 Let's start, because we're limited to two hours, so we'd like to be out of here by noon. I'd like to introduce our committee, new party from Addison County, Anthony Polina, from Washington County. I'm Bobby Starr from Orleans County. We have Senator Randy Rock with us. It's on the finance committee here in the Senate from Franklin County, and Senator Kitchell, Chair of the Appropriations Committee, who represents Caledonia County. And Chris Pearson is the Vice Chair of the Committee, and he's almost in town, but I just don't like starting meetings too late. And so anyhow, I think Tom Berry's here from Senator Lay's office. There are any others from Representative Walter, Senator Sanders' office? If not Jenny Nelson's here, who used to be a legislator and worked for Senator Sanders for many years. The, some people have asked, well, why are we holding this hearing? And agriculture and our rural economies are really critical to our state. And up to this point, there hasn't been any open hearings for the state to know what's happening and what's going on. We value our dairy agriculture, which is basically 80, 85% of our total agricultural income for the state, generating roughly, I don't know, a million or more a day in revenue to the state and our rural economies. And it's very important how that, this merger deal all works out. And you know, I think if you added up what we in the state of Vermont contribute to our rural areas and our communities between us and the federal governments, probably well over a hundred million dollars a year with current use programs and all the different ag programs that we help support and fund. And over, personally, over my 40 years being in this building as either a legislator or a senator, you know, we've done, we've created many good programs. And I've always relied on the St. Albans Co-op for direction and it's always been good and straight up direction. And when we did the dairy compact, St. Albans Co-op was a major player in putting that together. And hopefully this merger will bring the same strong feelings with DFA to the state of Vermont, even though they aren't a Vermont Co-op. So what we're gonna do is the program or the agenda is set up so that we would hear from Secretary Tavitz and Diane Fosfeld in regards to dairy and how that works in Vermont. We'll hear from President, I believe, of St. Albans Co-op and then CEO of St. Albans. And then we'll hear from Brad Keating and if he has others to come with him, I guess gonna do it so all. We'll hear from him next. If there are farmers present and want to say a few words, we'll take them afterwards. Before we get to the farmers though, we have some questions. The committee has questions of St. Albans or of DFA. We'll have them up to answering questions or concerns that the committee may have. So I think with that, do any of the committee members have anything to say? Well, if not, we'd like to welcome Anson, Secretary Tavitz, and Diane off. If any of you, if you don't have an agenda, we do have extras here on the table. Well, good morning. Good morning. Good morning. For the record, Diane St. Tavitz with the Agency of Agriculture, Food and Markets been joined by Diane Boffel. Many of you know Diane for her expertise in the dairy industry for a number of years with the Agency. And I'll just to put it out, Diane began her career. I wanted for early jobs, was working for St. Albans. So she has background working there as well as the number of years here at the Agency. Well, good morning all. And I might begin by a few statements and then Diane is gonna go into a rather deep dive about the overall industry of dairy and where we're at and the landscape. So doing business for a century is a big deal. And even a bigger deal is the 100 years of hard work, innovation and commitment to community. The St. Albans Co-op is celebrating its centennial this year. It's a time to reflect, a time to look at the accomplishments of this Vermont dairy leader. And it's also a time to think about the Co-op's future. The 360 members of the Co-op faced a big decision this month. After two years of planning, the Co-op's board of directors have voted to recommend to their members a merger with Dairy Farmers of America or DFA. The proposed merger would make the Co-op's plant, the retail store and trucking service a wholly owned subsidiary of DFA. A critical part of the economy in Franklin County, the dairy industry contributes an estimated two billion to the Green Mountain State and the economy. According to the International Dairy Foods Association, dairy provides more than 4,000 Vermont jobs and farmers' expenses indirectly support another 12,000 dairy industry jobs. Now these jobs create more than $162 million in wages and they generate $127 million in Vermont tax revenues. Vermonters love our state because of our open farmland, our barns and our animals. And a key part of the Vermont brand, visitors seek out the renowned dairy products like milk, cheese, ice cream while they're here and while they are at home. No stranger to the business, the Kansas-based DFA and the Co-op have had a relationship since 2003. DFA has 115 members in the Green Mountain State and those farmers now produce about 67 million gallons of milk each year in Vermont. DFA has pledged to invest in St. Albans and Vermont planning to pour millions into the St. Albans facility to make it more viable. The proposal will offer farmers a more competitive market into which to sell their milk. We are all familiar with the fact that dairy farmers and dairy co-ops have faced enormous strain over the last several years and oversupply of milk, a decline in milk consumption and a highly competitive international market have all contributed to the challenging times. The proposed merger comes at a time when the statewide and regional dairy landscape is shifting. Dairy farmers now must decide if they want to join DFA. It's a larger collaborative that while it offers less independence has strength and resources. For farmers, this is personal. They'll push the pencil, they'll ask the questions and vote on their future. This is a serious decision for farmers. The Agency of Agriculture Food and Markets is watching the proposed merger closely. We understand that farmers are making pivotal decisions that could impact their businesses for many years. Others are watching as well, including employees, policymakers, and businesses such as Ben and Jerry's for my creamery and green-bound creamery who rely on milk from St. Almond's co-op. We will know the outcome of this vote soon. In the meantime, we are grateful for those wise farmers who started the co-op back in 1919 and those who have kept it viable and relevant in 2019. Thank you. Thank you. Any questions for Secretary Kevins? If I wonder, Secretary, does he think there's any possibility that this is gonna increase farmers' pay prices for their milk if this merger goes through? We're gonna see higher prices than we thought because of farmers. I think that is a what-if question and of course with federal policy. The esteemed foods have a record of paying higher prices for milk than their competitors since they've just controlled so much of a market. I think that's a question that remains to be seen. I hope to engage, if this merger does go forward, I hope to engage DFA in the proposal that the Vermont Milk Commission has put forward. We're looking at a growth management plan and we hope over time, if we can get that established, I know DFA has been at the table listening and watching us as we roll that out and I hope over time we can engage if the proposal goes forward that we can engage with them on a program that we hope will make it more stable and put more income in the farmer's pockets. You're aware that over the years, DFA's been sued by farmers and their members for trying to lower the price of milk performance if you're aware of that. Okay, yeah, it's been very public, yes. Thank you. Thank you, Secretary Dianne. Okay, thank you for inviting us here this morning. Dianne Boffville, Director. Can everyone here, okay? If not, just raise your hand. I'm the Director of Administrative Services for the Agency of Agriculture, Food and Markets and yes, I spent my first five years working for UVM Extension, 10 years with the St. Alvin's Cooperative Creamery and 14 years now with the Agency of Agriculture. So yes, I do have some history with the St. Alvin's Cooperative Creamery. You asked us today to look at the impacts of the proposed merger of DFA and St. Alvin's Co-op on Vermont farmers, the environment and the rural economy. If you do have that paper hand out in front of you, but the slides are up here and I hear there are handouts over there for those who are in the crowd. For the Vermont farmers, we're looking at the data that the Agency can collect. It's either through USDA or directly with the Agency. It's all public information. So we have the current farm numbers by county, farm numbers by size, farms by milk buyer. The environment, I think the RAPs, MFO, LFO regulations as well as regulations governing the plant, the rural economy, we have some data from the milk matters, the economic impact for cow, the number of jobs, dairy processors in Vermont, how many of those and by what size and where the milk goes and then some information on exports and gross domestic product. So this is the number of dairy farms, cow dairy farms, only in Vermont. We do have sheep and goat farms. The goats right now are 46 herds, commercial herds and the sheep vary from four to six, depending on when they're milking. They have a seasonal milk production schedule and most of them are going dry at this time of year so the numbers drop. So we began the year at 700, we're at 675 at this point out of the 1st of July. The count's coming in every beginning of every month so we haven't had an August count yet, of course. So seeing that change in farm numbers, it's a similar rate of decline as we saw last year and the year before. So we've been on this track to lose five to 10% farms per year so it has not changed and has not increased or decreased at this point. So if we look at the size of farms, this is the large farm operation, over 700 milking cows, medium farms, 200 to 699 milking cows, small farm operations under 200 cows and at the bottom of that chart, you see the CSFO, certified small farm operations. Those came into being as of July 1, 2017 that they had to certify. So we now see out of the total of small farms that in 2018, 273 of those had registered as certified small farm operations, milking 50 cows up to 199 cows. So there's the data of the size of farms. We've seen some growth in those farms that milk more than 700 cows, a decline in the number that milk between 200 to 699 but the greatest decline has been under farms that milk under 200 cows. For those two pieces of data, the farms by size and the number of farms by county, there isn't any information at this point that would show that this impact would change either the rate of decline or the farms by size. There's nothing that shows us that merging two cooperatives together is going to change either of those sets of data from its regular progression on the number of farms going out of business or the changes in the farm size. There isn't any data available to us that would tell us one way or the other the impact. If I may, what about the farms under 50 milking or under 50 cows could have a number of them? It would be a simple subtraction of the total of 587 minus 273 would be, 314, hard to do math while you're talking. So this is an important slide. As of June one, these are the buyers of milk in Vermont. So you have four cooperatives, AgriMark, Dairy Farmers of America, St. Albans Cooperative Creamery and Upstate Niagara Cooperative. All purchase milk in Vermont from farmers. 180 of those are with AgriMark, 114 are with DFA, 262 are with St. Albans and six are Upstate Niagara, but that is organic milk only. Independent buyers, they're not cooperatives, they're independent businesses that purchase milk directly from Vermont farms. Gorelloc, Four Farms, Horizon, White Wave is the parent company, so that's the operating company. They're in parentheses, 10, which is organic only. HV Hood Booth Brothers, 12 farms, that's just plain old conventional milk. National Farmers Organization NFO has 19 farms that are organic only. Stonyfield Farms, Inc., four farms that are organic and nine farms with Denone Company, which are also organic. I'm sorry, I omitted the organic in that final category there. We put Vermont Creamery up here, but that's goat milks only, and they have 19 goat milk dairies. And the farmstead is they milk animals, milk cows, and make a product. We have 51 of those. So they're milking some cows and making cheese, yogurt, butters. That's 51, that's a pretty good-sized category there. There will be an impact here. The merger, St. Albans Cooperative Creamery, 262 farms, would now add to the total of DFA. I took a math correctly. While you were talking, would be about 52% of the farms and the state would be shipping to DFA. You add 114 to 262. So they would have the majority of farms. Is there a concern that more than half of our dairy farms would be shipping to one producer? Is that two meg of the market share for them? Making them too big to fail kind of situation? I think that this category, or this slide shows that there are other opportunities for buyers of milk. Aggramark has stated clearly that they have a closed membership at this point. They're not taking on farms. Upstate Niagara being organic. There's a possibility there, but people would have to choose to switch to organic production if they chose. Gorelloc, NHB Hood for conventional milk are another couple of opportunities for farmers. But it does change the number of cooperatives that are available for farmers if they choose the cooperative route. And do you have a concern? Because I know you're an expert on the dairy market in our state. I'd love to hear you talk about it. So what should this be a concern for us? I think it's important that farmers have options. So if there were just one buyer of milk in the state, I would be very concerned. There are more than one. It would be, Aggramark has a closed membership at this point. Will that continue? I don't know if you'd have to speak with the folks at Aggramark. But the fact that there are some other opportunities from conventional milk for farmers to look to, I'm more comfortable than if there was only one buyer. Just to follow up on that, though, if Aggramark, at least at the moment, is closed to new, they don't really have options, right? Your word, garlic and hood together, takes 16 producers. That's my business versus Microsoft. It's not really, right? Yes, it does change the marketplace. And it is important for farmers to have options. That is very competitive to entice garlic or HB hood to buy that milk, possibly. So yes, it is a consolidation of farmers' choices of where to sell their milk. But a market is important. What is the option without this merger? I don't know. Well, plus on the other hand, it could be a plus because you've got more producers under one group that could supply a bigger supplier if need be. So I mean, it works both ways. And