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Dean Foods Declares Bankruptcy. Milk Co-Op May Take Over Dean's Plants


The business of getting milk from cows to stores is not easy. And as Frank Morris of member station KCUR reports, the nation's biggest milk company recently declared bankruptcy.

FRANK MORRIS, BYLINE: Out on Eric and Julie Neill's farm near Freeman, Mo., there's a quiet building full of dusty equipment.

ERIC NEILL: So there isn't much dairy left in this barn.

MORRIS: There are milking machines here, stalls, hoses, feed. But something's missing.

E NEILL: Cows. Yeah, cows. I hate that I could not - I hate that I couldn't continue to do this.

MORRIS: Julie Neill, on the other hand, is glad to be done with dairy.

JULIE NEILL: Just this morning, I looked out the kitchen window. And I can see the holding area. And I out loud said, praise the Lord. There are no cows in that holding an area. We did it, and we did it well. And it still didn't work.

MORRIS: Partly because the industry just outgrew Neill's small 200-cow operation. Many modern dairy farms are many times larger. And Michael Dykes, who heads the International Dairy Foods Association, says ever more efficient.

MICHAEL DYKES: We're producing twice as much milk today as we did 50 years ago with half as many cows.

MORRIS: And a small fraction of the farms. Fifty years ago, there were well over half a million U.S. dairy farms. That's dwindled to about 37,000 today. At the same time, milk drinking is way down - off 40% per capita, losing out to soy milk, almond milk and nearly every other beverage for sale today. And though milk prices are heavily regulated, they slipped below breakeven for Eric Neill, who had a total of one buyer for his milk.

E NEILL: I didn't have any options. That was it. And I did look at one time. I did look just to see if there were 'cause it struck me as odd.

MORRIS: And the number of raw milk processors keeps shrinking.


UNIDENTIFIED PERSON: The nation's biggest milk producer, Dean Foods, filed for bankruptcy today. The company, which also owns...

MORRIS: Dean Foods carried lots of debt. And its biggest customer, Walmart, fired up its own milk processing plant last year to become one of Dean's biggest competitors. So Dean's bankruptcy wasn't surprising. But Julie Neill says it was unsettling.

J NEILL: If the processors can't make it, who's making money on dairy? So if Dean can't make it, how - who's making money on it?

MORRIS: Well, there's these guys. Just an hour's drive from Neill's dark, mothballed dairy barn, there's a bright, airy, spanking-new office building with a gleaming, two-story milk sculpture in the lobby.

MONICA MASSEY: Yeah, no, truth be known, the CEO thought we should have a cow out back. And then when we started fighting over who would milk that cow every day, we decided we would just put some faux milk pour in the entryway to pay that tribute.

MORRIS: Monica Massey is executive vice president of Dairy Farmers of America or DFA, the nation's largest farmer-owned milk cooperative.

MASSEY: It is safe to say that if you go into any dairy case in any grocery store across this country, our farmers' milk it is in that case in some way, shape or form.

MORRIS: Last year, as Neill and 27,000 other dairy farmers were going under, DFA made more than $100 million in profit. DFA markets almost a third of the milk produced in the U.S. And Massey says it's always searching for new ways to sell it.

MASSEY: So in Springfield, Mo., we have a facility where about 99 percent of the Starbucks Frappuccinos in glass bottles that you would see around the world are manufactured there.

MORRIS: Flavored milk, powdered milk, cheese, cheese, cheese. DFA keeps buying brands and developing new products. DFA was already selling lots of the raw milk it buys from farmers to Dean Foods. Now DFA is poised to take over some of Dean's processing plants, primarily, Massey says, to make sure that all that milk keeps flowing. But Gerald Carlin, a Pennsylvania farmer squeezed out of the dairy business several years ago, isn't buying it.

GERALD CARLIN: They're not looking out for their members. They're looking out for, you know, getting more and more control of the market.

MORRIS: Carlin notes that DFA has settled big price-fixing lawsuits and faces another one. He charges that DFA is building a processing empire by undercutting the farmers who supply it. Not all dairy farmers feel this way. Eric Neill sold all his milk to DFA for years and still loves the co-op. Still, federal regulators will want to take a hard look at any move by DFA to buy more processing capacity to protect the few surviving dairy farms and to keep a lid on Big Milk. For NPR News, I'm Frank Morris in Kansas City. Transcript provided by NPR, Copyright NPR.