security of the food supply.