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CFAP (Coronavirus Food Assistance Program) Details Announced

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(Washington, DC) USDA and White House make CFAP (Coronavirus Food Assistance Program) Announcements at a news conference this morning
Highlights:
  • Trump suggests that officials look into terminating trade deals involving cattle imports
  • FSA Offices begin accepting applications on May 26
  • Final Rule – Read in its entirety at this link (40 pages) (you may also download the document or or print the pdf if you prefer hard copies)
    • Pages 1-24: Administrative Rules with Payment Limits, application to Gross Income, other limitations and interactions
    • Pages 25-40: Payment amounts by Commodity
    • General website for CFAP:  farmers.gov/cfap
    • Cost-Benefit Analysis found here:  25 page pdf
Today, May 19th, 2020, shortly after 11:30 am, the White House held a news conference to announce the highly anticipated CFAP program details have been published.
FSA offices across the country will be accepting applications beginning Tuesday, May 26.  In the meantime, it is highly suggested to thoroughly review the linked documents above and get your pencils ready.
Below is the official USDA News Release:
USDA Announces Details of Direct Assistance to Farmers through the Coronavirus Food Assistance Program
Farmers and Ranchers to Receive Direct Support for Losses Related to COVID-19
(Washington, D.C., May 19, 2020) – U.S. Secretary of Agriculture Sonny Perdue today announced details of the Coronavirus Food Assistance Program (CFAP), which will provide up to $16 billion in direct payments to deliver relief to America’s farmers and ranchers impacted by the coronavirus pandemic. In addition to this direct support to farmers and ranchers, USDA’s Farmers to Families Food Box program is partnering with regional and local distributors, whose workforces have been significantly impacted by the closure of many restaurants, hotels, and other food service entities, to purchase $3 billion in fresh produce, dairy, and meat and deliver boxes to Americans in need.
“America’s farming community is facing an unprecedented situation as our nation tackles the coronavirus. President Trump has authorized USDA to ensure our patriotic farmers, ranchers, and producers are supported and we are moving quickly to open applications to get payments out the door and into the pockets of farmers,” said Secretary Perdue. “These payments will help keep farmers afloat while market demand returns as our nation reopens and recovers. America’s farmers are resilient and will get through this challenge just like they always do with faith, hard work, and determination.”
Beginning May 26, the U.S. Department of Agriculture (USDA), through the Farm Service Agency (FSA), will be accepting applications from agricultural producers who have suffered losses.
Background:
CFAP provides vital financial assistance to producers of agricultural commodities who have suffered a five-percent-or-greater price decline due to COVID-19 and face additional significant marketing costs as a result of lower demand, surplus production, and disruptions to shipping patterns and the orderly marketing of commodities.
Farmers and ranchers will receive direct support, drawn from two possible funding sources. The first source of funding is $9.5 billion in appropriated funding provided in the Coronavirus Aid, Relief, and Economic Stability (CARES) Act to compensate farmers for losses due to price declines that occurred between mid-January 2020, and mid-April 2020 and provides support for specialty crops for product that had been shipped from the farm between the same time period but subsequently spoiled due to loss of marketing channels. The second funding source uses the Commodity Credit Corporation Charter Act to compensate producers for $6.5 billion in losses due to on-going market disruptions.
Non-Specialty Crops and Wool
Non-specialty crops eligible for CFAP payments include malting barley, canola, corn, upland cotton, millet, oats, soybeans, sorghum, sunflowers, durum wheat, and hard red spring wheat. Wool is also eligible. Producers will be paid based on inventory subject to price risk held as of January 15, 2020. A payment will be made based 50 percent of a producer’s 2019 total production or the 2019 inventory as of January 15, 2020, whichever is smaller, multiplied by the commodity’s applicable payment rates.
Livestock
Livestock eligible for CFAP include cattle, lambs, yearlings and hogs. The total payment will be calculated using the sum of the producer’s number of livestock sold between January 15 and April 15, 2020, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head.
Dairy
For dairy, the total payment will be calculated based on a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by a national price decline during the same quarter. The second part of the payment is based a national adjustment to each producer’s production in the first quarter.
Specialty Crops
For eligible specialty crops, the total payment will be based on the volume of production sold between January 15 and April 15, 2020; the volume of production shipped, but unpaid; and the number of acres for which harvested production did not leave the farm or mature product destroyed or not harvested during that same time period, and which have not and will not be sold. Specialty crops include, but are not limited to, almonds, beans, broccoli, sweet corn, lemons, iceberg lettuce, spinach, squash, strawberries and tomatoes. A full list of eligible crops can be found on farmers.gov/cfap. Additional crops may be deemed eligible at a later date.
Eligibility
There is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants who are corporations, limited liability companies or limited partnerships may qualify for additional payment limits where members actively provide personal labor or personal management for the farming operation. Producers will also have to certify they meet the Adjusted Gross Income limitation of $900,000 unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Producers must also be in compliance with Highly Erodible Land and Wetland Conservation provisions.
Applying for Assistance
Producers can apply for assistance beginning on May 26, 2020. Additional information and application forms can be found at farmers.gov/cfap. Producers of all eligible commodities will apply through their local FSA office. Documentation to support the producer’s application and certification may be requested. FSA has streamlined the signup process to not require an acreage report at the time of application and a USDA farm number may not be immediately needed. Applications will be accepted through August 28, 2020.
Payment Structure
To ensure the availability of funding throughout the application period, producers will receive 80 percent of their maximum total payment upon approval of the application. The remaining portion of the payment, not to exceed the payment limit, will be paid at a later date as funds remain available.
USDA Service Centers are open for business by phone appointment only, and field work will continue with appropriate social distancing. While program delivery staff will continue to come into the office, they will be working with producers by phone and using online tools whenever possible. All Service Center visitors wishing to conduct business with the FSA, Natural Resources Conservation Service, or any other Service Center agency are required to call their Service Center to schedule a phone appointment. More information can be found at farmers.gov/coronavirus.

Dean Foods (Estate) Makes Payment of April Settlement Checks to Previous Dean Independent Producers

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UPDATE – JUNE 9th, 2020:  Southeast area farmers, previous Dean Independent producers, report that they have received funds for their April Settlement milk checks via electronic deposit into their bank accounts.   This action follows several letters from producer organizations both to the Court and to the Committee for Unsecured Creditors.