we have to consider all the different avenues. Are there questions? Oh, you're not finished yet. I'm not finished yet. No, you're not finished yet. Nope, not yet. Okay, the environment, I wasn't exactly sure of your area of interest there, but for the agency of agriculture, when we say environment, we think water quality and the dairy farmers that are available there, there'll be no impact by this merger on all the regulations impacting dairy farmers in our state, be it water quality, be it the pasteurized milk ordinance, there is no change there. There are regulations governing the dairy processing plant in St. Alvin's that will also still be in place. They are governed by ANR, but there are certainly permits for the disposition of spoiled milk into a person's manure pit or the wastewater going down the drain, the city of St. Alvin's as well as ANR have permits for that. So those, nothing changes there, but I may be misinterpreting your question around the environment, but that's how I would answer it. So I'm not sure if that is the, when you say environment, is that what you mean? Well, yeah, we wanted to make sure that the DFA milk is already going to St. Alvin's. So that won't change in the, of course, the St. Alvin's co-op furnace that merged with the DFA, they'll still be there. So it isn't going to add or delete to the amount of processed waste going into the waste. Okay, correct. So moving on to the economy. We did some work in 2011, 2012, excuse me, on milk matters is what we termed our work, but we looked into the economic impact. We talked about doing that again and the researcher at the Agency of Commerce and Community Development said there was not enough substantial change to run that data again. So this is from 2012, that every cow has a 12,500 economic activity impact on the state annually. Vermont has 126,000 dairy cows according to USDA. So that's a 1.575 billion economic impact, simple math there. This merger is not expected to impact cow numbers or the number of farms. There isn't data that shows us that there'll be an impact there. Vermont dairy industry from the data we collected in 2012, six to 7,000 jobs from the farms, feed, seed, fertilizer, equipment, dairy processing. At that point, it was 360 million in wages and salaries. I do not see any data that shows us the merger would impact the number of jobs associated with dairy. So the number of dairy farms isn't gonna change, the requirements for feed, seed, fertilizer, those companies are still there. And the statement that the processing facility in St. Albans would remain open, those jobs are still there as well as well as the store and the trucking company. Senator, it's 3 million a day of circulating cash that comes into Vermont from the sale of milk and dairy products, 3 million. That's through farmer's milk checks, the money coming back into the state from the sale of milk for further processing. The dairy farmer milk prices, that was brought up earlier. Dairy farmer milk prices are set by the base price is set at the federal level. It's a calculation and I don't see any impact on that base federal calculation from the impact of this merger. I don't see any changes there. It's a calculation, it's done at the federal level. There isn't this impact of this merger, there will not be an impact on that calculation of price. That's the minimum. That is the base price. You can pay above that to generate the money, but that's the base price and it's important to all of that. The number of dairy processors in the state, when they have to license with the agency of agriculture, they pay on a sliding scale. So we have this range of sizes for dairy processors and that's pounds of milk processed per day. 500 pounds are less, 510,000, 10 to 50, 50 to 100,000, 100,000 to 500,000, over 500,000. So those are pretty broad categories, but those are the numbers that are licensed with the agency by category. Currently we have 150 processors in Vermont. From the information we've been provided about this merger, there should be no impact on those number of processors. We just recently reached 150 and there's two or three more that are coming on this summer, but as you can see, the majority are 500 pounds or less. So they're very small, they either milk the animals themselves for a dairy cow farm that could be milking 10 cows or less and making a cheese, a butter, et cetera. So the majority have been in that size. So I don't see any changes from this merger on those numbers. This is a bit small, but we track, we get information as part of our regulatory work about where the milk first leaves the farm to who's buying it, to a processor. We get that information because that first buyer of milk is responsible for running antibiotic testing on that milk. That's the only reason we get this data. We have to know who's responsible for that milk. So this isn't going to tell you anything about how much cream went to Ben and Jerry's. It's just the milk as it left the farm. So that's the extent of this data. Doesn't tell you anything more than that. So looking at this data, where did the milk go? It's difficult to pull this all together. So we do this once a year. We have not done it for 2018 yet or 2019 because it's a lot of data to go through. So in 2017, you could see that the states where the milk went were Connecticut, Massachusetts, New Hampshire, New York, and remain in Vermont. 61% in the spring remained in Vermont. In the fall, 58%. And that's one month in the spring, one month in the fall. That's what stays in the Vermont and the rest leaves the state. The majority going to Massachusetts for further processing. So that has changed a great deal in the last 20 years. Yes, it used to be closer to 50-50. Now more stays in the state, 60-40. So that means we have more processing value added. Value added, the advent of Commonwealth and Brattleboro helped that change that as well. If we got a 17%, well, being from about 10 or 11% increase, how come our farmers are doing better with their value added bonus months? I think that's a question for the marketplace and how many customers total there are in the marketplace. And we know about Vermont. We don't know about the markets out of state. So I think that would be a great question for the presenters that are coming behind today. So this is, as it leaves the farm, this is where it's going to be processed. But then this 152,000 million, that isn't staying in Vermont after it's processed. Correct, if it goes to Ben and Jerry's Cabot, the last information we had on that, 95% of what Cabot processes and Ben and Jerry's processes leaves the state. 92% is that one. 95. 95. It takes very little to provide food, all types of dairy products to our 625,000 people. About 67% of the total milk volume produced in Vermont would feed every Vermonter every type of dairy product they could ever want for a year. It does not take much of our total milk to feed every Vermonter dairy products. So I guess my point is that this is somewhat deceptive. Yep, it is limited death, very limited. Only as it moves from the farm to the first buyer. And so if you wanna know. I'm just curious what manageries that Cabot would represent at that. Agri-Mar Cabot would represent a very large amount of that with their cheese processing in Middlebury and Cabot. Cheese and Cabot does other things besides cheese. And then the other large buyer would be St. Almond's Co-op that would take it into their processing facility to either separate it to cream and skim or process it into dried milk powder. Those are other possibilities, but those are the two largest in-state buyers. So if you wanna know what products the same volume of milk goes into, the majority of it is fluid milk, 33% fluid milk, 37% in the fall. That's the larger one and the majority of fluid milk processing is out of the state in the southern New England states. 21% for cheese, so you would think that is the majority going into cheddar in the state. And then the skim condense and cream would be that further processing that would help supply the likes of manageries. Cheese and cultured is a broader category, cultured being yogurts and sour creams, et cetera. I don't think this merger is gonna impact these numbers or these percentages per se because we know the difference in farm numbers from 2017 to 2019, but I don't think it'll change the percentages of those buyers, those buyers still exist. So I don't think there's gonna be major changes. Do you have listed here the amount of powder? Not specifically, it's in the skim condense and cream and butter powder. Here's the butter powder, but they're combined. Very little. Because we know the plant that's going to, we just know that the milk left the farm and went to this plant. This plant does all these things. They make cheese, butter, powder, to melt many plants in Vermont do more than one thing. So we're not getting the information that of this milk that went in, they made so much cheese and so much butter. We just know it went here and that's the products they make. See, because it's quite important not to have St. Albans with this merger, have them turn into a bouncing plant and produce a low grade product or a cheap product. To my knowledge, the money's in fluid milk, milk for consumers. And it seems like when you go down the list, if you look at what goes to Boston, it's pretty well known that that's fluid milk or sales of fluid milk. It's important to keep that fluid market going because that's the money driver. It seems like our value added products that there is value in. It doesn't really show in your charts that that's bringing a lot of profit back to the farm earth and it's all just economy, I guess. So the rural economy, again, dairy exports are important to this state. About 74 million in dairy exports occur in Vermont. That could be the dried milk powder, dried whey that are exported. This is from the US Dairy Export Council. They say 886 Vermont jobs are created by dairy exports and 169 million is the economic impact from exports. I don't see this merger impacting the exports. Dried milk powder will still be produced. Dried whey is not produced by this merger of these two cooperatives. The dairy companies contribute to the Vermont Gross Domestic Product. This is from the International Dairy Food Association. They say a 4.93% contribution to Vermont's GDP from the dairy industry, not just exports. I don't see the merger changing that number as well. So now I'm at the end. You have a very good question. You can always have questions amongst other questions. I mean, I might be a comment or a question, but I mean you talk a lot about things that will not change on the macro level and I think most of us would agree that we don't expect the dairy industry per se to change in the New England region except that there will be more control by the evasion of the milk supply. I'm really more concerned about the impacts on individual farmers. As I mentioned before, I wanna know if there's any reason to believe that this merger would result in higher paid prices for farmers. We know that about the base price, but we don't expect people to get the base price. That puts people out of business and if somebody controls the whole lot of the milk in the region, you would expect that they would be able to pay premiums and do things that improve the economic condition of the individual farmers and that's what we're not really seeing. The other thing is to talk to somebody. One of you mentioned that DFA has made a pledge to invest in Vermont and I wonder what kind of pledge that actually has been. I haven't seen anything in paper that pledges to make an investment in Vermont and I think it is possible. You've said that one of you has said that while the plant will stay open in St. Albans and yet I would argue that there's no guarantee that the plant's gonna stay open in St. Albans. We know that DFA and Dean Foods have shut down plants around the country as well as around the region. And we also know that DFA's made it clear in their papers to have the investments in Vermont and the treatment of Vermont farmers is gonna be subservient to other interests that DFA may have. So if DFA decides wants to buy an almond milk plant down in California somewhere and shut down the plant in St. Albans because they have to choose either the almond milk plant in California or the dairy plant in St. Albans, they may choose the almond milk plants in California. Nothing that we're gonna be able to do about it. So that's my concern is that and we haven't seen any real evidence that there's gonna be real investment in Vermont. We haven't seen any, heard any talk about higher prices for Vermont farmers. That troubles me. I don't think you have any answers to that because obviously you can't say if they're gonna pay more. It's not your job to say if they're gonna pay more but I think it's our job as representatives and legislators to stand up on behalf of the farmers who are making the milk and creating the value that this industry has and not getting rewarded for it. So that's the problem that I have with this in general. Well I think that question though would be better asked of DFA. Sure. Yeah I agree, we'll ask it in DFA and I think it's important of that as we all represent farmers whether we're with the agents here or with the legislature, it's important that we do what's best for Vermont farmers and ask those questions on their behalf. I think the similarities come where the, what is a cooperative and the St. Albans Cooperative Creamery is a marketing co-op. They are, within the members contract they will market the milk that you produce. The other thing that St. Albans co-op is is a buying co-op. Putting the power of all the members together to have the store and buy the supplies that farmers need. And DFA is very similar. They're a marketing co-op for the milk. They also are a buying co-op. And I'll let them talk about the different programs but member buying power together if you've got to have a deep dip for cows. You've got to keep the cows clean and you have to wash your milking equipment and you need all these soaps. The larger company can buy soap at a lower rate and get that potentially to farmers. And DFA is also a processor. They own brands. They own board and some other brands. And St. Albans co-op is a processor as well. Interesting contradiction of having to, on one hand, you want them to stand up for farmers and after taking for higher prices for farmers, on the other hand, they want to make their profit off of the processed products which necessitates a low farm price so that the processors can make money. I think we'll find out that DFA makes most of it when you have the processed products, not all farmers. I'll let them address that. But all of the co-operatives on that list that are in Vermont right now also own processing facilities. All of them. Agribar, DFA, St. Albans and upstate that. That's different than owning major brands that rely on low-mote prices to major brands. Cabot is a major brand. It's still different. Cabot, as far as I know, Cabot's not paying their farmers a higher price than anybody else either. So that's not necessarily a good example of somebody who's paying more. Yeah. So I think that is the