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Regulators Probe Potential Dean Foods Merger
USAgNet - 01/29/2020

Federal antitrust regulators are probing a possible deal between a major U.S. dairy cooperative and Dean Foods Co. as the dairy industry realigns after decades of declining milk consumption.

The Wall Street Journal reports that the Justice Department is discussing with farmers and retailers the potential impact of such a deal on milk prices and competition in the dairy business, as Dean explores asset sales after filing for bankruptcy.

Dean, the top U.S. milk processor by sales, sought chapter 11 protection in November after struggling for years with slumping demand. That month, the Texas-based company and Dairy Farmers of America, the largest U.S. dairy cooperative by membership, said they were in deal discussions, which have continued.

Some farm groups have raised concerns that a tie-up between Dean and DFA might lead to an excessive concentration of milk buyers in parts of the country. As U.S. milk consumption has fallen about 40% over the last four decades, fluid-milk production has shifted to a smaller number of bigger plants.

In 1980, 1,066 plants across the U.S. processed an average of 50.1 million pounds of milk annually, according to U.S. Department of Agriculture data. By 2018, there were 459 plants each producing an average of 103.9 million pounds of milk.

The plant closures and consolidation have challenged dairy farmers, forcing some to find new buyers and leading others to close their milking parlors. The Agriculture Department reported about 37,500 U.S. dairy herds at the end of 2018, down from about 57,000 in 2008.

A deal between Dean and DFA would unite two dairyland giants. Dean is the biggest U.S. milk processor by sales, selling $4.8 billion worth in 2018. Dairy Farmers of America estimates that it markets nearly one-third of milk in the U.S., counting Dean as the cooperative's biggest customer. DFA also runs milk-bottling plants and consumer dairy brands of its own.

The outcome of any antitrust review could determine the fate of dozens of plants and other assets owned by Dean. Competition authorities could ultimately decide to take no action.

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