ST. ALBANS — On Monday, members of the St. Albans Cooperative Creamery voted 99-9 to merge with Dairy Farmers of America.
The merger decision comes as St. Albans celebrates its 100th year.
St. Albans will officially join with DFA on Thursday, but no immediate changes for members or employees are expected, explained Leon Berthiaume, the CEO of St. Albans.
“I could not be prouder,” said Harold Howrigan, the chair of the St. Albans board, speaking of St. Albans membership and staff. The vote, he said, showed “tremendous support.”
There were 307 St. Albans members eligible to vote on Monday.
The merger comes as dairy farmers enter their fifth straight year of low milk prices, which has driven a number of Vermont farms from business. According to the Vermont Agency of Agriculture, 25 farms closed in the first six months of this year alone.
Merging with DFA won’t bring farmers larger milk checks, but it will offer them access to programs to let them better manage their costs and risk, explained Howrigan and Brad Keating, DFA’s chief operating officer for the Northeast Area. Those programs include discounted buying programs, insurance and risk management.
DFA has also promised to make substantial investments in the St. Albans processing facility and trucking operation, both of which will become wholly owned subsidiaries of DFA.
Keating said at a Vermont Senate Agriculture Committee earlier this month that DFA expects to invest $30 million in the plant and several million more in the trucking operation.
Engineering teams are currently evaluating the St. Albans plant, which has the ability to separate milk into cream and skim, and to create a variety of milk powders.
“Some of the investments could come almost immediately,” said Keating, speaking of retrofits and modernization of the plant.
DFA also plans to replace trucks and trailers used by McDermott’s.
According to Howrigan, St. Albans members have long known about the need for investment, but given milk prices the co-op has not had the financial wherewithal to make those investments. DFA, with 14,500 members nationwide, has greater resources.
One issue central to the merger will not be resolved until the end of October – the exact value of St. Albans assets.
In a cooperative, those assets are owned collectively, with each member having an equity account, which is closed when they depart the cooperative. How much equity a farmer has depends on how long they have been a member and how much they have paid, a function of how much milk they have shipped, toward maintenance or expansion of the cooperative’s infrastructure.
With the merger, the value of each farmer’s St. Albans equity account will transfer to a new account with DFA.
But farmers won’t know the exact value of St. Albans’s assets, with its liabilities deducted, and thus what will be in their new equity account, until a full valuation has been completed.
That valuation, said Berthiaume, will be issued within 90 days.
St. Albans will officially close its books on Wednesday.
“Anytime you close a business, there’s some costs and liabilities to be taken care of,” said Howrigan, who indicated that as of the last audit in October 2018, there had been 3 percent “slippage” in the value of farmers’ equity.
Since 2003, St. Albans has been a member cooperative in DFA. That membership meant the two cooperatives worked together to market their milk, that is to sell it to processors, and to collect milk from farms and transport it to manufacturers.
However, that cooperation did not extend to joint finances. “Even though we were a member of DFA, we were autonomous,” said Berthiaume. Full financial responsibility for the plant, the trucking operation and the store lay with St. Albans.
That will now change as the plant and store will become St. Albans Creamery, LLC, a fully owned subsidiary of DFA. The trucking operation, currently a subsidiary of St. Albans, will also become a subsidiary of DFA.
With the merger, “farmers will still have a voice,” said Howrigan.
The entire St. Albans board will join DFA’s Northeast Area Council. A member previously with St. Albans will continue to sit on the DFA’s national corporate board. And ten St. Albans members will be included in other parts of DFA’s governance structure, explained Berthiaume.