similarity where I think farmers will have the same benefit of a marketing cooperative and a buying cooperative. So that merger. Which they already have. As you said, they already have. Correct. But the situation where St. Albans is in at this point, they'll have to address of why this merger is needed. But I'll let them, I think it's time for us to let the other speakers address those questions. Thank you. So, I guess we're all set. Thank you very much. We really appreciate you folks coming. Sure. And your comments and thank you very much. Thank you. While we're shifting gears here, Senator Cory Farron, who represents Franklin County and came in and you're from Senator Welch. Welch. Representative Welch, his office. Welcome. So, the next folks we'll hear from is St. Albans Corp and Harold and Liam. And what we're gonna do is hear from them in regards to the merger part. And we'll hear from that. And then we'll have questions for both groups together. Both you and BFA can answer questions, concerning questions that we might have as a committee. Yeah, good morning. Good morning. My name is Harold Largan Jr. Just like to start off by saying we're delighted that you've taken a keen interest in the dairy industry in Vermont and what we're proposing to do. However, as I'm sitting here, I hope that this isn't just an obfuscatory process that's with predetermined opinions and predetermined bias of the outcome. Hope for listening intently and learning and we'll divulge our process in the working through. Currently I serve as chairman of the St. Albans Cooperative Creamy Board of Directors, which is a 300-plus member owned private corporation. It is my responsibility as board chairman along with the rest of our board of directors to assure the decisions made about the cooperative's future will help secure dairy farming for our members well into the future. Like all other co-op board members, I am a dairy farmer. I'm a sixth generation dairy farmer in Fairfield, Vermont. Work side by side with my two brothers and our six sons, our families. We have four medium-sized dairies and a small maple operation. We operate in Fairfield, Glacier, Sheldon, and Fairfax. As a dairy farmer in business with our family, I want to do as previous generations have done to us in maintaining viable operation that is strong and will continue well into the future of belt markets that will provide an opportunity in the ever-changing dairy environment. The proposed merger of St. Albans and Dairy Farmers America is one that will not only benefit members of both cooperatives, will strengthen the dairy landscape overall. This merger will allow for needed reinvestment in a St. Albans plant and trucking fleet. And most importantly, this merger will protect our members' equity in belt markets. When the St. Albans Cooperative Board approached the FAA with a suggestion, it was after a great deal of strategic planning and evaluation. A big part of this planning fell back to the question, what do we want from a partner in our future? We wanted one that could protect our members' equity, one that could maintain competitive markets for all of our members, one that could handle class one fluid sales, one that shares our vision, a partner that had the resources to reinvest in our infrastructure and the willingness to do so, and a partner who could give us the potential to produce a branded product. With ease in mind, it was determined that the best partner for our future is Dairy Farmers America. DFA is no stranger to us, nor are we to them. Since 2003, we have been a member cooperative of the DFA and also co-owners of dairy marketing services. Our relationship has been very strong. DFA, as has been stated, has over 110 member farms throughout Vermont, some of whom were neighbors with our members. I should note the entire membership will merge, small, medium, large, organic, this is an opportunity for all. As a board of a small cooperative of just over 300 members, we have an obligation and a judiciary responsibility to look at the future needs of our membership. This merger will benefit both cooperatives. This merger will include transfer of full equity of our co-op members into DFA accounts, access to all their member programs and services. This merger will also ensure some major investments into what we already have. And to that note, St. Albans Co-op has a lot to offer DFA also. We have a production plan in St. Albans and a trucking company that moves milk all over New England and beyond. We have a cooperative farm store that offers a delivery service to our members and the public. St. Albans Co-op will bring to DFA membership that produces some of the highest quality milk in the Northeast. Any very valued array of markets where this amount goes. St. Albans Co-op has a robust young co-op program, the program that DFA hopes to build on with their young farmers. This is a tremendous opportunity, which gives us our membership, immediate ownership of 45 plants within the DFA system. The ability to increase capacity at the St. Albans plan to provide multiple branded products and array of dairy markets. The end result of this merger will be a stronger presence for our members in the dairy industry. The St. Albans Co-op more knows that the time is now to make a change. We too are dairy farmers and have faced the same challenges as our member owners in recent five years. Mount prices, although rising now for nearly five years have been very stagnant. Our customer demands are changing. Consumer preferences are changing. On the gold lifestyle, there's less meals at home. Consumption is changing on some of our products. The introduction of other products into the beverage market is robust. Competition for the consumer dollar is very competitive. As we merge, the St. Albans Co-op board and existing members will still have a voice in the industry, as well as within DFA. From a governance perspective, we will still have two members on the Northeast Council in the seat on the corporate board. However, for a transition period, all of our board will merge onto the Northeast Council. In the end, we are all dairy farmers dealing with the same challenges and issues. Whether named St. Albans Co-op or Dairy Farmers America, we all have to adhere to the same roles and regulations in the state of Vermont. We'll all ship milk into the same markets that we currently do. The question of supply management will continue to come up. In the end, it will be dairy farmers, member owners that will answer that challenge sometime. In conclusion, we are very fortunate to have this opportunity to be merging with a larger cooperative with a broader reach, multiple brands, more resources to work with. While the board unanimously recommends that the snowmen's cooperative merge with Dairy Farmers America, let's not forget that it is the members that will ultimately vote on this process. We are just coming off a round of member meetings that have been very positive, and we are not trying to circumvent the process. It is the members that will vote in the near future. Thank you. Thank you. Yes, good morning. My name is Leon Berthew, and I'm the Chief Executive Officer for the Sid Albans Cooperative Creamery. I've had the privilege of working for the Sid Albans Cooperative over 35 years. So during that 35 years, I certainly have experienced the changes throughout this industry. Again, dealt with opportunities at the same time where we've been able to grow our membership areas over the course of those 35 years, continue to build on the relationships we've had with our customers and grow with our customers during that time, and continue to add programs and services to our members. But at the same time, we also experienced the consolidation, especially from the marketplace during those 35 years. One of the initial time frames was really prior to enjoying the early 2000s where we've seen significant changes in the consolidation of our marketplace. We saw one of our key customers, Stop and Shop, decide in 2000 to contract their bottling and no longer bottle them milk themselves in their own facility. We saw Ben and Jerry's become a purchase by a Unilever organization. So again, we began to really look at that time, what is the strategy, the business strategy for Sid Albans Cooperative going forward at that time in the marketplace. We saw that it was important for farmers to work together and not to compete with one another. So at that time, we decided again, after looking at strategic opportunities to become a member cooperative of Dairy Farmers of America in 2003 and a part owner in Dairy Marketing Services that later that year, that provided us the opportunity to work hand in hand with Dairy Farmers of America to market milk here in the Northeast. It provided us the opportunity to garner greater efficiencies in the assembly of the dispatching of milk. It also gave us the opportunity to better service our customers and reduce the overall administrative costs again to support those customers. Again, we found during that period of time that again the marketplace continued to change and evolve and again more constant changes whether it's on the farm side or whether it is with our customers in the marketplace. So again, based on our fiduciary responsibility that Harold mentioned is that we need to take time and reflect what's transpiring with the industry today but what does it look like for tomorrow. The things that we needed to really address was the fact that we have been losing Dairy Farmers. You've heard Diane Boff-Belt say where we are in Vermont today with less than 700 Dairy Farmers. As I mentioned, we continue to see the consolidation and changes of ownership of our customers. They're no longer Vermont regional owned customers. They are now national or global in nature. We continue to see the increased demands from these particular customers and what they're expecting from us as a supplier whether it's on the farm or within it's the plants that we operate. We've also seen increased competition with the additional supply of milk. We have seen additional processes in other areas actually come and compete in the New England market. More importantly, in the most recent years we've seen the lack of financial returns for our cooperative that has again created additional stress on the organization. We've also had challenges as a dairy industry in terms of our own employee recruitment and retention at various levels within the organization. Our business model, again, of producing commodity bulk products, again, it's not sustainable. It does not provide us the margins necessary in order to support our dairy farm operations going into the future. And this has really taken us into that whole strategic planning that, again, Harold mentioned, that we need to continue to look at who can market our milk in the New England and the Northeast, who has the opportunity to work with us in terms of marketing our milk products from our plant, who has the opportunity, again, to build on branded products, to build on member programs, to really look at the plant synergies that was established as doing today, as well as the willingness and the ability to invest, as well as, again, who has, again, the opportunity to create synergies within our membership. And that's why, as Harold said, we approach Dairy Farmers of America. I'm gonna take a few minutes to share a little bit about, again, the impacts on membership, our customers and our plant, our employees, the community, and what if we don't move forward with this merger? As Diane talked about, farm numbers, but from, said, Auburn's Cooperative in 2019, currently we're at 325 farms that are members of the Cooperative. Of that, 230 farms are non-organic and 95 are organic. Again, all those farms would transition into Dairy Farmers of America as part of this transaction. Dairy Farmers of America and, said, Auburn's both have relationships with all of the organic handlers that has been mentioned by Diane in her overview. If you look at what we have in Vermont, again, at this point in time, we have 264 farms in Vermont, 59 in New York and two in New Hampshire. If you looked at five years ago, we had 314 non-organic farms and 92 organic farms. In Vermont, we have 330. So you can see our market share of farms in Vermont has dropped dramatically. Again, our membership, again, needs to remain competitive. Every penny on their milk check, again, represents significant dollars for our members. Again, but most importantly, in order for them to receive that milk check, we need to ensure that they have markets for their milk and milk products. In addition to, again, the markets, again, we've been always have been able to provide additional member services to assist with their cash flow as well as to leverage their purchasing power. Those particular programs are gonna continue as we move through this, again, merger if the members so decide to move forward and only to really build on to the opportunities that DFA will be able to leverage with our programs. When we look at DFA, we'll increase our overall membership inclusion and overall governance structure, again, with other opportunities. Again, it will allow us to remain with competitive programs in terms of what is being paid to dairy farmers. DFA has demonstrated year-end dividends and distributions as well as a greater opportunity to take benefits of 199 tax credits. They will, again, continue to support and extend our membership programs and services. Again, they're very much committed to technology and access to information both at the farm and the plant level, which will truly be beneficial to this next generation of dairy farmers. As Harold mentioned, again, they are investing in their youth and the next generation of dairy farmers and are excited about the program that said Aldens has for a young cooperative program and will continue to move forward. They have some of the shared values relative to the importance of members, what's transferring the farm, supporting the F-Iron program and leading those initiatives. Again, we will also benefit that our membership will become owners in the DFA brands. But most importantly, this will allow arts to really diversify the risks that our members currently have today. When we look at the merger consideration, as Harold has indicated, that our members will receive the full network value of the cooperative at the time that this transaction would close if approved by the membership. Which means that we will get the full value of the assets that we currently have and then they will assume the overall liabilities of the organization at that date. Again, with the balance of it being the members' equity will then be transferred to DFA. Our inactive members will continue to be paid out under our current Said Albin Space Capital Program. We talk about the customers in our plant. I think it's first important that we do again and market a significant volume of milk onto the New England market. As Diane has discussed this morning, but the plant really plays a significant role today more so than it ever has. When you look about the volume of milk that's remained in Vermont today, it's because of the need of the plant of Said Albin because there's been less volume demanded