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: 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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3 Southeast Dairy Events: Networks Working Together to Find Solutions

A Compilation of stories and news about 3 challenges affecting Southeast Dairy Producers:  Dean Foods, Maryland-Virginia and Piedmont

 Southeast Dairy:  In the News. Pushing Forward.
 
Introduction:
In the past two weeks, in a time of already depressed milk prices, there has been a three-fold challenge to dairy farms in the southeast.  Tennessee, Kentucky, Virginia, and North Carolina all have farmers affected, with varying degrees of uncertainty about their milk buyer futures.
To say these past days have been painful and a flurry of concern, high emotions, and rumor mills have resulted is an understatement, but yet, as the dust settles, some activity has encouraged some hope, and herd owners are beginning to look forward. Many are making decisions based on faith, and in a calm fashion based on what they believe best for their farm. Some of those farms are being public, while others are remaining cautious and quietly seeking answers behind the scenes.
Bright Spot? Yes!   One farmer asked if there was going to be any good news to share about this whole mess, and yes, actually, there are two:
First, phone calls, texts, and Social Media outcries have indicated loudly and clearly that consumers, government officials, fellow farm organizations, and economic development personnel are indeed concerned about preserving ‘local’ or ‘regional’ milk in their areas, and appear to be eager to learn how they can help accomplish that.
Hopefully, this newfound energy can be channeled for long-term purchases of local milk, from local farms.  Time will tell. Consumer outreach is going to have to continue.
The second is this:  We still have upwards of 40 herds (at least in TN) shipping to Dean. The company is still the largest volume buyer of ‘local’ milk in TN at its three plants.  Putting that in perspective, every Dean Direct herd in Indiana,  with the exception of one, received letters of notice. Several were herds well over 1000 cows.
Background:  The three part challenge:
1.) Dean Foods:  On Friday, March 2, news broke of upwards of 115 (tallies still underway) farmers in 8 states receiving 90-day termination notices of their supply agreements to Dean Foods plants.  10 Tennessee herds and 22-25 Kentucky herds were affected, with 25-27  in Indiana, 42 in Pennsylvania, 6 in the Carolinas, and a yet unknown number in New York.  Three plants in our area – at Athens, TN, Spartanburg, SC, and Louisville, KY are involved in the contract termination decisions.   Herd sizes in all states range from under 100 to 1000 cows; 20 Million pounds of Indiana milk will need to find a new home, or be removed from the already overabundant nationwide supply.
The herds involved were Dean Direct producers, meaning the farm itself had a purchase agreement with Dean Foods plants, instead of gaining access to the plant through a milk co-op. Farmers who were members of co-ops did not receive these termination letters.  All of this activity followed a Dean Foods Earnings Announcement on Monday, Feb. 26 in which the phrases such as ‘rescaling the supply line’ foretold of company wide cuts to come.
2.)  During:  the week prior to the Dean Foods announcement, rumors began to circulate that Piedmont Milk Producers, based in Blountville, TN and serving farms in TN, VA, and NC,  was restructuring their business. (Story below with a video link)
3.)  MD-VA Milk Cooperative with 1,500 members from Pennsylvania to Florida, and some in Kentucky and Tennessee, sent a Feb. 27th letter to all of its members that their advance milk payment checks, expected at the end of the month, would fall to levels of $12.62 cwt in FO 5 & 7, and $10 in FO 1 and $33. The company said it was working on financial restructuring and was renegotiating credit facilities. Over the weekend, sources have begun to indicate that the problems may have been resolved to some degree, but the company has not made any official announcements. With settlement checks expected within a couple of days, some direction will be known.
In the days since, there has been a flurry of activity following the first notices: meetings of  farmers, meetings of farmers and agribusiness personnel, meetings of dairy organizations, and frequent phone calls between many parties in positions to help chart a future course.  AgCentral has been busy assisting producers in a variety of ways in a three-state area. While we have yet to have a formal working group to address what can be done and how to approach a dairy future, a tremendous amount of contacts have been made information gathered.
Following is a “Digest” of some the best information available, in no particular order – stories mentioned include stories of the Watsons and the Stooksburys, as well as a couple of stories from Ohio which further outline the far-reaching affects of the Dean announcements:
1.) Dave Natzke, an experienced and respected dairy industry reporter, now with Progressive Dairyman, published a broad perspective view of the Dean Foods story, and puts it in context with the dairy industry and events across the country. In his article, Dave reports that the Walmart plant was originally announced as a $165 Million Dollar venture, and provides a glimpse into how the Walmart plant may source their milk.
2.) Sherry Bunting, Farmshine, reports with a focus on PA, where 42 herds lost Dean contractsShe notes hauling routes were a factor in terminated Pennsylvania herds, and reports the loss of a Food Lion contract, which was a factor which triggered a decision regarding 5 TN herds in Greene and Hamblen Counties.
From the article: “This affects all size herds and is not a large or small farm thing,” said [Reace] Smith, [of Dean Foods Corporate Communications.]  While she was unable to supply specific information about the farms that were terminated, she said the widespread volume adjustments at multiple plants across four Federal Orders was necessary do to the new Class I plant (Walmart) coming online this month and the loss of a contract through a competitive bidding process. (Food Lion).” 
It is the loss of that Food Lion contract, previously filled largely through a Carolina plant(s), which created a shift in milk hauling from plant to plant, and created an excess at the Dean/Pet plant at Spartanburg, SC, which had to be eliminated.  The milk from five (5) producers in Hamblen and Greene Counties in TN was being hauled to Spartanburg. Those producers are now searching for new markets or making decisions to sell cows.
Dewey Morgan, of the Daily Post-Athenian, in the hometown of the Mayfield plant,  cites these significant stats:
Regarding declining consumption and increased production: “Americans are drinking about 3 gallons less per person since 2010, and 11 gallons less than 1975, while every year, 350 Million more gallons of milk are produced than the year before.”
Amount of local milk: The Dean Foods plant in Athens ‘still sources 90% of our milk from Tennessee.’
The Watson Family: their stories on WVLT-TV and on the Knoxville News-Sentinel website:
The Watsons, who farm near Sweetwater, TN, were one of the southeast TN farms who received 90-day notices.  The senior generation is Robert and Rosemary Watson (mom and dad), who farm with their sons Josh and Caleb.  The family is known for being extremely generous members of their community.  Both Josh and Caleb have been featured in news stories in Knoxville, TN media:
  •  Josh: From WVLT-TV, a story and video clip: Josh states that he doesn’t entirely blame Dean Foods. He adds: “there’s a lot of jobs that revolve around the dairy – it will hurt them.”
  • Caleb: Both a video and a photo album have been posted at the Knoxville Sentinel website. Caleb notes the family will continue to look for a milk buyer, and will look at other options to diversify, he says they will survive.
  • Front Page: The Knoxville News Sentinel published a front page story featuring Caleb on Tuesday, March 13.
Piedmont considering new business structure and how the company operates: story on Knoxville WBIR-TV
  • Brant Stooksbury, and his father Brian in Jefferson County, currently ship their milk through Piedmont Milk Sales, with offices at Blountville, TN. Piedmont, who represents farms in Northeast TN, Virginia, and North Carolina (the great majority are in NC) is making business changes.
 
Farm & Dairy:  Provides additional details on  WalMart distibution
WKBN-TN at Waynesboro, Pennsylvania – a video story describing some of the trickle down effects.
Ongoing:  This story will continue to evolve over the next few weeks, and spring crop work is already cranking up.  We know this challenge is great, but this region has overcome challenges before: at this time 25 years ago, many of us were digging out from a record blizzard, and some went without power for days. 27 years ago, in February of 1991, 400 herds received notices of a Pet bankruptcy, and lost a month’s worth of milk payments, along with having to scramble to find new milk handlers – there were no 90-day notices.
No doubt, our dairy industry is changing, but we have proven we can survive.
P.S.   Rod Carmichael has scheduled a complete herd dispersal for April 27.  Please mark that date on your calendars and keep Rod and Donna in your thoughts.

 

 

A Milkshed of a TN Dogwood Winter

We’re back!

After a hiatus that was longer than it was meant to be; Milksheds Blog is back up and running. This post isn’t going to be real complicated –  just a quick reminder of what a milkshed is – courtesy of a cup of hot chocolate!

Today, in East Tennessee, despite sunny skies, we woke up to a rather chilly morning in our ‘Dogwood Winter’  – freeze and frost warnings were a forecaster’s Sunday morning hymn!

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And after church, there was still a chilly undertone, and a cup of hot chocolate was the perfect answer to warming my bones.

My general definition of a milkshed is “all of the elements that come together to bring any glass of milk or other dairy product from the cow to the consumer.”    The picture below is a ‘snapshot’ of almost everything in the economic chain that came together in that one very delicious cup of hot chocolate.

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In this area, Dean Foods has a big footprint, and the ag community is so glad to have them in East Tennessee and North Georgia, bottling under the national Dean brands of DairyPure and TruMoo, the beloved regional brand name of Mayfield, and several private labels for regional grocery chains and big box retailers.   The direct jobs at the processing plants in the Athens, TN and Braselton, GA communities are important to economic developers in each of those townships.

And the pride that is found regionally in that Mayfield brand and those plants can’t be measured!

But not often considered is the much wider impact those milk plants have as they drive the farming industry in this geographic corridor.  There are hundreds of dairy farms and thousands of cows that have a purpose and are sustained because of those milk plants.  And extended from that, hundred of row crop and hay farmers grow grains and hay that get milled into feed for those dairy herds. Even farmers outside the area benefit, because commodities find their way to feed mills in the area to get blended into TMRs for  those cows.  At some point, maybe some numbers can be put to that, sequence of farm economic events, but that will wait for another day.

I would be remiss if I didn’t mention there are several other milk plants within a 150 mile radius that utilize ‘local’ milk, but we’ll discuss them on a future day.  Today, DairyPure was in my fridge, and thus in my hot chocolate.

As for the hot chocolate mix – I bought it because of the ‘milk bottle’ container originally, but wow, is it great!  It is made by Burnham & Mills in Vermont – if you’d like to order, try clicking on their name.

Milk is white, and looks simple.  But a milkshed can be far more complicated.  We’ll explore more – after I finish that cup of hot chocolate mix!  These chilly days won’t last long!  Until next time – drink a few gallons of milk in your milkshed!