“Global opportunities are now an integral part of our business,” shared Randy Mooney during the chairman’s address at the 25th Dairy Farmers of America (DFA) annual meeting on March 21, 2023. “Back 25 years ago it was all about the world coming to America,” he said noting dairy product imports were higher than the exports totals. “Over the next 25 years, America began taking dairy products to the world,” said Mooney.
To further grow its export wings, DFA closed on a transaction to purchase 80% of the ownership interest of Mana Agro, a dairy ingredients distributor throughout the Middle East and North Africa. The agreement has a pathway to full ownership for DFA. “With offices in Dubai and New Zealand, Mana Agro offers valuable insight and expertise in global dairy markets,” shared Kevin Strathman, DFA’s executive vice president and chief financial officer. “This investment aligns with DFA’s strategic initiative to secure markets and create new demand for dairy and will provide valuable insight in global dairy markets,” continued Strathman on the second day of the annual meeting.
The Dean Foods purchase
“We had built a financially strong co-op. As a result, we were in position to buy the bulk of the Dean Foods assets,” said Mooney. “We were prepared for the unpredictable,” continued Mooney of the demise of the nation’s largest fluid milk processor and the need to secure milk markets for DFA’s dairy farm owners. That Dean Foods purchase on May 1, 2020, also transformed the cooperative’s inner workings as the member milk processed at its solely owned plants moved from 15% in 2019 to 32% by 2022. That also helped reduce the milk sold to third parties from 55% to 34% during the same time span.
Overall, the Dean Foods purchase added 43 plants to the cooperative. These days, DFA has 85 wholly owned and controlled manufacturing facilities.
“These strategic acquisitions were not made to make us bigger,” reflected Mooney. “They were made to create value for producers,” he stated with the “value” portion being a constant focus.
“Our new scale and complexity caused us to evolve,” said Dennis Rodenbaugh in his first address to membership as president and CEO of DFA. “As we entered the pandemic, we doubled our manufacturing base and tripled our employee base,” continued the one-time dairy farmer.
Rodenbaugh spoke candidly about the labor challenges that continue to exist to this very day. “Labor challenges are real for all businesses,” he said, noting the cooperative had 2,000 job openings during the height of the pandemic. Those job openings also led the cooperative to implement some creative staff schedules to keep processing facilities running during the pandemic.
Those job openings also impacted labor cost. “At DFA, a 1% change in our labor cost is equal to $7 million,” Rodenbaugh said of the cooperative that employs 19,000 people and handles 3,500 loads of milk each day. All these innerworkings also make DFA the nation’s largest refrigerated supply network.
Given those financial realities, DFA’s leadership team did a deep study of plant profitability at mid-year. A few plants were sold, shuttered, or repurposed. As a result of those decisions, net income transformed from a negative $13.9 million in July 2022 and negative $9.3 million in August 2022 to numbers ranging from a positive $8.8 to $54.4 million from October to December 2022.
In addition to the Dean Foods fluid milk business, DFA purchased a pair of extended shelf life (ESL) plants as it looks to enhance manufacturing options for dairy beverages and ice cream mixes.
Farm owners are important
“You are the owners of this organization,” said Mooney to the assembled delegates. “We wanted to be sure we hired a CEO who understands farmers,” he said of Rodenbaugh being just the third DFA CEO.
“That’s important to us. Looking ahead, we don’t know the future, but we are prepared for it,” Mooney said, noting that no one could have predicted the Dean Foods demise or the COVID-19 pandemic.
In reflecting on DFA’s first 25 years, Mooney shared the following observations at the close of his chairman address, “What we do is important. How we do it is important. We did not get here without making mistakes. We did not get here by accident. We did not get here overnight. We did not get here alone.”