in the New England market. So today instead of again might be almost close to not quite double the volume of milk in our plant today because of the demands of the plant because we have less directive milk going to the fluid market. So this plant today is operating somewhere around 650 million pounds of milk on an annual basis. So it plays a very important role. This plant's again changed their seasonal demands or daily demands through the course of the year. It's our plant again along with other plants in the region that have to balance those other customers that are processing our milk. Just recently we saw one of our customers just close for two weeks during the July 4th holiday. That puts again this plant into again a different situation. And so that's what the role is of this plant. It's not only to be able to market key products out of that plant, but it's really to support all the other processors whether they're in Vermont, New England or the Northeast. When we look at our plant operations, one of the things that concerns us is that we have top five customers that represent 72% of our sales. So we have a high risk concentration with very few number of customers. And with constant changes with those customers, we know that we could be at risk for changes in our sales. Again, we continue to see competition, again for products. We've recently lost again a particular pilot project because others were able to provide that milk, again a lower price that we were willing to provide. Our margins continue to be challenged by these larger customers that we currently have as they're continuing to respond to their shareholders. So again, with reductions in margins that also has an impact to the overall membership. Again, when we look at the demands from our customers, they're looking more for product on product safety, more on product quality and additional testing, which again will require more investments in our plant. We invested in 2012 to 2014, somewhere in the range of $20 million, again to really upgrade our overall drying operations and packaging lines. But we were limited even at that time with the capital expenditures because there were certainly other investments we would have liked to have made at that point in time. DFA again brings the key of secure and key markets when we look at marketing of milk and milk products. Again, it brings us the opportunities to create more plant synergies and opportunities as we work our plant with their plants. Again, it's an opportunity to better serve the needs of our customers and reduce their risk aversion. Their concerns with Sid Alvin's cooperative is something happens to our facility, where will they achieve their product? So again, this will assist that they'll have greater sources for product. But more importantly, DFA's willingness and commitment to invest into the Sid Alvin's operations as Harold has mentioned, both of the plant, the store and McDermott's. They provide key resources that can support our operations. When we talk about our employees, employees along with our members are key to this overall transaction. We currently have 95 employees that support the world cooperative operations. When we talk about McDermott's, we have approximately 89, again, employees that represent the McDermott's operations. Within McDermott's, we have 23 that are out of Enosburg. We have 31 in Irisburg. We have 16 in Shorm, and we have 19 in Sid Alvin's, so that we are really part of the Vermont fabric and our economy. And those employees will all become part of the DFA organization, which I think is really important and a real opportunity for them. But we have concerns relative to our employee retention and future recruitment. When you look at our drivers and McDermott's, we have over 30 of our employees that are over the age of 60, and that creates great concern for me and for our dairy farmers. So when we also have a challenge is that we have a 24 hour, seven a day week business, again, as along with our dairy farmers that really creates more challenges in our workforce today, because their demands and their needs are different than what we've had from past generations. And so we need greater resources to be able to support what is needed to support this industry. Also as a smaller organization, we have limited growth opportunities for many employees. So DFA brings a larger bench to support our team and our operations. We have more sophisticated systems and information that will benefit our plant, our members and our employees. It will allow for growth opportunities for our individuals with greater training and resources that do strongly believe it will support our job retention and recruitment when they can be part of, again, of a national organization that will give them opportunities for the future. I know that DFA will invest in our systems and our equipment that is needed. And most importantly, they're gonna invest in McDermott's fleet and trailers. Again, that we acquired back in 2014 that we have yet to really be able to recapitalize at any great extent. And that's really important as it relates to job retention and job recruitment. From a community, I'm pleased that they're gonna retain a part of, again, the subsidiary of the name of the St. Alvin's Creamery LLC. The St. Alvin's board and staff has been fully engaged in this industry and we continue to plan to be fully engaged along with DFA. We believe that that will only create a greater voice. We, again, have made investments in our community over the recent, I mean, over our history when you think about what's transpired over the last 100 years. And we see those investments continuing. As it relates to our county community and St. Albans in particular, we paid over $350,000 in property taxes to the city of St. Albans, which is fairly significant in addition to being, again, one of their stronger users for their overall municipal services. Our employee base is really critical to DFA. And DFA, I know, will continue to use our board and our employees to be engaged in agriculture and in our state. And I know that the investments in all of our operations will benefit our community and our state. The impact, if we don't move forward, and this is what we've shared to all of our member regional meetings that Harold has referred, is that if we do not move forward, we're gonna continue to experience increased operating costs to support the demands of the business. This, in turn, could result in also an additional loss of membership due to our higher operating costs. Or, again, also just experience loss of membership because of the economics. It will require members to increase their support to achieve the necessary operating results. It will also, again, will have a continued risk to the membership of any market changes or changes in our operations. We will need to see increased demands for capital contributions so that we can continue to invest in the plant in McDermott's really to meet the needs of our customers and our employees. We can't all do that soon enough on our members alone. So, again, why DFA and this merger? I think we are on an offensive strategy. We will secure markets and provide greater market opportunities for our products, improve the infrastructure for dairy in Vermont in the Northeast, support the needed investments to meet the demands of our customers, support our employees, benefits for our part of a larger team, continue to support our communities with greater investments, and will provide our members to be part of a member-owned, governed cooperative with extensive member services, with diversified business base, and a strategy that will benefit them for the future. We encourage you to embrace and provide support that is essential for our membership. Thank you. Thank you. Thank you, Leigh. I have a quick question for Gorda and then back up. Yeah. We have some questions that I would have wanted. Can we ask some questions now while we're, we have an ARPAT, what they can tell us? I'd rather have them answer all the questions, either one or the other as we actually hear from DFA. So, keep your notes. Yeah. Brad? Good morning, everybody. My name is Brad Keating. I currently operate out of Syracuse, New York, and I presently serve as the senior vice president and chief operating officer for DFA in the Northeast area. I'm a 25-year veteran now of working for dairy cooperatives and working for dairy farmers. I've been in the industry for 30 years. I started my first five years on the processing side. The last 25 years have been primarily dairy-leaf cooperative who merged in 2014 and now dairy farmers of America. My current responsibilities as chief operating officer, I market the milk. I deal with the members. I deal with the regulatory agencies. I deal with the market administrators. We negotiate for price. I deal with logistics companies to get the milk moved from point A to point B. Basically providing support services in Syracuse on everything from communications to human resources to accounting and finance. I have a long history with the St. Albans Cooperative Cramerate. I've been kind of the key relationship manager now for about 16 years in terms of the breadth and depth of our relationship. I'm pleased to be here with you and talk a little bit about what we're doing, share some data with you, talk a little bit about what DFA is, talk a little bit about how we're thinking about the merger, how it works, and then certainly here to answer your questions at the conclusion of my comments. You know, if you look at DFA, our strategy simply put is about threefold. Number one, we market the milk of the members. And I'll talk about the size and the demographics of our members in a minute. That's the first thing that gets us out of bed every morning is making sure we get the milk off the farm and get it to the right location, market it effectively, and try and bring back a competitive price level. Number two, we provide programs and services for farmers to try and help them do a little better with economics on the farm. And it could be anything from a risk management program to an insurance program, to a buying program, to a financing program, to an energy program. In certain parts of the United States, we actually have grazing programs to help farmers that graze. So we try and provide services and programs that create really meaningful value on the farm. We can't always control the milk price, but if we can help them be more profitable along the farm, we do that. The third point is we actively engage in putting together packages to acquire, grow, build, and acquire brands and markets. We take the equity that farmers invest in DFA and deploy it in commercial investments, operations, plants, brands, product lines, teams, innovation, all of that. We take the equity and deploy it into markets to try and better the farmers for the long-term shake in terms of how they market their milk. In terms of DFA, we have seven regional areas. So we are a national cooperative, but we're broken into seven operating areas. I am in the Northeast area. And with that, we have local representation, local governance, and we really believe it's grassroots coming up. Farmers into the areas, into the councils, up to the corporate board. That way we remain touched to the community and focused on the farms in front of us by a single area. We have the Northeast, Mid-East, Southeast, Central, Mountain, Southwest, and Western area. That is essentially the breakup of DFA. That is the areas that we operate in and I currently manage the Northeast area. With this merger, this would be the Northeast area of DFA. Some metrics that I wanted to give you from farm size. Because sometimes we look at DFA with the overall size of the cooperative, our reach, but we sometimes forget about the literal size of the members. DFA today has 8,100 farms around the United States. 8,100 farm locations. 7,300 of them milk on average, 77 cows. So we are essentially a small farm cooperative that's just fairly large. 77 cows on average. Out of 8,100, 7,300 DFA members milk on average 77 cows. Across the United States, we have 45 manufacturing facilities and we make all kinds of dairy products. We start at the lower end of the milk powders. We go into the whole milk powders, skim milk powders, non-fats. We then go up to scale into cheeses, whether it's mozzarella or a cheddar or a specialty cheese. We then move up the chain again into the cultured area, soft products, where we do a significant number of class two products. And finally, class one. We have a number of class one facilities. In my region in the northeast, we own four of them here that we've acquired in the last seven years to basically take our milk and put it in the class one. So we are across the spectrum of products that the farmers own. These facilities, they put their milk into their facilities. They get a milk market, a competitive return from the facility. And if we do it right, profits and patronage that come back to them at the end of the year from the profitability of their cooperative. Let me shift to the northeast and give you a flavor for the northeast. That was some national numbers. In the northeast area, we have 3,100 member farms across the northeastern states. 2,600 of them milk on average, 38 pounds. So out of 3,100 northeastern farms, our membership, 2,600 of them milk 38 pounds. 38. 