Updated at 3:45 p.m.
The 340 farmer-owners of the St. Albans Cooperative Creamery will soon decide whether to merge their century-old institution into Dairy Farmers of America, a much larger Kansas-based dairy marketing co-op.
Listen above to reporter John Dillon discuss the proposed merger with All Things Considered host Henry Epp.
St. Albans co-op board chairman Harold J. Howrigan, Jr. said it's a bittersweet time for the Vermont farmers. Up until now, the St. Albans Cooperative Creamery has remained a venerable, independent institution, one that supplies cream to Ben & Jerry's and ensures that milk from Franklin County cows ends up in ice cream pints all over the country.
Howrigan, whose family runs a dairy operation in Fairfield, said that he and others involved in negotiating the deal had to set aside their emotions.
"We had to look at our fiduciary responsibility to our cooperative and to our members," Howrigan said during an early morning call with reporters Tuesday. "That's how we had to change our deep feelings for our cooperative. We had to move away from that, and look at the financial position of our members."
The co-op's board of directors' decision to recommend the merger with DFA is the culmination of two years of strategic planning in response to a challenging market and a prolonged period of low milk prices.
"With increasing shifts in customer needs, an imbalance in supply and demand and a volatile milk price cycle, it is clear change is needed for our cooperative," Howrigan said.
He added that DFA can offer needed money to upgrade the St. Albans dairy plant as well as a clear vision for St. Albans co-op farmer-owners and their future.
"Our number one goal is to protect the equity that they have invested in the cooperative," Howrigan said. "Having worked with DFA since 2003 as a member cooperative, we saw this as a logistical next step, to merge with them and become part of a national cooperative with a national marketing presence, and also global reach."
Brad Keating, senior vice president and chief operating officer of DFA's Northeast Area, said the proposed merger would be a natural evolution of the existing partnership between the St. Albans co-op and DFA. And for now, that evolution wouldn't include a supply management system to curb chronic overproduction and depressed milk prices.
While the Vermont Milk Commission has called for such a system — which pays farmers a higher amount up to a predetermined amount of milk, and then a lower amount for their excess, in order to better match dairy production with consumer demand — Keating said there isn't enough agreement among farmers in the region about how to proceed.
"And so we continue to study it, we do utilize some of these programs in other parts of the United States where some of the milk market dynamics are different," Keating said. "But we generally listen to local farmers about what they want to see. And right now, it exists that there is no consensus yet.''
St. Albans co-op members will vote on the merger at a special meeting in late July. Two-thirds of those attending the meeting must approve for the deal to go through.
Mailings with details of the merger proposal will be sent out over the next 10 days, and the co-op will also host five regional meetings throughout the membership area.
If approved, a merger between the St. Albans co-op and DFA would mean that the hauling company McDermotts, the St. Albans Cooperative Store, and the St. Albans Cooperative Creamery plant would all become wholly-owned subsidiaries of DFA.
St. Albans co-op CEO Leon Berthiaume said DFA also intends to keep current employees and fold them into the new structure, which would add the 340 St. Albans co-op members to the 3,100 farms already in DFA's Northeast Area.
"I have seen the dairy industry evolve and the continued need for dairy farmers to work together," he said. "DFA has been a strategic partner and I am very enthusiastic about what they will bring to our members, community and state."
DFA has been the subject of an anti-trust lawsuit filed by northeast dairy farmers in 2014. The plaintiffs claimed that DFA, along with Dean Foods, fixed milk prices. That case ended in a $50 million settlement.
Correction 10:40 a.m. This post has been updated to correct the number of members in the St. Albans Cooperative Creamery. There are about 340 members, not 320.