Please scroll for letters from Zippy Duvall, President of the American Farm Bureau Federation, and H. Barlow, Executive Secretary of the Kentucky Dairy Development Council (KDDC), which were sent to the Court. 

The Pennsylvania Milk Marketing Board was also active in the process to recover those payments to producers. Read more about their efforts here.

On behalf of the (former) Dean independent producers, we say “THANKS” to the Honorable Judge David Jones, the Court, Dean Foods estate officials, and to all who advocated on their behalf.

At this time, it is not known if dairy co-ops or the FMMO Producer Settlement Funds have received the balance of the funds owed to them by the Dean Foods Estate.

 

Letter from Zippy Duvall, President, American Farm Bureau, to the Court and Dean Foods (Estate) Officials

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Letter from H. Barlow, Executive Secretary, KDDC, to the Court:

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The story as first reported:

 

Payments to Farmers Late at Best, in Question for the Future

A May 13, 2020 memorandum from USDA-Agricultural Marketing Service, Appalachian Order, reads as follows:

TO:  Regulated Handlers

FROM: Harold H. Friedly, Jr., Market Administrator, F.O. 5

SUBJECT: Producer Settlement Fund Non Payment

On May 12, 2020, Dean Foods, DIP (debtor-in-possession), a regulated handler on the Appalachian Order, did not pay its obligation to the Producer Settlement Fund (PSF) as required by Federal Milk Marketing Order regulations. USDA recognizes the significance of this non-payment and is continuing to work with the Department of Justice to attempt to recover these monies as part of the Dean Foods, DIP, estate.

When payment is not made to the PSF, Federal Milk Marketing Order regulations prescribe procedure for how the remaining marketwide pool monies should be distributed to handlers (1005.72).  When PSF monies are not sufficient to make full payments to handlers, the Market Administrator shall reduce uniformly such payments to handlers due a payment from the PSF.

Accordingly, for milk pooled on Order 5 during April 2020, payments to handlers from the PSF have been reduced pro rata.  Should the PSF payments be recovered from Dean Foods, DIP, Estate at a later time, full payments will be distributed.  In the meantime, Federal Milk Marketing Order regulations provide for reduced payments to producers from regulated handlers who did not receive full payment from the PSF (1005.73(c)). Consequently, the enforced minimum payments to producers will be at the pro rata amount.

USDA will continue to monitor the situation and work to assist the dairy industry. Additional information will be provided as it becomes available to all market participants. Please feel free to contact Jason Nierman, via nierman@malouisville.com, or (502) 499-0040, ext. 222, if you have any questions.

The memorandum also had this addendum included:

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This schematic explains workings of a Producer Settlement Fund:

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News could not have come at a worse time:

From an industry viewpoint, this non-payment could not come at a worse time for the farmers themselves.

When monies are received by the Producer Settlement Fund, they in turn are paid back out to handlers (co-ops or agents), who then distribute the money to farmers, paying them for milk sold (see the diagram above).  This process is highly regulated by FMMO rules, and has proven to be predictable, and reliable for decades.

Farmers then use their money to pay bills to any number of agribusiness and service firms with whom they do business.   Since this process has been so reliable, most farmers have set-up automatic withdrawals to pay supply companies.  Farmers will now be dealing with any issues related to those automatic withdrawals and any repercussions due to lack of funds. Agribusinesses will lose money as well, and incur any number of extra costs.

Ravaged by a myriad of challenges due to Covid-19, farmers are facing financial stress of an untold magnitude, and many multi-generational farms with long histories of serving consumers are at risk of being lost. The mental health and fortitude of those farmers is a prime concern across the country, due to the stresses which were already in place. Many fear that this news could catalyze additional health issues in farm communities.

An industry insider, who asked not to be identified, said this Dean Foods payment to the PSF could normally be in a range from $160-$250 million, affecting dairy co-ops, individual farms and the communities they serve in many states.  (Note – this figure will be verified and updated if needed – Covid 19 has changed almost everything.)

 

PERPLEXING:  WHY did this happen given Chapter 11 processes?

This payment, which is a regular course of business in both a predictable amount and timing in getting farms and co-ops paid for milk,  had regularly been made by Dean Foods during the course of the Chapter 11 proceedings.

Therefore, it stands to reason that attorneys, accountants, and consultants representing Dean Foods should have budgeted and accounted for these payments as Dean Foods books were closed out over the course of the next few months. In the last months of the process, fluid milk sales were up substantially according to many sources, which should also have added to Dean Foods income.   (An email inquiry to an attorney representing Dean Foods in the proceedings has not received a response as of this posting.)

This gets even more perplexing since farmers were named as critical vendors in the early days of the Chapter 11 process.  Dean Foods officials filed motions, which were granted by the Court, to ensure that those payments were indeed accomplished. It was believed those financial obligations to farmers for products delivered would have been honored until the last payment was due.

Impact on an individual farm:  During this payment cycle, any single farm would be due payments from thousands of dollars to even hundreds of thousands of dollars, depending on the size of the herd.

POSSIBLE SOLUTIONS OR HOPE AHEAD?

At this time, this is a profound question with unknown answers.  Some of those answers might be:

  • Payment to Settlement Funds in all FMM Orders might come at one of the later dates in this payment cycle, being only a few days late
  • Payment to the Producer Settlement Fund might come later, as accounts receivable from product and property sales come into the Dean Estate
  • Payment to farmers might not come at all, which is a bitter pill to swallow at this juncture in history.

Whatever the answer is, farmer co-ops and individual farmers deserve that answer, and deserve it quickly.  Perhaps a projected payment schedule could be stated by the Dean Foods Estate officials.  Even if it’s a worst case answer, to know what that answer is will honor the dignity of earnest farmers who deserve an answer so they can make some possibly excruciating decisions,  instead of ‘the system’ tap dancing around farm families like performers on a Broadway stage.

According to the Dean Foods / Southern Foods Group, LLC Chapter 11 website, two additional Omnibus Hearings are scheduled for May 20 and June 24. 

One dairyman has often said “The dairy industry at the grass roots level is a dairy community full of really good, decent people who want to earn an honest living and contribute to their communities. However, those good people often have to endure some very wicked events.”