38. Again, we are in my words, a cooperative made up of small farms. And quite frankly, I'm proud of that and proud to work for that type of organization. In Vermont, we have, I checked my number, it's a little different than what I've heard, 113 active members right now. And 77 of them milk on average, 49 cows. So again, just some metrics to give you a sense of our size of our membership and who we are to talk a little bit about just the flavor of the event. In the northeast, we have 11 manufacturing facilities. We're across various product lines. We do everything from contract manufacturing to mozzarella cheese, to cheddar cheese, to a host of fluid products across a number of facilities. We're also big in butter. And so we have 11 operating facilities right now in the northeast that we put our milk into. Again, for a milk market, returns from the market, header of returns. And again, if we do it right, profits and patronage that ultimately come back to the farmers. We've had a very long relationship with St. Albans, a proud relationship. Leon and Harold both touched on it, but we've been together now formally for 16 years. We've had a member cooperative relationship where St. Albans has been invested in DFA. They've had governance where they've had positions to sit on the northeast area council. They've had governance where they sit on the national board of directors. We've worked together on everything from industry initiatives, to joint milk marketing efforts, to collaboration in terms of looking at the northeast area. So it is a long standing relationship with I think good cultural alignment as we look at each other and work together over the years. I'm here today to support St. Albans. They gave you a long message, a litany of the reasons that they have looked at the reason for this potential merger. And again, it's up to the members to decide if they want to go forward with this. But hopefully it meets their needs and it benefits them into the future and that is our intent and our goal, is to make sure it does. You know, looking at this merger, whenever you perform one of these transactions, we basically broke it down into three, fairly simple goals. Number one, protect the members' equity. The St. Albans members have invested in their cooperative for the last 100 years and they have ownership in that cooperative. How do we protect it? So the equity transfer's over. Number two, major reinvestment in the plant and the transportation company. And as I sit here today, we have earmarked in the first two phases over $30 million for the facility, for modernization, flow, compliance, throughput. We have another 5 million earmarked for the transportation company that would go to trailers, tractors, power units. And then finally, number three, to stabilize and strengthen the milk check. How do we look at that milk check and how do we think about ways to stabilize it and strengthen it, either through product lines that are milk marketing, more returns from the marketplace. I would even say cost aversion or risk. But those are the three goals. Protect the equity, reinvest in the assets, strengthen and stabilize the milk check. That is the path we've been on. As we move forward, a couple just reiterating comments to back up Harold and Leanne. Assuming a positive merger vote because this is up to the St. Albans members at this point. St. Albans members become DFA members. They become part of the Northeast Area Council. We retain employees, so we keep the employees in DFA in terms of the transportation company, the facility, the key staff. They become DFA employees. We reinvest in the plant. And so we immediately get to work. Again, assuming it goes forward, we have engineers and people ready to go. We reinvest in the transportation company in terms of trailers, tractors, ways to logistically get the milk. We look for new product lines through the store. St. Albans has a wonderful store that the members use that the public uses. Are there ways that we can dovetail some of the member services we already provide through DFA with St. Albans to bring better member offerings? St. Albans board members become part of the Northeast Area Council. All seven of them. Inclusion is good. So that we're working together, looking at what the marketplace is doing, making the proper decisions. St. Albans keeps representation on the DFA corporate board. So that there's representation on the national level as well as the local level. We're actually adding additional delegates for more representation so that St. Albans members can participate not only locally, regionally within DFA, but nationally within DFA. So that the voice is heard. Again, with DFA as a grassroots organization, there are ways that members locally can participate in districts that ultimately participate in an area, that ultimately participate in the national picture. In the Northeast, for example, we have 15 local districts where we've broken our size up into more local areas with local leaders and directors so that the members have a place to go to certainly have communication. I'll conclude my comments with that. Again, I wanna thank you for the opportunity to be here with you. Certainly answer any questions. And with that, I will entertain questions probably along with Harold and Leon. So thank you. Thank you, Brad. Harold, Leon, do you want to come up? So thank you to three of the presentations that was well explained. And so I'll get to the question time. Chris. The, I guess my question is for St. Albans, guys, we heard that you've been exploring this for two years at least. And one of the themes is investments in the plants in Alcatraz. And I think we can all appreciate what's been around for two years in the industry. So it's not surprising, yeah, more than two years, but. But then this spring, I guess it was March, we heard that DFA was doubling the payment that producers were, forgive me, I don't remember the terminology. They're equity payments, so per hundred weight. And so I'm curious, I assume if the merger went forward, that would apply to our farmers as well there. And I'm curious if you, if that paused your thinking at all or if you considered what would it mean if those investments were coming into St. Albans, since that would obviously, I would assume, mean you had more money to make investments locally without a merger. You see my question? Yeah, yeah, good question, Senator. So I think it's a general knowledge in the greater co-op world that we co-ops, bigger, smaller, all gonna need a little more money to work with that equity, as Brad stated, has turned into assets, infrastructure, to reinvest in brands, innovation and process and Brad can answer better, that was a long-term looking at their financial structure that they needed to raise their equity level. As far as did it waver our opinion on what we should do, no, not at all. Currently our equity contributions are very similar. Change will be, as of January one, we realize as dairy farmers to combat these global companies that we should help to to protect our assets that we have in this country and to reinvest, it is gonna take more dairy farmer dollars. Yeah, I just wanna just tag on just to Harold's comments as it relates to what if, you know, that capital increase wanted to set ovens directly, you know, the intent here is that, unfortunately, the investment that's required is really to address some of the things that we need to upgrade the overall facility wouldn't necessarily add additional returns to members as a result of that. It's more about, again, making sure that the plant continues to, one, operate, replace equipment, two, again, meet the demands of the customers from a, again, product safety, product quality perspective. So, again, when we're looking at investments, you know, we need to also look at investments as DFA is done, really to look at other manufacturing type operations that will bring greater value and returns. But we didn't, we don't see that, again, from a said all that's been able to do that alone. Anthony, you had a question. I'm sorry to start. First of all, I really appreciate the summary that Leon gave, I really appreciate the impact that St. Almond's has on the state of Vermont and that you link it up really well. I think you deserve the same kind of $700,000 a year salary that the CEO of DFA gets as well. You probably don't get quite that much. Couple of things, I mean, I was concerned about the doubling of the equity payments as well, but also the idea that it seems in terms of the co-op's value, it's gonna be audited and the book value is determined and whatnot after the merger takes place. And that seems kind of strange to me. It seems like if I were gonna buy a house, I'd wanna know what kind of debts there were on the house and what the house was really worth before I decided to sort of go ahead and buy it. So that just to me seems to me, if I was a farmer and I was wondering about whether to vote on this merger or not, I would, my first instinct would be to say, I think I wanna wait until I know what the actual value I'm gonna get from this merger is gonna be as a farmer and as a company. And it just seems really unusual that that's not happening before the merger, instead it's happening after the merger. Is it, is the question, is that happening? Just wait and see if that's a question or a statement. Why are you doing it that way? So net value is a snapshot in time of your assets, your infrastructure, what you have on hand of that day. That's what it is. We audit our books every year and the farmers full well know that is mailed out to the members. They know what the net book value is as a... But at the same time do they know then the impact that the merger will have on them in terms of their individual values and whatnot? They have been apprised of what will happen to their equity when we merge. Because DFA's sending their reports, their papers that this comes gonna be determined after the merger. So I just wonder why this is contradicting. You're saying on one hand it's all been started out there. DFA's, when you read the material, it says it's gonna happen after the merger. So I'm confused as to whether it's gonna happen after the merger or before the merger. So one is again, the net book value again is created technically on a daily basis. I mean in terms of what transpires with the business each and every day. So what we've shared with the members at the regional meeting is what their net book value was as of October 31st, 2018, which was the last time that there was a financial audit completed. Obviously since that period of time, members have added to their capital accounts during that period of time. So the intent here is again, obviously, is that whatever the end of this time period when we close, again it'll be another evaluation of the, again of our full balance sheet to make sure that all the assets are properly recorded, all the liabilities are probably recorded. Again, obviously the balance of that is the equity of the organization which will be transferred over to members' names on the DFA's side. So they do have an estimate as to what the net book value is in that process. The members are given statements of their capital accounts that they have. Obviously they will have other statements that will come forward as we close, again this time period again. So they will officially have the information from state office as they go forward. And we certainly answered questions to the members over the last month, if you will. Thank you. I have a question, not being a farmer, very interested in my neighbors and farmers around the state. One thing we have come to the conclusion of is the major problem with our pricing structure is it's Washington to start with national dairy policy. But the other issue is that we can control to some degree as a whole, not individually, is the supply of milk that we don't need. Whether you call it a two-tiered system or supply-demand-type system. And we went to Albany last spring, I think it was a year ago or more, and we've held hearings with no commission most all winter and this spring again, Secretary Tevitz has held hearings. And at our last hearing it was revealed that DFA was not really interested in putting together a supply-demand or supply-control system and I think Diane Mosbell talked with Syracuse or Kansas or somebody in regards to this and the word came back while their farmers wouldn't support it. And I guess my question is why wouldn't DFA and St. Albans was so-so on the supply-demand wouldn't commit. But we all know that if you over-produce whatever it is, the price is gonna get different and if you control that supply to some degree, the price is gonna go up. And if DFA is gonna have 31 hundred dollars members in the Northeast region, why can't a vote be put out directly to the farmers, not the board of directors, because I can imagine that there's big farmers on that board of directors. Not too many of those that have 77 cows probably sit on the board of directors. So why not send a ballot out to every farmer yes or no or maybe and get a result back. So Senator, let me give you some context to this. As I mentioned, DFA is broken into seven local areas. Three of them actually use a base access program. If you go west, the farmers on the west coast generally and maybe the mountain states have come up with a plan to use a traditional base access program or two tiers. When you go eastward, it becomes more difficult. Now in the Northeast area, we've studied this extensively for about three or four years. We actually formed a committee of farmers in the Northeast to look at this and study the programs. DFA's formed a committee nationally that has been going to Kansas City and trying to figure out is there something that should be done nationwide. The problem on the east coast is that the farmers are not necessarily in consensus on what they wanna see out of this program. That is an underlying theme. And our chairman has about 70 cows on the Northeast area council, Gerald Ewa. He's a small farmer. The farmers are just not necessarily in consensus. We actually brought this to a vote, a ham straw vote in March at our annual meeting when we had not only the board of directors there, like the Northeast area council has 15 or so. We had 200 people in the room and that would be farmer leadership with resolutions and delegates. 200 people and tried to bring them to a vote. Who wanted to chase a program like this? And we could not get them to a consensus. It was about a third, put their hands up that wanted it. A third did not want it and a third did not vote. So we just can't push it to a consensus position with the farmers in the Northeast area on what they wanna see. In meeting after meeting and I go out and do many farm meetings, invariably I run into a room where I'm talking to farmers about what they wanna see for policy out of their industry. And I'll have one side of the room say we desperately need this program now. And the other side of the room will say no, we don't. It happened again in one of our St. Albans member meetings when we were explaining the merger vote. Nice woman said, we need this now. And right after that, the gentleman said, no, we don't because how do we bring in small farms into this industry? This is a challenge that the industry's gotta work itself for in terms of driving the consensus. We've created base programs. We've actually created a base success program and demonstrated it to the farmers that said here's how it would work and we cannot drive it to consensus. And you present it to yourself? Yes. Maybe they like low milk prices, I don't know, must be. Same old same old, you're gonna get the same old same old result, right? For those of us that market milk, less milk would be invariably easier. Yeah, you wouldn't have to invest quite so much in trucks and tanks if it would produce. Or you would invest in something more value added. That's right. Yes. Okay, well thank you all of you for coming and sharing all this information with us. Specifically looking at the two of you from St. Albans, Brad and Leon. Oh, I'm sorry, no, I thought your name's wrong. Harold, I'm sorry. You know in Vermont we like to have our own Vermont products and we feel very tied to Vermont and Vermont farmers and the Vermont landscape and the Vermont brand. This committee has spent a lot of time this year talking about marketing Vermont milk and how can we get more people in Boston to drink our more kind of conversations which I know you're completely familiar with. And you know you heard me asked, I am in 52% of the market is too much for one cooperative especially given that it's dairy farmers of America, not dairy farmers of Vermont. So my concern in listening to this are two. One is that we as Vermonters would have sort of less control and less buy-in to our own milk and that our farmers will have less guaranteed that they will have a voice and that they will have a share in the benefits of this larger, bigger organization that is no longer Vermont specific. I think we as Vermonters, I'm not from St. Albans but I've been always proud