COLUMBUS, Ohio — The dairy industry has seen a number of points, together with rising milk costs in addition to different challenges inside the industry. Consolidation is one other concern being handled by dairy producers.
One instance of consolidation could also be seen in Canton. The Michigan Milk Producers Association or MMPA, mentioned it is buying Canton-based Superior Dairy.
Spectrum News 1 agriculture knowledgeable Andy Vance mentioned the deal is typical of the related sort of offers and transactions seen in the dairy industry in the previous.
“Where you’ll see one cooperative or processor of milk and dairy products acquire another, merge with another one, this is very typical of mature industries in general,” Vance mentioned. “You can think about the number of industries that are out there, how many automobile manufacturers are there, how many jetliner manufacturers are there and so on. When you have a mature industry, it is only logical that the players will eventually consolidate. They will get larger and there will be fewer of them. And that’s what you see in the dairy space.”
Vance mentioned the consolidation is an instance of a farmer-owned cooperative buying an almost 100-year-old family-owned processor of milk in Ohio, so the cooperative that is already working in 4 states is now going to get even bigger, and serving the farmers in its four-state footprint.
The MMPA reported it plans to fabricate dairy all through its serviced states, together with Michigan, Ohio and Indiana, using a workforce of greater than 600 individuals and servicing dairy farmers throughout the Great Lakes area.
The merger with a cooperative could show useful to the farmers concerned.
“In a lot of ways, cooperatives have some advantages. Farmers tend to benefit from cooperatives because the profit motive, in other words, is to make the farmers profitable, not the cooperative profitable,” he mentioned. “That doesn’t suggest that the cooperative is not worthwhile, nevertheless it returns its income again to the members in the type of what’s known as patronage, normally at the finish of the yr. So the flip facet of that is you are taking a competitor out of the chain.”
Vance mentioned two totally different entities competing may pay extra to farmers for milk, however milk pricing will get sophisticated due to the federal milk advertising and marketing order system, although there are trade-offs.
“In different phrases, the place on one hand, farmers could profit due to the cooperative nature of the possession. On the different hand, perhaps that is one fewer participant who is perhaps bidding up the worth of milk, in this case,” he mentioned.
Acquisitions, like the one with MMPA, is one thing Vance mentioned ought to be anticipated to proceed in the future.
“It’s just really the nature of market economics. When you have mature industries there, the trend will be for fewer players getting larger. That’s just what you see across industries. And agriculture is a very mature industry,” Vance mentioned. “And we’ve seen this in other sectors of agriculture, not just dairy processing. And in fact, we see it at the farm level, too, where you have fewer farmers getting larger. Again, just the nature of mature industries and the economy.”