Dean Foods has historically paid its ‘independent producers’ well, which is much appreciated.  It is sincerely hoped that Dean Foods closes its chapter on a better note than this non-payment, and quickly rectifies this payment shortfall to farmers.  For the sake of the mental and physical health of many farmers and their families, lets hope they do just that.

 

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Dean Foods Files Bids; DFA successful for most of assets, Court must approve bids

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Attorneys representing Dean Foods in their Chapter 11 proceedings have filed two highly anticipated notices of bids and bid results with the US Bankruptcy Court for the Southern District of Texas, Houston Division.
The notices are Document 1270, Notice of Bid Results, and Document 1271, Notice of Bids.
The Court has a hearing scheduled for April 3, 2010, for the purpose of hearing any objections and furthering the sale process.     Any objections to a Sale Order or a Sale Transaction must be filed by April 1, 2020 at 12:00 pm, CST.
Dairy Farmers of America, Inc. has been announced by Dean Foods as the successful bidder for the great majority of Dean Assets.   This includes 8 facilities situated in the following southeast locations:
  • Athens, TN  (Mayfield)
  • Birmingham, AL (Ice Cream)
  • Nashville, TN  (2 plants – Purity and Country Delite)
  • High Point, NC
  • Winston-Salem, NC
  • Spartanburg, SC  (Pet)
  • Orlando and Orange City, FL  (TG Lee)
Prairie Farms Dairy, Inc. has filed bids which were successful for the Birmingham Fluid Plant (Barber’s), the Hammond Louisiana plant, and the Customer list related to Louisville, KY facility.  Prairie Farms also successfully bid on several plants throughout the Midwest.
The McArthur Dairy assets have a successful bid from Mana Saves McArthur, LLC.
Alternative bids were stated in Document 1270. MD-VA Milk Producers was the Alternate for High Point, NC. OP Church Street Property, LLC, is listed as an alternate for the Country Delite property in Nashville.
Details of various Bid offers for plants across the country can be found in a number of documents at the Epiq Southern Foods website.
The “Notice of Bid Results” – 6 pages long – is posted below:
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Borden Files Chapter 11; Moves to Protect Farmer Payments for Pre-Petition Milk; Interim Motion Approved on Jan. 8th

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UPDATE: Jan. 9th:  The Court issued an Order, posted late on Jan. 8th, which did indeed authorize Borden to pay independent farmers and co-ops, but there is some leeway as to the amount those producers and handlers might be paid.  Independent producers especially are encouraged to read the full 7 pgs. of the Order found here (you may also download and print), and perhaps consult with an attorney for interpretation and clarification.  Some situations may differ per state laws and milk bonding statutes.

Dave Natzke, Progressive Dairyman, has also published a report of the hearing with added information from the courtroom, which may be read here.

 

Borden Dairy Company, et al.,  now becomes the 2nd major dairy company within two months to file for Chapter 11 Bankruptcy to reorganize their financial structure.  Dean Foods, the nation’s largest processor of fluid milk, filed for Chapter 11 protection in November.

The Borden Chapter 11 filing caught many grass-roots dairy farmers off guard, especially due to renewed optimism due to recent new product introductions under the leadership of Tony Sarsam.

Progressive Dairy published an informative report written by Dave Natzke, Editor.

Borden Dairy  issued the following press release about the filing, which can also be accessed on the web:

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When a milk-purchasing company announces bankruptcy, the first question that grass-roots farmers and rural communities is concerned with is “Will those farmers get paid for ‘pre-petition’ milk?”  (That is the milk delivered in the period prior to the filing for which the farmer has not received payment.)   Payment for milk delivered from the day of filing forward is generally protected by the Court.

Normally, independent farmers, those who sell milk directly to a plant or company, and who are not members of a milk cooperative, are left holding the bag, and don’t get paid, because they are generally considered ‘unsecured creditors.’  Some states, but not all, have ‘milk bonding’ statutes, which protect payments to farmers to some degree; some states may protect payment for all or a significant portion of the milk delivered, while others may have bonding statutes which cover only a tiny portion.

In this Borden Dairy Chapter 11 process, the company has filed a Motion with the Court to ask that the Company be allowed to complete those payments to those independent farmers and five milk cooperatives. This Motion was scheduled to be heard as part of the “First Day Hearings” on January 7th, but at the writing of this blogpost, (midnigh/early am, Jan 8th) an Order has not been entered which will actually permit that to happen.  An Order must be entered on the Court’s Docket which will finalize payment.

The documents below, on page 3, paragraphs 7 and 8, note that Borden purchases raw milk from ‘approximately 262 independent family dairy farms’ and ‘five farmers’ cooperatives; collectively, those farmers and cooperatives are called ‘Milk Vendors.’  They also detail the normal times of payment.

The Borden Chapter 11 proceeding is legally known as Case 20-10010-CSS, and is being heard in the United States Bankruptcy Court for the District of Delaware.    Below are the 7 pages of Document 11 in the above captioned case, titled “Declaration of Jason Monaco in Support of Debtors’ Motion for Authorization to Pay Critical Vendors,” which is the Motion asking for payment to farmers.

Affected parties residing in or operating farms in the states of Mississippi or Texas likely need to pay special attention to a Footnote (3)  at the bottom of Page 3. Such parties may need to have this Document 1, along with other documents in this case reviewed by an attorney for interpretation, and have such a qualified attorney determine how this footnote may affect their farming operations.

NOTE:  The author of this blog is not an attorney, and any information posted SHOULD NOT be considered legal advice, only observations. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights.

 

Here are the pages of Document 11, the Motion requesting payment to farmers:

 

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Any updates of significant events and/or official rulings by the Court will be added or noted when they are available, as will additional information related to this process.

NOTE:  The AUTHOR of this blog IS NOT AN ATTORNEY, and any information posted SHOULD NOT be considered legal advice. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights per their individual situations.  The author has experienced a milk company bankruptcy as a producer, so therefore is familiar with the process from a farmer/producer perspective

 

ON A PERSONAL NOTE:  As Borden now joins Dean Foods in Chapter 11 proceedings, this is the second Financial Reorganization/Bankruptcy filing of a major purchaser of fluid milk in the United States within two months.  Many, many family farms will be affected to some degree by these proceedings, no matter if a farm is an ‘independent’ or a member of a cooperative. In turn, the rural communities across the country in which those farms are located will be affected as well.  May I ask that anyone who is a Believer in a Higher Power please join me in keeping the entire US Dairy Farm industry in your collective prayers?  Thank you for doing that!