that we have St. Albans Cooperative of Vermont organization. So I know that you have done your due diligence and I'm sure I'm wondering what specific guarantees you have that Vermont farmers will be protected and that the Vermont brand will be protected in this larger corporation. Well, that's several questions rolled into one but it's all fine. Brad's laid out their governance structure pretty well. BFA is owned by dairy farmers. They have a pretty strong grassroots network. Our members pending, I'll get ahead of ourselves. We have to get through this process pending a positive role will be part of that process. During the transition for almost two years, our board will have full representation on Northeast Council. So we'll have opportunity and with a delegate structure we will reach out to some of our members and get involved at a higher level. As far as the Vermont brand, it's Vermont milk coming off our farms. It doesn't matter what color hat we wear, it's still Vermont milk. Our St. Albans cream room will still be there. There's a lot of major brands around New England and Vermont. We think about hood, vending areas and cabbets and both brothers, they are here because the quality of the mountain is not gonna change. This will allow us, when we emerge to partner up with a cooperative that has a broader reach and more resources to work with around innovation and branding. It is opportunity for our members. So I mean, I asked if we've had some specific guarantees. I've sort of heard this sort of general more opportunity, more investment, more resources. And not a loss of control is what you're telling me. Is there anything, does your agreement specifically state that your processing plan won't be closed and that you're gonna get this kind of investment in your infrastructure or this kind of investment in your farms? I've only heard sort of general. So this is a process we're working through? Yeah. If you wanna hold that conversation in August or sometime later, we've gotta get there first. They are committed to the cooperative in the region. They have money here to work with our plan in our hauling company. So before this goes to a vote of your farmer members, you'll have those eyes dotted and teased crossed so that when the farmers walk into the meeting, they'll be able to see the actual agreement before they vote and know what they're gonna get out of it. The members have been fully apprised of what we're working on going forward. I'm not gonna get into proprietary numbers and information here as we haven't got there yet, but they are fully apprised of what's involved through this process. So I think the only, again, that I would add, I mean, obviously, you know, DFA is here today to support said Albans and support what, again, they believe is gonna be the best interests of all dairy farmers, both DFA and said Albans. And again, I've expressed to you publicly here in terms of what they plan in terms of investment, both in the plan operations as well as with McDermott's. And I think that's a major statement that has been made today, you know, in this particular forum. And so that's been certainly a commitment that also has been expressed to our membership. And Brad has been at all over five regional meetings. That Brad has participated in the past with our annual meetings as well. But when we look at, again, the marketing of milk today, as Brad has indicated, we've been working together for 16 years. Again, the day afterwards does not mean that anything dramatically is going to change in terms of how we're gonna be marketing milk, you know, in the best interest of dairy farmers. So the operations and those roles we're gonna continue as we know them today, but again, elevate what is needed, again, to have a better presence. I think there's also greater opportunities that DFA, you know, again, will explore in terms of how to capitalize on Vermont. One of the things that they believe, again, is an opportunity for them to increase the presence in Vermont. So the current relationship you have where you're a member co-op of DFA, is that correct? Yes. And that's mostly from the marketing side, so you, is that correct? So you've been involved in their ability to market milk more broadly, but not the infrastructure kind of investments, not those kinds of money on the table. Correct. So we haven't, again, since 2003, we've had, again, been a member co-operative of Dairy Farmers of America that allowed the state office to continue to have its autonomy, but at the same time be able to come together with DFA Dairy Marketing Services to work collaboratively in terms of assembling, dispatching and marketing of milk and working with our customers in the Northeast. And so I've had the opportunity to really be part of the overall management of DFA during this period of time, working closely in hand, because we also serve some of the same customers in other ways, so it's been beneficial working together. So the marketing has already been in place. It's more that this merger would be more on the money and the infrastructure and the employee side. So I have a question for you, Brad, Brad, right? Yes. So in your presentation about DFA, it sounds like you've had, for the last five to 10 years, pretty big expansion in DFA. You noted a number of years where you acquired other dairies or processing plants or brands. And I'm curious, we all know that the past five to eight years have been really tough for dairy and the price of milk has been record lows. And it sounds like, correct me if I'm wrong, but it sounds like your company has actually capitalized and expanded on these low dairy prices, that farmers have been suffering low dairy prices, but your company has been expanding off of the benefit of low prices for farmers, but your company has been expanding. So how do you reconcile that kind of juxtaposition where our farmers are suffering low dairy prices, low milk prices, but your company is doing super well and acquiring new assets all the time? You know, you look to the cause of what the low dairy pricing is. If you look at what's going on internationally, geopolitical, inventories in the EU, inventories around the world, EU milk production, there was a depression in the price of milk that hit everybody that really decimated pricing and has put farmers in very terrible straits for the last five years. Coming off a 2014 high level, very bad time. Now how are we trying to deal with this? The DFA farmer leaders are looking forward saying there's too many plants closing. We are better off as DFA members being more vertically invested, getting a facility, getting a market for the milk, getting a competitive return and hopefully driving patronage and profitability comes back to the farmers, because the risk of not having a place to go with the milk is too high now. And over the last three years in the Northeast, you've seen that play itself out in spades with farmers that don't have markets. So how have we been able to do this? The first thing we have to have is a market. I wouldn't say capitalizing on low pricing because if you look at our system of plants, we do everything from milk powder, we do everything from cheese to culture products and the fluid. Different times, different ones perform differently with milk prices, but the base milk price was caused by the international conditions really and too much milk across the United States and the region. So over this period where your business has been expanding and you've been bringing more farmers into your fold and you're continuing to do that here, what specifically has been the financial benefit for farmers? Number one, certainty of getting a cooperative with long-term stability, in my view. Certainty of getting a milk market and a competitive return from marketplace. Maybe not the highest return, but a competitive return. And I think that has led to farmers looking forward saying I could either go it alone and take this model, which I think is sometimes troublesome because the risk quotient is very high or I can get affiliated with something larger to take that risk off the table, get a milk market and get a competitive return. It'd be interesting maybe Diane can get us some of these numbers at some point where if we look at the number of farms who are leaving the market and going out, which model they are? Are they DFA farms? They're all in farms, agro-marked farms, independent. It would be interesting, I bet you have those numbers saying, just to sort of see, is what you're saying actually playing out in the market will be in five years see fewer farmers going out under your model than we will under other models because that's what you're saying, that certainty is the benefit that farmers are getting is you're not getting the higher milk prices. No, it's a certainty. We can't sit here and tell you today the higher milk prices are magically gonna happen because of this murder. It's a market price that people are getting. Now, we are losing farms in DFA just like everyone else because the basic economic conditions that are presenting itself to the farm do not allow them to remain. And that is unfortunate and sad. And that's what we're seeing across the spectrum across, I think, all two hours and all sizes. Chris? Brad, can you explain to us the relationship between DFA and Dean Booth? Because as I understand, that's your major consumer and just wondering why we, I mean, isn't that put us at a different vulnerability to be effectively shifting into a place where our farmers are gonna have at the end of the day one very large consumer? Dean is our largest customer, one of our largest customers in the Northeast area. So we sell them a significant volume of milk on a monthly basis. And doesn't that create a vulnerability? We've been talking about the five major customers for Staten Albans that was a vulnerability. Right, but again, at the same time, we have been providing along with DFA as we have marketing milk in the Northeast or some of Staten Albans milk that's going into the Dean Foods facilities today. So what transpires though is again, from a risk standpoint, again, the risk will be a lot less than Staten Albans members as being part of a larger organization than if it was just Staten Albans alone dealing with that particular customer. Just to further answer the questions, Dean is one of our largest customers. We also sell to other large customers like an HP hood. We sell to a significant number of the class two players in the Northeast that do Greek yogurts. We sell to a number of cheese players in the Northeast, very large cheese companies that basically take milk in for cheddar cheese or mozzarella. And we have a number of our own facilities, obviously. Plus we've tried to diversify risk by adding facilities in the Northeast over the last seven years by making four fluid acquisitions in the Northeast area. So to Leigh Ann's point, we're trying to take that risk and spread it with a diverse platform of marketing opportunities. Hanson. Sort of played on the last couple of blocks. I was just asking if you would agree that we have this long relationship with DMS and DFA in Staten Albans that's going back to, I think it was 2003, when in fact the plant in Massachusetts that Staten Albans was sending its milk to get through shop and shop was closed down. My understanding is at the time it was Dean Foods that paid stop and shop to close down that plant, which then shut Staten Albans out of that market. So Staten Albans had no choice but to start working through DMS and DFA. Do you agree with that? Trying to think about the ownership of that Franklin mass facility, whether it was Dean at that time or not, it could have been prior to Dean. My understanding is Dean Foods paid stop and shop to close down the plant. Again, from. That's not true. No, I think from a stop and shop's perspective, they made a decision that they wanted to move out of processing of their own milk volumes for their supermarket stores and to use the facility in, I think it's Reed Mill, Massachusetts as part of the distribution system. And so that's the decision that they made. And that. Put Staten Albans in the position of having to work through DMS. So again, put us in a decision back then. Our contract with stop and shop was assigned. And again, again, at that time, I knew more as garlic farms. So we worked through that process, but obviously we had time again for the board to sit and management to look again out based on what we've continued to experience and keeping in mind that we were seeing, what we knew is Ben and Jerry's also changed in 2000. And so again, another plant's going out. So we're beginning to see the landscape change. So again, our responsibility as management and a board is to make sure we're looking forward and positioning our membership, you know, in the right course of direction. And that's where the conversations and back in 2001 and 2002, we started looking at what's our business strategy going forward. And again, and when farmers can work together as opposed to compete with one another, we believe that again gives rather the returns to the members. And that's what we decided in 2003. My point there was that the influence as the ability to change the marketplace by choosing to shut down plans absolutely. I just want to be clear about that. Yeah, absolutely. I also wonder whether it gives you pause when you consider the fact that DFA has been sued a number of times by farmers and farmer members for, because the farmers claim that DFA has created a monopoly that has resulted in them being able to lower family addresses. You're familiar with those lawsuits? Yes. And you're familiar with the fact that there's a lawsuit currently going on the Burlington Federal District Court with farmers who are again claiming that DFA continues to sort of drive more prices down? I'm familiar with all those stories. That doesn't get you any pause? No. The only pause is that it's so easy for someone to sue someone in our society. But on the other hand, DFA settles out a court for $140 million or so, I don't know if that's easy or not, but there's, you know, when somebody settles out a court, you begin to believe that maybe they had something for some reason why they didn't want it to go in court and become more public. So DFA has settled at least two than I'm aware of, one for $140 million. The other one was more local, which would settle for $50 million, but then some of those farmers decided to keep on going and continuing to sue a federal court. The reason why I bring that up is partly because it has to do with sort of the trust on the part of the foreign members, but also because if something should happen in that lawsuit where the judge would should decide that DFA was actually in fault, they can actually ask DFA to, what do you call it, break itself up, and that's not the legal term, but to break itself up into smaller units and that would affect what we're talking about here, which is a merger between St. August and DFA could be affected by the outcome of that lawsuit, whether we know the outcome of that lawsuit for a while. That to me is another reason why farmers would want to think twice about entering into an agreement at this time. And my question I guess is