For dairy producers, the news couldn’t have come at a worse time.
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Dean Foods, debtor-in-possession (DIP), failed to meet its payment obligations to three Federal Milk Marketing Orders (FMMO) with May 12 due dates, as required by Federal milk marketing order regulations for April 2020 milk production.

The payments, officially known as Producer Settlement Funds (PSF), were not made for the Appalachin, Florida, and the Southeast FMMOs on or before the May 12 due date.

While PSF payment due dates vary in each of the 11 FMMOs nationwide, it’s unclear if Dean Foods will make its remaining payments due to dairy farmers in the other eight orders as well, including the May 15 payment due today to the Mideast FMMO, which covers Michigan.

In response to several Michigan Farm News inquires, Mideast FMMO Market Administrator Sharon Uther refused to comment on whether Dean Foods had met the May 15 PSF payment obligation, or how much the company owed the PSF, citing business confidentially concerns.

The non-payment is significant, resulting in lower milk prices paid to all dairy farmers pooling in a given FMMO, according to Michigan Farm Bureau Dairy and Livestock Specialist Ernie Birchmeier.

He added it will effectively lower regulated minimum pay-prices for all dairy producers.

“When PSF payments are not made, FMMO regulations prescribe procedures for how the remaining market-wide pool monies should be distributed to handlers,” Birchmeier said. “If PSF monies are not sufficient to make full payments to handlers and consequently producers, the market administrator is required to uniformly reduce payments to all handlers owed a payment from the PSF.”

PSF payments to handlers for all milk pooled during April 2020 are likely to be reduced pro-rata — affecting all cooperatives, independent producers and handlers in the FMMO pools, Birchmeier said.

“Consequently, the enforced minimum payments to dairy producers will be at the pro-rated amount,” he said. “The timing couldn’t be worse for dairy producers who have seen milk prices drop 40% since the onset of COVID-19.”

Should the PSF payments be recovered from the eventual Dean Foods bankruptcy settlement, full payments will be distributed back to producers.

Financial obligations for PSF payments for May 2020 and going forward will be the responsibility of Dairy Farmers of America (DFA) and other purchasers of previously held Dean Foods assets.

DFA completed the purchase of substantially all Dean Foods assets on May 1, 2020, including the assets, rights, interests and properties relating to 44 of Dean’s fluid and frozen processing facilities.

The potential sale by Fonterra of its Australian operations could have implications for the course of Australia’s entire dairy sector over the next five to 10 years, according to ANZ’s latest Agri Commodity Report.

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