May God Bless our Dairy Farms, and our Farming Communities!!

 

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Dean Chapter 11 – HUGE Step 1: Company Steps Up and Will Honor Previous Obligations to Farms

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A HUGE first step will take place in the Dean Foods Chapter 11 Bankruptcy proceedings.
Dairy Farmers will get their payments for milk delivered in the month prior to the date of the Bankruptcy Filing, an almost unprecedented event.  This news was confirmed by a Dean Foods source familiar with the situation on the evening of Thursday, November 14th.
Dean Foods announced on Tuesday, Nov. 12th, 2019, that it had initiated Chapter 11 Bankruptcy in the United States District and Bankruptcy Court, Southern District of Texas, Houston.
From the moment that filing became known, farmers, who are generally seen as unsecured creditors in a milk company bankruptcy, were extremely concerned that they would never receive payment for a month’s worth of milk. In hard dollars, this would be equal to tens of thousands of dollars to multiple hundreds of thousands of dollars, depending on the size of a producer’s herd.
In this case, officials in the Milk Procurement Division of Dean Foods advocated on behalf of payment for their producers.  In a court document titled  “Docket 29, Declaration of Robert Bruce Matson In Support of Debtors Motion to Pay Critical Vendors,”  Matson, Dean’s Senior Director of Milk Procurement, lays out a brilliant and passionate case on why these farmers deserved payment.
Nationwide, this would have been a loss of several millions of dollars scheduled to flow into dairy farm communities across the country. Those monies in turn would pay farm employees, pay feed bills, machinery repair bills, and a host of other expenses related to farm business operations.
These payments are known to apply to independent producers who contract directly with Dean Foods – it is not yet verified if this also applies to co-op handlers.  That will be clarified as quickly as possible.  Also needing more certain clarification will be payment for Nov. 1-11 milk deliveries to milk plants.  With the Nov. 12 filing date, all deliveries from that day forward will be secured as the company works through the Chapter 11 process.
The ability to make those payments, along with flexibility on how to make those distributions, was enabled by Court Orders entered on Wednesday evening, Nov. 13th, in US Bankruptcy Court, Southern District of Texas.
From that point on, it was up to Dean Foods officials to make determinations on what portions of the Settlement payment would indeed make their way to farms.
In an unprecedented bankruptcy in the dairy and food industry, an even rarer occurrence has taken place with this full payment being delivered to what the court defines as an unsecured creditor. Classification as ‘critical vendors’ helped achieve that end.
Officials at Dean Foods deserve an extraordinary amount of credit for taking farmers into consideration in their court documents and pleadings and getting this money to them which will be crucial for ongoing operations as the company determines a future.  If you have the opportunity to say “Thanks” to any of them, please do so.
While we are a very long way from a more stable future in this Chapter 11 Reorganization of the country’s largest milk processor, this is a HUGE first hurdle to cross.
Before this very complex bankruptcy is over, there will be many ups and downs, good days and bad days, and unexpected twists and turns. But on this Day 3 of Bankruptcy proceedings, many farm families are breathing a lot easier.
We hope for a brighter future for both farmers supplying the plants, and the employees processing and distributing the milk.
This will be a ‘one step at a time process.’  More information will be shared as it becomes available
Timeline thus far in a rather fast-paced and frenzied week:
  • Tuesday, Nov. 12th: Bankruptcy documents filed
  • Wednesday, Nov. 13th:  Court pleadings and Orders entered for ongoing operations
  • Wednesday, Nov. 13th: By close of day, over 125 document filed on court’s docket in less than 48 hours.
  • Thursday, Nov. 14th: Word received farmers would receive payment for their previous month’s milk.
  • Monday, Nov. 18th: Payments expected to be delivered to farmers
We are most thankful to a God who has answered many prayers with this news. The prayers for wisdom and guidance continue as we work to a more stable future.
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Dean Foods Files Chapter 11 Bankruptcy: News. Producer Questions. FAQ Sheets

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UPDATE – posted 6:35 pm Tues, Nov. 12:  “Emergency Relief Has Been Requested. A Hearing will be Conducted on this Matter on November 13, 2019 at 2:30 pm [CST] in Houston Tex.”   This information per court documents, TXSB.

Dean Foods, the nation’s largest processor of fluid milk, has filed Chapter 11 Bankruptcy in the Southern District of Texas. According to a company news release, Dean Foods states the company is working toward an ‘orderly and efficient sale of the Company.”

In the same release, Dean Foods also states it is “engaged in advanced discussions with Dairy Farmers of America, Inc. (“DFA) regarding a potential sale of substantially all assets of the Company. If the parties ultimately reach agreement on the terms of a sale, such transaction would be subject to regulatory approval and would be subject to higher or otherwise better offers in the bankruptcy.”

Related to the announcement, Dean Foods cancelled its regular Quarterly Earnings Call, which was scheduled to occur at 9:00 am on the morning of Nov. 12.

Information about the actions and proceedings can be accessed at http://www.deanfoodsrestructuring.com.

The major concern for dairy farm communities – especially the farmers, and  related agribusinesses and community small businesses across the country who serve those farmers – will be how independent dairy farms, who ship directly to Dean Foods plants, will be affected, treated, and compensated during the Bankruptcy proceedings.  Those detailed answers are not available at the time of this initial posting (11:50 am, EST, Nov. 12).

At this time, there are more unanswered questions than answers, and no doubt there will be many anxious farmers and co-ops around the country who depend on milk checks from Dean Foods.  It will take time for accurate answers and solutions to be found as this process works through the reorganizational Bankruptcy process.

For now, here are some FAQ sheets, as posted at http://www.deanfoodsrestructuring.com:

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Here is the related News Release as posted at http://www.deanfoodsrestructuring.com:

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As the news broke on the morning of November 12, here are some additional links from financial news outlets:

From ‘Seeking Alpha’: Initial (breaking) News Release – Dean Foods Files Chapter 11; posted at 7:09 am  – with a link to the news release below:

From ‘Seeking Alpha’: Dean Foods Company Initiates Voluntary Reorganization with New Financial Support from Existing Lenders, a posting with these bullets:

  • Company secures commitments for $850 Million in DIP Financing to Support Operations
  • In Advanced Discussions with Dairy Farmers of America Regarding a Potential Sale
  • Business Continues Regular Operations; Customer Receiving Uninterrupted Supply of Dairy Products as Normal

From ‘Seeking Alpha’: Dean Foods EPS misses by $0.72 – posted at $9.38 am

More information will be posted as it becomes available.