for Brad is what was the net profit of DFA in the last couple years? It makes, on average, three years ago, 127 million last year, 109, and I think we're projected this year about 100 million, and when you look at the profitability over the mill supply, it's about 20 cents, 20 to 25 cents per hundred net profit bill. And is most of your profits tripled in the processing or from, you know, because you have DFA as the daring co-op, and yet DFA is a seller of brands, I would say. Yeah, I mean, DFA, if you look at it, structure is a milk marketing side of the business, it's a commercial side of the business, and the commercial side of the business is generally profitable. And then that comes back to the farmers, the farmers decide what they're gonna do with the profits at the end of the year, they can reinvest in the business, they can buy another business, they can update their infrastructure, they can strengthen a balance sheet, they can pay out patronage, however they want to do it, we pay patronage for the last six or seven years. But the farms still end up with low prices. Farms end up with low prices right now, I think because of what's happening from the global economic environment, just like next year we're already seeing increases coming up in prices because of the global economic environment. So of our 3,100 plus another, around 300 or so, what percentage of farms will belong to DFA here in the Northeast region? Ooh, I don't know if I know that the percentage of farms, probably the milk buying is gonna be around, the milk buying is probably on the order of 30 to 35%, that's what it has to mean. So you still won't be up to a half then? No. Because I hate to keep harping on the same old thing, but until we get that supply under control, we're not gonna get higher milk prices. The, it seems like I had another issue. Is there certain properties or are there any other properties that St. Alden's co-op owns that's getting transferred to DFA or to be kept by co-op or is- Co-op or assets or being transferred? They'll all be in the process. They're all equity. Yeah. Where's the job in? I don't think so. I think you, I really hope that in five years, you guys come back and we can see that fewer of your farms have failed and that your farmers are healthier and get higher milk prices and greater benefits. I know you're trying to do the best you can for your businesses and your farms and I appreciate that. I just clearly have concerns about Vermont farmers and Vermont products. So I want to just leave it there. And two years and then. Yeah, I'll try to make this quick. DFA is increasing equity requirements in farmers and doubling including the Vermont farmers. So I've seen that's to help the business make investments that it has to make. And I know one of the investments that you've made recently has been in the company. I'm not sure how to say the name, but Stemmer, maybe, do you want to have? Strummage. Strummage in California, which makes almond milk, oat milk, and soy milk, which a lot of farmers around here are kind of disappointed that those kind of products would be pushed into the market because they're not milk, per se, great almond juice and fruit juice and soy juice. It seems that we could be in a situation where Vermont farmers, through their equity payments, through their engagement with DFA, would be helping to pay for an investment in a plant that actually makes products that farmers don't like to see on the market and compete against them. Is that basically true, that that could be the case? Well, let's break it up. First of all, yes, we are increasing equity. The DFA Board of Directors has been looking at this for about two years and has decided that with everything that we're gonna have to do, and the farmers are basically saying, we want to be more invested in the marketplace to secure markets for the military. So that's yes, that's happening. Yes, we did acquire Strummage. Now, that does do almond juice, and believe me, as I work for farmers, nobody likes that type of product line anywhere near the dairy case. I get that. But there's also consumers drinking it. And let me make one final point. You're gonna probably see it in the next couple of days. We're now rolling out some brand new products that it's not just almond milk without milk, it's almond milk and dairy to start infusing dairy in the almond milk to try and make sure that we're protecting the marketplace and creating new products, come back to innovation, innovation, trying to make sure that we're getting new products in so that we can satisfy that consumer that will touch dairy, but get them a product line that has some dairy in it. And oh, by the way, Strummage is profitable, which means the profits come back to the dairy farmers. And technically they're now having profits coming off of alternative products. Right, but that's a piece of that plant as well. Yes, they do. With that, I want to thank you guys very much. Yeah, thanks a lot. Thank you. If that merger goes through, you'll be expecting to chat with you from time to time on making sure the investments happen, the trucks are updated and new trailers. I would be happy. And our farmers will get treated fairly. I make a commitment that I'll be happy to come back and talk to them. Yes, I know you will. Thank you. Thank you. And now we have some farmers in the room. I'm wondering, are you a farmer? Yes, yes. And I'm a farmer, I'm a farmer. And Vermont. Ainer? Yeah. Yeah. Well, I had grass to shoot. And also, Vermont Farm, I'll also remember, I'm a board of directors of national dairy producers, which is organization to do the better of the milk price for the farmer. And I submitted a letter I was going to read and you have this packet to the Vermont State Agriculture Committee. The National Dairy Producers Organization, Inc. National NDPO, is the only National Dairy Farmer organization comprised entirely of dairy farmers with the goal of dairy farmers sustainable from the building. Were you, this isn't all one letter. No, no, no. It's just a three page. There's exhibits attached to this. That's what it is. OK. Today, dairy farmer owned processing co-ops claim to control more than 80% of the milk produced in our nation's dairy farms. Dairy Farmer of America, DFA, is one of these dairy farmer owned processing co-ops that has contributed to the loss of over 180,000 dairy farms in the US since 1980. Most NDPO members are dairy farmers who are owner members of processing co-ops and or who pool milk under the federal order. The issues litigated in the Northeast Class Action lawsuit were the same problems and issues that many NDPO members have had with their respective processing co-ops that own and ship milk to. A, the management fails to comport themselves as a cooperative and fiduciary existing for the benefit of the dairy farmer owner members, but rather operates a dairy farmer owned cooperative processes as a for-profit corporation that benefits the membership at the dairy farmer's expense. B, the management fails to promote dairy farmer profitability. On the contrary, actively pursues policies and actions that promote dairy farmer losses. C, the management philosophy and strategy is one that promotes unrestrained milk growth, which in turn causes the milk supply in excess of profitable demand, which in turn results in dairy farmers selling their milk for less than what it costs to produce. D, the management fails to consider let alone implement a business plan that pays a profitable price for the dairy farmer owner's health. Now, DFA is a cooperative whose farmer's net equity has diminished over the last 10 years, from $722 million in 2006 to $470 million in 2016. Gary Genske, a fellow board member of NDPO, goes on to say that DFA is a cooperative that has not made any net profit from its own operations and has made profits only from joint ventures in all the last 10 years. Illustrated that only milk buying customers are making the money. Gary Hammond, then CEO of Mid-America Dairy, Inc. confirmed this in his 1997 article. The Mid-America solution is to use joint ventures. Mid-America has been buying equity positions in various fluid milk processing companies across the country. With the ownership stake in a plant, Mid-America agrees to supply the raw milk, leave in the bottling plant management in place, and splits the profit from the operations with their co-owners. That's exhibit B. After you analyze DFA's financials, the Mr. Genske provided to the court, you asked yourself, what profits? Where is the proof that profits flowed back to the memberships? In a letter addressed to United States District Court for the District of Vermont, the National Dairy Produce Organization, States Defendants, DFA, have always had management practices that promote management, profitability, rather than co-op dairy farmers' own profitability. Given the dairy farmers, giving the dairy farmers a voice, NDPO has provided opportunity to their 1,300 newsletter recipients concerning these matters, seed petition for representation, as well as a letter of opposition to exhibit B. I'll leave you with a quote that is quite disturbing when you consider that St. Almond's DFA merger is before us today. In context, in 1997, just one year prior to the formation of DFA, the quote is of Carl Bowman's president of Mid-America, Derriman, Inc. And I quote, large, four large co-ops handle 30% of the milk marketed by the co-ops. The 20 largest dairy co-ops account for 70% of all the milk marketed by the co-ops and 66% of the milk in the United States. That leaves 200-plus co-ops marketing what's left. There are 61 dairy co-ops registered in the state of Vermont. How effective can 61 co-ops be? He goes on to say, co-ops need to integrate to have a chance to capture more of the value-added aspects of the market. Mid-America is doing just that. That's Exhibition B. That was in 1997, and this is 2019. I ask each of you to ponder a moratorium to the proposed merger. If in 22 years, DFA has been unable to profit its member by participating in a reduction of the 61 dairy co-ops, how many more mergers do we need to witness until the producer profitability can finally be achieved? It's obvious consolidation of dairy co-ops is not the answer to producer profitability, respectively Robert Baum, NDPA director, and Vermont farmer. In New York, the 61 dairy farm co-ops is now, I counted it this morning. The last night is 19 in the state of Vermont. St. Alma's co-op will be the last co-op for Vermont. Thank you, Rob. Is there a question for Rodman's statement? There's a lot of information there. Thank you. OK, thank you. Yeah, thank you. Are there other dairy farms, Bill? Bill Rao? Well, I got a concern. We were Annapole producers. I get many. Jacques Brinkville, I get X farmer. And basically, we'd like to put the question to Fred King. We were shipped into DMS marketing. Do you have a personal question to ask him? OK, well, I guess I'll bring it up to the whole thing here. We were marketing two days. We were marketing two Annapoles to DMS. And they said, go find your own market. And we approached DFA. And DFA said, no, we're not taking you. We were lucky we had a little co-op here. And said, Alvin, I took them. That's what's nice about keeping little co-ops to be separate, not with these huge. Because you're entering to somebody way out west. And we're just a fish in a pond. And I know that, I guess, it's unavoidable that you have to merge. I guess my question to the Sinovnikoa membership is to put conditions. We all know supply and demand is a must if we're going to keep farming in Vermont. If DFA's got 7,000 small farmers, I think he mentioned, I'll tell you, I know 7,000 farmers, I'll tell you, they're really on the side of supply management. He's totally wrong. He's representing that co-op. He's representing their plants, like Anthony said a little earlier. That's where the problem we're having with these big co-ops. Co-ops is a good thing. The more we got, the better off we will be. This is my suggestion to the Sinovnikoa. They need to put conditions on supply management. They have to be supportive of supply management. That's it. Well? Bill Rowell, Dairy Farmer, Sheldon Vermont, St. Oliver's co-op member, you see everything today has merged, consolidation, hospitals, grocery stores, filling stations, schools, you're familiar with the schools. Yeah, they're better. That's what Mike and Stitch was telling me. They want to close their little schools and go to a big school. Yeah, they really want that. But what do you do when you have a situation where you wake up and you say, do we have a milk market tomorrow? How much is this costing us to go down this road? Can we afford to keep this plant open? Do we have enough throughput in this plant? It's a small plant, a small co-op to begin with. And we have to be competitive with the ones that have consolidated. Otherwise, we get crowded off the map. To some extent, that's what's happening to St. Albans. But St. Albans, in a sense, was pretty smart to team up with DFA and build that trust in 2003. That's 16 years now that they've been a partner. And you get to know how people operate. You have representation on their boards. You get to see the information. You get a feel for who they are and what they're trying to do. And if you're a farmer, for example, I think last year we produced on our farm 27 million pounds of milk. Who's going to use 27 million pounds of milk? Quite a few cups. Quite a few cups. So you better get things lined up so that you can market your milk at a competitive price with the rest of the country. It's not a question of whether or not DFA is making a profit. It's a question of whether or not DFA is competitive with the other cooperatives in the country under the federal milk marketing order system. Are we getting paid fairly? We're getting paid as fairly as we can get paid. Our problem with St. Albans is we're getting paid as fairly as we can get paid, but we're not competitive, so more has to come out of the Farmer's Check to stay in business. That's the problem. So myself, rather than to sit here and hang on to the edge of the table and wonder if we're going to be able to prevail for another generation, I'd like to join an organization that has value-added products, that has a command of the marketplace that can participate in the global market and move forward. Thank you. Thank you. Can I get quite a bit of truth? It's good to see you, Bill. Good to see you. Yeah, you two get along so well. We love each other, too. Yes. And I'm going to rock each star. Yeah, no rock. So as a farmer, are you on the board? Are you on the St. Albans Cooper? Well, I've been at the end of the plank for a good many times, but I'm not on the board. You're not on the board. So you're just an independent farmer, not associated with the management of the company at this point. Correct. And you're clearly supportive of the merger. Do you feel like there are enough, based on what you know, do you feel like there are enough guarantees or enough protections of individual farmers in this plan? Do you know the details enough to be able to say confidently that you feel like farmers and your other farmers will be protected? I understand your question. I understand