Dean Foods to end more than 100 milk contracts by end of May

By Mary Ellen Shoup contact

- Last updated on GMT

Deans Foods cited increased milk production combined with declining market demand as the main reasons for ending its contracts with some dairy farmers.  ©GettyImages/jenoche
Deans Foods cited increased milk production combined with declining market demand as the main reasons for ending its contracts with some dairy farmers. ©GettyImages/jenoche
Dean Foods has ended some of its milk procurement contracts with more than 100 dairy farms, mainly due to a surplus of raw milk in the US at a time when US consumers are drinking less fluid milk.

The affected farms, from Indiana, Kentucky, Pennsylvania, Ohio, New York, Tennessee, North Carolina and South Carolina, will see their contracts terminated May 31, 2018.

“Our decision was an incredibly difficult one and a step that we worked very hard to avoid,”​ Dean Foods said in a statement.

Dean Foods said it would provide farmers with resources and connect them with counselors if needed. It will continue to buy milk from approximately 12,000 dairy farms across the country including Ohio, the company added.

Contributing factors

The US dairy company has seen consecutive quarters of declining fluid milk sales, registering an 8% drop in gross profit last month for Q4/17.   

According to Dean Foods, Americans drink about three gallons less milk per person per year since 2010 and per capita consumption is down roughly 11 gallons since 1975.

In addition to a milk surplus and declining consumption volumes, Dean Foods added that competition for milk volume has increased, leading to higher-than-anticipated volume declines.

“Companies assertively entering or expanding their presence in the milk processing business, have exacerbated an already tenuous situation in a highly competitive market,”​ the company continued.

“The introduction of new plants at a time when there is an industry-wide surplus of fluid milk processing capacity forced us into this position.”

The dairy farmers will need to find a new processor for their milk supply or face shutting down their farms.

Mayfield Dairy Farms, in Tennessee, for example, who supplies milk for Dean Food’s TruMoo and DairyPure labels, has started a petition to encourage the US dairy processor to keep its contract, and has amassed more than 10,000 signatures so far.

“We understand the pressure is to sell cheap milk from Wal-Mart, Kroger, Aldi, but you won't win by racing them to the bottom. You will lose us – your base –  the customers who made Mayfield successful,”​ the petition said.

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