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Beringause, Dean Foods: “It is time we stood up for the Dairy Industry, for our nation’s Dairy Farmers . . .”

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In a bold move, the largest processor and direct store distributor of fluid milk in the United States has decided to leave its membership in the International Dairy Foods Association (IDFA), due to differences of opinion with the organization on the labeling of plant-based beverages.

Announcing their decision, Dean Foods issued the following statement: 

“Dean Foods has been a strong supporter of the International dairy Foods Association (IDFA) for many years, however, we have reached a point where one of our key priorities is no longer shared by the entire IDFA organization.  More specifically, as one of the largest dairy processors in the country, we are proud of the role we play in providing one of the most nutritious products in the grocery store – milk – to consumers around the nation.  With this in mind, we believe it is wrong that many plant-based products are currently marketed using milk’s good name, yet are lacking several of the inherent nutrients of their dairy counterparts. Unfortunately, IDFA has been unable to reach consensus and take a stance on this important issue.”

“As a result, we have decided that we can no longer financially support an organization that is not behind one of our core priorities We’ll instead divert our advocacy resources to pursuing accurate product labeling for the benefit of the dairy industry, including farmers, processors, and consumers around the country. We have appreciated IDFA’s support over the years and wish the organization and its member companies the best.”

 

Eric Beringause,  Dean Foods President and CEO, stated the following:

“There are plant-based products called “milk” on grocery store shelves today that don’t include a single drop of dairy.  Even worse, consumers are being misled into believing that these imitation products are as healthy as their dairy counterparts. It is time we stood up for the dairy industry, for our nation’s dairy farmers, for the integrity of our milk products, and for the families who rely on them for adequate nutrition.

We’re exploring every potential avenue for ensuring imitation products are labeled properly, and we welcome others to join us in this effort.”

 

Beringause, who assumed the reins as CEO of Dean Foods on July 29, came with the reputation of having a record of transformation.  In an industry crying for a renewal of sales for ‘nature’s most nearly perfect beverage,’ this decision may be a step in restoring real milk’s identity and reducing consumer confusion.

This move should be well-received by thousands of dairy farmers and industry stakeholders who have been demanding proper labeling of dairy products for years, and who have been seeking a ‘big-player’ advocate with an even bigger voice.

Dean Foods, on behalf of the nation’s dairy farm families, we look forward to working with you to advance the cause of proper labeling in keeping with standards of identity.

 

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Dean Foods Q2 2019 Earnings: Reports & Follow-up Perspectives

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The Dean Foods Earnings Call, the public report of the company’s Q2 financial results, took place Tuesday, August 6th, 2019.
Dean Food stakeholders and the financial community had their first widespread engagement with new CEO Eric Beringause, who assumed the roles of CEO and and President on July 29, 2019, only a week before the Earnings Call.
Mr. Beringause warmly greeted those on the call, briefly introduced himself and his background, and noted he was still getting to know the company and help determine his thoughts on specific actions going forward. Fair enough, since he had only been on the job a week.
This Call and webcast, relatively brief (38 minutes compared to the normal hour), yielded no real surprises concerning the challenges of Dean Foods.  The company is still recovering from not only its own distresses, but is a player in a big food sector, which is also facing challenges.
As such, the stock price, which had gained back into the $1.67-$1.70 range in the couple days before the call (following the announcement of the CEO change), has been rolling up and down again this earnings week. This has been normal for several Earnings Call price cycles in recent years.
At this point, it does seem that there is some renewed optimism for the future since Mr. Beringause has taken the reins as leader of the company.  With processing plants from coast-to-coast, the company’s success is critical to many farming and agricultural communities across the United States, the Southeast included.
One observation is that the spectre of the loss of the Walmart business in 2018 is still coloring the thoughts of the financial community.  However, at the current time, talk of a Walmart expansion by building other milk plants appears to be on a backburner.  There is still just the one plant in Fort Wayne which is operated by Walmart, and many sources indicate that milk plant is still experiencing volume and delivery issues, and still trying to get some consistency with operational standards.
Below is a summary of the financial reports and perspectives following the call. As you read the reports below, and if you do Google searches for Dean Foods news, I would caution everyone to make sure you check dates of any report.  These stories are often old news, but they keep popping up in searches.
This Week’s Dean Foods Earnings-Related News:
 

PRESS RELEASE / Earnings Report: Dean Foods Announces Second Quarter 2019 Results