the details well enough to know that there's a better opportunity with DFA at this point than there is staying St. Albans. It's going to be more expensive. There are less guarantees with some of these. Less guarantees with the current situation. With the St. Albans. Is it a lesser to evil situation or do you really think it's a positive step? Well, let me say it in a maybe a little different manner. If you look like something that washed in with the tide, how do you wake up one day and lament over the fact that the ship sunk? You know, I think we better pay attention here. I'm sorry to say, but it comes down to that, doesn't it? And we're not interested in losing our farm any more than anybody else's. So we're doing what we think we need to do to ensure a future for our farm and for our next generation or generations. Thank you. Thank you, Bill. Any other farmers that want to say yes? How are you? It's a marjorie year. We have a small farm in Cranbury. And I hear a lot of concern from you all today about us, the farmer. And I like that. That's nice that you care. This situation is between St. Albans and D.O.P. And I think that if we are going to keep farms in Vermont and like Diane said, we still have the same amount of cows right now, but that will change. We need to have this merger happen. We need to be able to move our mill. We've been on St. Albans since 1993. And that year is important because that's the year that Cabot merged with Agmark, two American companies. Cabot Creamery Farmers had a place for their milk. DFA is going to do that for us. St. Albans was in peril, or Cabot was in peril. And members Harold and the board has worked so hard to protect our member equity. And we've been on the offensive, like Leon said. The Cabot Board was not. And families lost thousands and thousands of dollars in equity. We won't. They're protecting our equity, which is huge. Agmark came through, gave them a market. The Cabot Creamery still got to retain its name under the same kind of way that St. Albans will. And they gave them opportunity. They gave them, the farmers, the opportunity to stay farming. DFA is giving us that same opportunity. We cannot afford to keep our plants running in the way that they, in the marketplace that it is required. You are talking about farmer pay price. And right now we're balancing 62 cents a hundred weight, which is a significant amount of money. The dangers and the risks of not merging with DFA, that balancing cost will come right off my back. Every other farm that is a St. Albans member, everybody wants to keep our small co-op. And we will. Parts of our co-op will stay St. Albans. And we're very supportive of that. I am. It bothers me that people here think that this is a conversation that they get to have. This is our choice. This is our choice. It is, I think Vermont should, if you're concerned about farms, we need to move more fluid milk. Figure out how to get the dean foods back up and running, moving milk. We have, that's important. The other thing that's really on my mind is these are American co-ops. They're both American co-ops. They're member owned by dairy farmers with similar values, similar concerns, and similar goals to go forward. Thank you. Do you have anything? Go ahead. That's not a question. I had just your statement. It's none of our business. Dairy is a massive part of the economy in Vermont. We're the Senate Act Committee. Nobody is sitting up here. I don't think suggesting that we have any say in the matter of the murder. Somebody asked us to put a moratorium on them. That it's not even possible. I think we're just poking around to understand what's going on for major part of our situation, for major part of the Vermont economy. But I hope you don't think that's inappropriate. That seems quite appropriate to me. Thank you. You're welcome. James Corker, did I see you? Do you have your hand up? Well, I just wanted to say that this is, I'm here to support St. Albans as a DFA producer, and I really appreciate it. What are you doing sending your note to DFA if you weren't your support in St. Albans? Senator, I went through a merger when we were Eastern co-op producers, then it merged with MMI, and then MMI merged, and those were all Vermont farms, and then MMI merged with DFA. So I think the opportunities, as Bill stated, are many. But I think it is the same on the choice, but this is, I want DFA looks like too. So I think sometimes the big value gorilla, and it's like, no, it's not. It's very producers in Vermont that ship to DFA, and we've been very fortunate to have a co-op, in my mind, that is really so proactive. And as Senator Starr always talks about, what are the new initiative? What are the new product lines? DFA has the opportunity to do that because of their resources. So I think that is, in my mind, very comforting. Yeah, thank you. Alice, would you like to? Come on, sit here. Come on, well, I'd like to have you sit there, but if you'd like to come right up, or we can all hear you. Okay, well, first of all, I need you all to correct your agendas. Do what? Correct your agenda. No, it's, you want to correct it? Yeah, you need to correct it. I get it, I get it correct. Well, it says Dairy Farmers of America, I'm not Dairy Farmers of America, and my name is Alice Allen, not Alice Adams. So that's kind of huge. I'll sit there for a while. Thank you, thank you. All right, and I did put my comments in writing, and I only made one copy for Anthony, but most of what I'm saying in here has already been said this morning by either Brad Keating or the boys from St. Almond's. But I think the reason that Anthony may have contacted me to speak here today is to share my thoughts on this pending merger because my late husband, Larry Allen, and I were the lead name plaintiffs and the only Vermont farmer name plaintiffs in the Northeast Dairy Antitrust case against DFA that was filed in District Court in Vermont in October of 2009 and settled in 2017. And for information purposes, any of you want to look on any of the documents that came out of that case, it's available on the web at northeastdairyclass.com. And it's in the letter I've given to Anthony as well. And as I say, a lot of the questions that I had and concerns I had have already been pretty much addressed. That was, what if the St. Almond's members vote against the merger? Will the St. Almond's board go ahead with it anyway? And does St. Almond's have a plan if the membership does vote down the merger? And does anyone question whether DFA is a true agricultural co-op or just a co-op and name only? And that has been brought up a couple of times from the fellow from NDPO saying did anyone pay attention to the allegations brought against DFA by farmer class members during the eight years of this class action antitrust lawsuit? And to list only a few of the allegations alleged all thing of DFA member milk samples at the lab, alleged threatening of DFA members by DFA field staff, alleged tampering with DFA member milk checks, alleged marginalizing or ignoring DFA member participation in DFA regional meetings. And I have to say, although these allegations were not experienced by all DFA member farmers in federal one, it's significant to note that 172 farms and that's 1.9% of the dairy farmer class in the antitrust case opted out of that settlement to move forward in the struggle against DFA by hiring another law firm, Neistrom Beckman in Paris, LLP in October of 2016. Their goal, they're called Farmers United, they're working with Neistrom Beckman in Paris. Their goal is to continue litigation in the hope of proceeding to trial on antitrust violations as well as other allegations such as those mentioned above. And as recently as May of this year, there have been filings in that case. And as we all have learned, say all of them's co-op board has been working with DFA now for a number of years. And I wonder if the St. Albans board is completely at ease with losing what market power they have and giving up their real identity as a co-op to such a large entity as DFA. The bigger question is, does St. Albans really have a choice? That's, I guess, the bigger question. St. Albans members have questioned the status of their equity in their co-op and what else they may lose by this merger. And it's hard to imagine how a farmer member can willingly accept this pending merger with so many unanswered questions. That would be my question if I was a St. Albans member. And my final comments are, despite my nearly half-century of involvement in the dairy business, I've come to the point in life where I have more questions than answers. We're facing consolidation on all fronts, not just in agriculture. Federal antitrust laws that are on the books have not been enforced for at least the past two decades, no matter which party was in the White House. Can we continue on this road? Will DFA be the only game in town in the near future so no dairy farmer will have any choice in markets? Is there really no choice for St. Albans but to merge with DFA? And I'm sure the St. Albans board at some point were wringing their hands the past several years to come to this decision to merge with DFA. And I want to thank you for the opportunity to speak and I would encourage any of you to look on the Oregon's dairy class website just to see what some of the farmers have alleged. And also the case, Farmers United, that's now with Neistrom Beckman in Paris and they're going to try to proceed to try it. Thank you very much. Thank you very much. Thank you. No question. We have one more witness on the phone. Mr. Harden. Yes, I'm sure. Yep, we saved five, six minutes for you. Okay, so I will attend to these and speak. First of all, I want to compliment Leon on his overview of the challenges and questions of modern dairy co-authors of management and marketing. My concerns on this merger are, first of all, the evaluation of St. Albans assets and liabilities by a member of the equities will occur after the merger broke. Let's see, backwards, farmers need to know that it's going into this economic marriage, if you will. Secondly, there appears to be little or no familiarity with your spend among your state farmers about relevant state law directing that president and former members of both co-authors or each merger co-authors may inject in writing in days prior to merger, both meetings. And if the merger goes through, those dissenters would be in line to receive their full equities back. There's a lot of money there, particularly for the retired equity holders of St. Albans and DFA. Thirdly, I think the state attorney general's office ought to do a quick forensic financial audit of DFA's finances before the merger is concluded. I will skip through the discussion of anti-DFA's past history of anti-trust settlements in the Northeast and the Southeast. Those have been covered. But note that in the past couple of years, DFA has been held back to put small co-authors out of business, including in New York, the South, Newverlet co-authors, and Cortland volt co-authors, whose members were instructed to dissolve their co-authors and drive DFA directly. In 2018, some 900 independent Northeast pit producers were informed that DFA would cease marking their melt-through DFA marketing services and that those producers would either have to join DFA or find other markets. The NFO situation with melt-through market was mentioned and the 85 members of the United Madison co-authors certainly are controlled by DFA last fall to join DFA to lose their market. Fortunately, those produced that co-authors found an alternative market through HP put. Now, my specific concerns focus on DFA's financial part. DFA's major assets are suspicious. Some of their major assets are suspicious, including goodwill of $247 million, intangible assets of $344 million and preferred equity securities of $375 million. Those items add up to somewhere between $900 million and a billion on $813 million of member entities at DFA according to their 2018 audit. Now, the preferred equity securities are really strange. They're listed as an asset, but in fact, DFA has taken approximately 45 million, 45% of its member assets and borrowed against them, paying interest rates according to the audit ranging from 7.125 to 7.825% interest rates annually. That's a huge premium to pay for an alleged asset. Moody's Investors Service in recent years has said that preferred equities are worth only 50% of base value. They contrast 14 years ago on No. 5, Moody's rated DFA's preferred equities as zero, saying they were debt-like. Now, what does the DFA assume with member securities? In January of this year, the DFA paid $947 million to remain, to acquire the remaining 53% of stock in Stremach's Heritage Dairy that's currently mentioned that produces oat milk, almond milk, soy milk in addition to some dairy products. But what benefits included DFA's dairy partner members from ownership of a company whose website has the title of acquisition listed the so-called plant-based milk products as its major product lines. And I would take a section of Mr. Keeney's comments earlier in this area, not all the profits. The profits of DFA's affiliates are not shared with the members. That is exactly one of the main challenges of the current court case in federal court in Vermont. And Mr. Keeney noted that DFA's profits last year were across 109 million, only 39 million of that came from member businesses. And in my analysis, if DFA paid approximately 16 to 20% less, pardon, 16 to 20 cents per 100-way to its members last year, less than the average all-milk price reported by USDA. I would argue that DFA's so-called member businesses profits of 39 million last year came because the co-op simply underpaid the milkshakes. Finally, DFA has announced it will be doubling the equity requirements up to three, now requiring up to 350 per 100-way on all-milk produce during a year's time by members, those that equity is built gradually over time. But on a good Vermont herd, all states make it 200, pardon me, a good Vermont herd of 200 to 225 s, making roughly 5 million pounds of milk a year. You're talking $150,000 investment for the common selling amount to DFA. So I would argue, in conclusion, that's the Vermont State Attorney General's Office ought to conduct a quick forensic audit of the area partners of America's finances so that at the very least, and in public it will reveal the results, so at the very least, the members of St. Albans have some understanding of the black hole they're getting into, and I apologize to the state officials in any such effort. There's a lot of transparency that needs to come from both sides of the merger, and to me, lack of transparency violates the old-time New England farmer logic of knowing the financial facts before diving in. Thank you. Yep, thank you. Are there questions for Mr. Hart? I just wondered what your affiliation is. I'm sorry, I didn't get your call. Well, I edit the published milkweed, which is a monthly dairy or marketing report. I've had it for 40 years prior to starting my own business. I was doing one ever for the American agriculture in the late 70s, and my lifetime has been spent reporting on the economic and marketing analysis of the dairy industry. Great, thank you. