Progressive Dairyman: Direct Milk Supply Contracts: Less volatility and risk, more vertical integration

Dave Natzke, editor at Progressive Dairyman, wrote an article based upon a presentation by Todd Janzen about how dairy supply contracts are changing to reflect changing times in the industry. As consumers demand more information about their dairy products, more farmers are entering into direct supply contracts with processors.

Dave Natzke writes:

Relationships throughout the dairy supply chain – from the farm to the table – are changing. One touchpoint feeling the biggest impact regards dairy farmers and their supply contracts with milk buyers.

Attorney Todd Janzen discussed dairy supply contracts during a National Agricultural Law Center webinar, “The New Deal: Understanding Dairy Supply Contracts.”

Historically, Federal Milk Marketing Orders and dairy cooperatives have provided marketing order and protection for dairy farmers. While milk production has continued to grow, both the number of dairy farms and dairy cooperatives has dramatically declined.

Janzen said more producers are facing new challenges with supply contracts, either with their dairy cooperatives or with direct supply arrangements with private processors.

“It’s really a changing time in the industry,” Janzen said, citing current milk supply/processing capacity imbalances and last year’s situation when dozens of Wisconsin dairy farmers were notified they were losing their milk market within 30 days.

“If you’re a dairy farm, it’s almost a death sentence in today’s market,” he said. “Milk prices are bad, and it’s hard to find a buyer for your milk. It’s troubling to imagine that an entire business turns on one single contract, and one party to that contract can terminate it for any reason at all.”

Janzen said 2018 will be the year direct marketing of milk “comes of age.”

Read the entire article at Progressive Dairyman:  Direct Milk Supply Contracts