SEC FILING: In keeping with SEC regulations for publicly traded companies
 
TRANSCRIPT:  Dean Foods Earnings Call for Q2, 2019 (in its entirety)
  • READ:  The call lasted 38 minutes and some change, a bit less than the hour which has been the usual length.  At the link above, you can read the transcript (not a hard read) and see the participants listed by name, including financial analysts who are the normal folks who participate in the Q&A following the company statements.
  • AUDIO?  Do you prefer to listen to the call? There is a link within the Transcript page (above)
SLIDES: The graphics from the Earnings Call webcast can be accessed here; graphics illustrate the discussion found in the company presentation portion of the transcript.
COMMENTARIES: (be aware, headlines may not reflect the actual content of the article)
7 Aug, 2019:  “We’d Rather Watch Dean Foods Stock from a Distance,” says Deutsche Bank    –  Content from Tip Ranks, posted on Yahoo Finance
8 Aug, 2019: “CEO with Milk in His Veins Wants to Restore Embattled Dean Foods,”  – by Lydia Mulvaney for Bloomberg, with assistance from Katherine Doherty
  • Beringause’s appointment has “sparked speculation that Dean is moving away from a sale”
  • Beringause: “Clearly, there’s opportunities to grow the business”, without specification
8 Aug 2019:  “Spoiled Milk: Dean Foods”  from Freyr Capital, posted at Seeking Alpha
  • This article does fairly note that part of the problem is with the entire dairy industry: “Dairy industry is helpless with some even attempting to salvage the situation by fighting the “milk” branding of non-dairy alternatives and labeling them ‘fake milk.’ “
  • Some of the comments following this article are a mixed bag, some positive for milk itself, some saying Dean is heading for better days, some critical
9 Aug 2019: “Dean Foods is Pricing Low, But Could this be a Buy-In Op?”  by Maria Ohle for MicroSmallCap.
  • Quotes CFO Jody Macedonia from the Earnings Call Transcript:   “As retailers continue to invest in private-label milk to drive foot traffic, private-label margin over milk is contracted to $1.26 in June matching a historic low[…]As retailers continue to fund pricing promotions to drive traffic into their stores, they’re draining their own profitability. As a result, we believe these margins are unsustainable and expect it to alleviate over time.”
  • Also stated by the author: “With vast industry experience, Beringause may be a knight in shining armor who will know how to turn this company around.”
It has been the recent pattern with Dean Foods that the stock prices have rolled around a bit in the days preceding and following the Earnings Calls. This graphic illustrates the days following Mr. Beringause’s appointment, and then following the Earnings Call when the financials were released to the public.  A  big positive is that, thus far, at the timing of this post, the stock price has not dipped below $1 a share, which was happening frequently earlier this summer (2019).
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In closing, to Dairy Communities and Dean Employees – how we can help:
  • We all need for this company to become more healthy, and increasing sales of existing products is one way for that to happen.  
  • So could we all join in by encouraging our neighbors and friends to buy Dean Foods products? Even by asking them at church or a community meeting is one way to help get the ball rolling. 
  • Let’s do what we can ourselves to help improve the Dean Foods financial picture, and help our futures in the process!
  • Some are already doing this with specific social media posts and consumer interaction, why not get on board and follow their lead?

 

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Eric Beringause named CEO of Dean Foods; brings a Record of Transformation

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Eric Beringause is the new CEO and President of  Dean Foods, the nation’s largest processor and distributor of fresh fluid milk and dairy case products.  He replaces Ralph Scozzafava, who has stepped down.  Beringause’s tenure began on July 29, 2019.

Mr. Beringause brings over 30 years of experience in the dairy, consumer products, and food processing industries to his new position.  Most recently, he was the CEO of Gehl Foods, the nation’s largest processor of nacho cheese.  Through his career, he has worked for a variety of companies such as Nestle, ConAgra, Alcoa, and Pillsbury.  His work portfolio includes private-label and branded products.

As the nation’s largest processor of fluid milk, the performance of Dean Foods in turns affects the fortunes of tens of thousands of dairy farms and regional farm economies across the United States.

It is no secret that the dairy industry itself, as well as Dean Foods, has seen its fair share of difficulties in the past two years;  Mr. Beringause faces daunting challenges in turning the company around.  Jim Turner, non-executive chairman of the Dean Foods Board, expresses confidence Beringause is the person for the job in a news release: “He has a long track record of creating value in dairy and consumer products companies, as well as a unique combination of turnaround and operational expertise.”

Upon the news of the CEO change late on Friday afternoon, July 26, Dean Foods stock rose in off-market trading over the weekend, rolled a bit during the day on Monday, July 29, and at the close of business, closed up 2 cents/share from Friday afternoon’s closing value of $1.25.  On Tuesday, July 30th, the stock had climbed again to $1.36 at closing.

Following is the original news release, along with some additional public information about Mr. Beringause:

The original news release from PR Newswire:

DALLAS, July 26, 2019 /PRNewswire/ — Dean Foods Company (DF) today announced that Eric Beringause has been appointed President and Chief Executive Officer and a member of the Dean Foods Board of Directors, effective July 29, 2019. Beringause succeeds Ralph Scozzafava, who has stepped down as CEO and resigned from his position on the Board.

Beringause brings to Dean Foods more than 30 years of transformational leadership and operational experience at a broad range of blue-chip brands in the food, beverage and consumer products industries, including expertise in food processing and branded and contract manufacturing. Most recently, he served as CEO of Gehl Foods, LLC, a market-leading producer of dairy-based beverages and food products. Prior to that, he served as CEO of Advanced Refreshment LLC, one of the largest U.S. producers of private-label bottled water and water-based beverages, and as CEO of Sturm Foods, Inc., a leader in private-label food products, specialty food brands and contract manufacturing. Earlier in his career, Beringause held various business development, finance, and sales and marketing roles at Alcoa Consumer Products, Gerber Infant & Baby Products, ConAgra, Inc./Grist Mill, Nestle, Inc., Nabisco Brands and The Pillsbury Company.

“We believe Eric is the right leader to drive the transformation of the business as the Company continues to execute on its enterprise-wide cost productivity plan and its previously announced exploration of strategic alternatives,” said Jim Turner, Non-Executive Chairman of the Dean Foods Board. “He has a long track record of creating value in dairy and consumer products companies, as well as a unique combination of turnaround and operational expertise.”

“I am honored to join Dean Foods at this important juncture,” said Beringause. “Dean Foods is the nation’s largest dairy processor and a leader in the industry, and I am excited to work with the Board and management team to leverage our scale and substantial assets to realize the significant opportunities available to transform our company. My top priority will be to ensure we have the right footprint and strategies in place to drive sustainable growth and profitability for the benefit of our shareholders, employees, customers and other stakeholders.”

Turner continued, “On behalf of the entire Board, I want to thank Ralph for his service and contributions to Dean Foods over the past five years. We appreciate his dedication to the Company and we wish him all the best in the future.”

Upcoming Webcast of Second Quarter 2019 Earnings Conference Call
The Company will host a live webcast of its second quarter 2019 earnings conference call on Tuesday, August 6 at 9:00 a.m. Eastern Time. The webcast is expected to last approximately one hour and will be accessible by visiting http://www.deanfoods.com/our-company/investor-relations/ and by clicking “Webcasts.”

The webcast will be accessible on most operating systems and browsers. A webcast replay will be available for approximately 45 days following the event within the Investor Relations section of the Company’s website.

About Dean Foods:
Dean Foods is a leading food and beverage company and the largest processor and direct-to-store distributor of fresh fluid milk and other dairy and dairy case products in the United States. Headquartered in Dallas, Texas, the Dean Foods portfolio includes DairyPure®, the country’s first and largest fresh, national white milk brand, and TruMoo®, the leading national flavored milk brand, along with well-known regional dairy brands such as Alta Dena®, Berkeley Farms®, Country Fresh®, Dean’s®, Friendly’s®, Garelick Farms®, LAND O LAKES®* milk and cultured products, Lehigh Valley Dairy Farms®, Mayfield®, McArthur®, Meadow Gold®, Oak Farms®, PET®**, T.G. Lee®, Tuscan® and more. Dean Foods also has a joint venture with Organic Valley®, distributing fresh organic products to local retailers. In all, Dean Foods has more than 50 national, regional and local dairy brands as well as private labels. Dean Foods also makes and distributes ice cream, cultured products, juices, teas, and bottled water. Approximately 15,000 employees across the country work every day to make Dean Foods the most admired and trusted provider of wholesome, great-tasting dairy products at every occasion. For more information about Dean Foods and its brands, visit www.deanfoods.com.

*The LAND O LAKES brand is owned by Land O’Lakes, Inc. and is used by license.
**PET is a trademark of Eagle Family Foods Group LLC, under license.

CONTACT: Investor Relations/External Communications, Suzanne Rosenberg, +1 214-303-3438. Media please contact +1 214-721-7766 or media@deanfoods.com

 

Additional Background Information about Mr. Beringause:

Vassar:  Mr. Beringause serves on the Board of Trustees of Vassar College, from whom he received his undergraduate degree.  A biography can be read on Vassar’s website, or is posted here:

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Giving Back: Related to experiences and friendships which began with a summer job while at Vassar,  Mr. Beringause has been a huge supporter of an effort which builds up the Navajo nation, assists the Student Conservation Association, and involves telecommunications – all at the same time.   And he believes that teaching the ‘why’ is important.  Learn more in “That Vassar Serendipity – Three Alums Find a Common Cause,” a part of the Vassar “Stories” series.

Management Board of CP Kelco / a Division of Huber:  Mr. Beringause is a member of the Management Board of CP Kelco, a consumer products division of Huber, which processes .nature-based’ ingredients for the food industry.

 

From FoodDive – a perspective on the circumstances which led to this change:

Dean Foods Replaces CEO with Eric Beringause amid Continued Struggles; by Lilliana Byington for Food Dive.  Insights from this article’s author describe the company’s struggles, the challenges ahead, and Beringause’s record.

In recent years, opinions about Dean Foods and its future have been offered by every level of the dairy supply chain from dairy farmers to financial outlets to board rooms across the nation.  A change has occurred.  The entire dairy economy will benefit from a healthy and vibrant Dean Foods. We are hoping that Mr. Beringause is indeed, the leader with the skills to build a positive future – many dairy communities will be counting on it.

 

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Dean Foods: Earnings. Farms. Jobs. Communities. What’s Ahead?

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The Dean Foods Earnings Call, a webcast relaying financial news of Dean Foods, a publicly traded company, was held on the morning of Tuesday, May 7th, 2019.
The timeframe immediately before and after these publicly available Earnings Calls, for any company generally provide a wealth of information concerning the financial health and status of that company, along with various industry perspectives.
According to company information, Dean Foods is the “nation’s [US] largest processor and direct-to-store distributor of fluid milk.”  As such, any decisions made by the company will have a direct impact on local/regional dairy communities across the country, affecting many dairy farms and jobs within and related to the processing plants.
It can be said that Dean Foods is perhaps the company which is most supportive of the local and regional farm communities within a fairly close radius of each of its 58 plants.  Additionally, there are 19,000 local jobs in processing and distribution and related company functions at the plants.
Here are general takeaways from the Earnings Call – a grassroots perspective:
  • First: No really horrible news for farms or local business, or even Dean’s resulted from the Q1 call, which I consider a positive, given the company’s downward trending stock prices of late.
  • Second: Stock value was generally up for the day, with market share price at $1.75 at the time of close of business on May 7th.
  • Third: No immediate transitions or sales of the company were announced (as of that day), even though it is no secret the company is exploring options.  Whatever the company’s eventual decisions, there is no doubt that local communities and farm economies across the country will be impacted – but no one knows if that will be in a harmful or helpful manner at this writing. 
  • Fourth: The world of food in general – and dairy companies in particular – is fast-changing, so any news today may be very different a week from now.
Stockholders Meeting: The Dean Foods Stockholder Meeting occurred Wed, May 9th at 9 am, CDT.  The meeting is archived here if readers would like to listen in. There is a delay at the front of the meeting in the recording.
 
Prior to and following the May 7th Earnings Call: These Posts  (chronological)
  • May 6, 2019: Dean Has Got Milk but Few Growth Prospects as it Hunts for Buyer, by Lydia Mulvany and Katherine Doherty for Bloomberg
  • May 6, 2019: Dean Foods Falters from More Concentrated Milk Market – authored by Heather Haddon, for the Wall Street Journal:    (and in case you can’t get to the online edition, here’s a photo of the article as it appeared in print)
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  • May 7, 6:58 am, by Seeking Alpha: Dean Foods Misses Q1 Estimates – notes that sales declined in 9% in Q1 2019, and to this blogger’s understanding, the comparison point is Q1 in 2018 (will verify). Remember, in 2018, the company still had branded shelf space in Walmarts in several states in the projected distribution radius of the new Walmart plant at Fort Wayne, Indiana.
  • May 7, 10:23 am (after the call): Dean Says It’s Turning the Corner with Dairy Drain Set to End – by Lydia Mulvany and Katherine Doherty for Bloomberg – authors note the report was a ‘mixed bag,’ stated the company’s bonds gained on Tuesday (the day of the call) after ‘tumbling since late February.’
  • Dean Foods Company SEC Filing – Current report (8-K) May 7, 2018 (Financial Statement)
  • A Transcript of the Entire Call – posted by Seeking Alpha – access at this link  (21 pages if you print, follow a link to an audio recording): includes the opening statement by Dean Foods officials, including CEO Ralph Scozzafava, and a Q&A Session with Financial Analysts  from well-known companies
  • Slides – played in conjunction with the Dean Foods officials portions of the call, includes graphs and charts further explaining the verbal points – access at this link

And then following the call:

May 7th, Afternoon:  From the Dallas News:  “Dean Foods posts Wider Losses Than Expected in first quarter amid Conversations with Potential Buyers.”

An article by Dom Difurio, a breaking news business writer for the Dallas Morning News, included these three statements of note:
  • “On a call with analysts frustrated with a lack of details around when the company could turn a financial corner, Dean Foods also reiterated that it’s looking at strategic alternatives to accelerate its business transformation and enhance its value.”
  • “When asked whether the company was in talks with any potential buyers for the company, Scozzafava said it’s possible the company could do nothing.
  • “We’ve been in conversations with some folks, and we’ll leave it at that . . . we are very open minded and exploring some things,”  Scozzafava said.

May 7th, Afternoon:  Dean Foods (DF) Reports Q1 Loss, Misses Revenue Estimates  from Zacks Equity Research, a financial publication.

“Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Food-Dairy Products is currently in the bottom 8% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.”
May 7, 2019 at 3:55 pm:   Dean Foods Needs an Activist Investor  
Posted at Seeking Alpha, authored by Holmes Osborne, of Osborne Global Investments
This is a blunt, tell-it-like-it-is perspective from a financial analyst’s viewpoint, who describes the company’s real estate and transportation assets as interesting. He also suggests some action items for the company to take in order to cause company value to rise.
With most of this blog’s readers in agriculture, it should be noted he suggests the company needs to widen its portfolio to include more plant-based or alternative beverages, or expand whey-protein production.
Parts of this article are a bit hard to read, but may be necessary to absorb in order to take action.
Also – take note, some of the $$$ referring to milk sales are not as impactful as he suggests due to market conditions of two different time frames, and some of his other statements related to agriculture show a bit of a lack of knowledge about grass-roots agriculture.
The Good News?  Osborne also suggests it may be time to buy stock, acknowledging it is risky at the moment.  The opening click title was  “Bottom-Fishing Investors, Snag Dean Foods.“
May 8th, 2019, Morning:  “Dean Foods Sees Positives After a Quarterly Loss,” by Jeff Gelski for Food Business News.
  • CEO Ralph Scozzafava notes that a cost productivity plan and improvements in free cash flow provide optimistic things about the quarter
  • Scozzafava: “We believe we have passed the inflection point in our transformation, as many of the initiatives we implemented over the past 12 months are now beginning to take hold.”
  • Scozzafava (when asked about a potential sale):  “It’s very possible that we won’t do anything, and we’ll continue to execute the plant that we have, which we’re very happy with, and we’ll continue to make progress on it. “So look, we’ve been in conversations with some folks, and we’ll leave it at that.”
May 8th, 2019, 1:42 pm: “Dean Foods Seen Trading at Fair Value,” posted at Seeking Alpha and authored by Clark Schultz.
  • Notes this from Wells-Fargo Analyst John Baumgartner:  “The outlook features some positives (seq. EBIT improvement, positive FCF, new business wins), but we think weak volumes, expansive price gaps, and inflationary price basis to dairy costs maintain DF in a vulnerable position.”
  • “Wells-Fargo has a Market Perform rating and a target price of $2 on Dean Foods.”
May 9th: Stock closed at $1.65/share
May 10th, 2019, Afternoon:   “Why Dean Foods (DF) Stock Price Advanced Up to 5.76% Today”  by Samuel Moore for Find News
  • Moore observes that stock has an (average analyst) potential target price of $3.47 share, thus a potential to rise 98.29% increase from recent ranges of $1.57 to $1.71.
  • Trading volume was considered high
Dean Foods stock closed at $1.76 for the week of the Earnings Call, up 11 cents from a close at $1.65 on Friday May 3rd.
May 13th, 2019 (Monday):  “Dean Foods Shares Up 11.4%”by Harvey Truce for Rockland Register.  Surprisingly,  Dean Foods stock rose 20 cents/share in light trading volume.   A midday report was posted by Ethane Eddington for the Press Recorder, “Dean Foods (DF) Add 4.5%, Cementing Place as Top Mover Today.”
May 13th, Market Close: Stock closed at $1.96/share, and traded as high as $1.98 during the day.
June 3rd, 2019:  (Monday) Now is the Time to Bet on Dean Foods Company’s Stock: by William Josephs for Finch News, an online publication.
June 3rd, 2019:  Stock closed at $1.06.
June 5th, 2019  (Wed am):  Dean Foods Company (DF) Among Top Stocks to Watch Today:  by Denise Gardner, for Press Recorder
June 5th, 2019 (Wed, 1:34 pm): Dean Foods +13% after skirting with dropping below $1;    posted on Seeking Alpha by Clark Shultz
June 5th, 2019 (Wed):  Should Traders Take A Bit Out of Dean Foods Company?; by Kiel Taylor for US Post News
June 5th, 2019:  Stock closed at $1.22/share
June 6th, 2019: Stock closed at $1.22/share
June 7th, 2019, 8:44 am:  “Saputo takes a pass at Dean Foods”: Seeking Alpha news alert breaks news Saputo will not be acquiring Dean Foods, after earlier announcements Saputo was considering that acquisition.
June 7th, 2019, Midday: “Let’s Make some Money with: Dean Foods (DF) Company” – posted at Nasdaq News Updates, compiled by the NNU Team.  This article explains many of the terms and acronyms commonly used in financial reports about stock prices.
June 26th, 2019: America’s Biggest Milk Processor is Trading at Less than a Buck, by Lydia Mulvany and Katherine Doherty for Bloomberg.
June 26, 2019:  Dean Foods Stock closed at 95 cents / share  (Volume 2,552,000)
June 27, 2019:  Dean Foods Stock closed at 93 cents / share  (Volume 2,974,000)
June 28, 2019:  Dean Foods Stock closed at 92 cents / share  (Volume 4,959,000)
July 1, 2019: Dean Foods Stock closed at 93 cents / share (Volume 2,537,000)
July 2, 2019: Dean Foods Stock closed at 97 cents / share (Volume 2,264,000)
July 3, 2019: Dean Foods Stock closed at $1.07 / share (Volume 2,397,0000)
July 5, 2019: Dean Foods Stock closed at $1.10 / share (Volume 2,338,0000)
July 6th, 2019: Dean Foods Cut to “Sell” at ValuEngine, posted by Steve Reilly on Riverton Roll.
As those in the dairy industry know too well, this is an evolving story with lots of moving parts.  Look for additional updates as they become available.
And please keep in mind, this is mostly a chronicle or digest of information which has been published by other sources. This blog in no way suggests advice on taking actions either in the stock market or in a related business due to information published here.
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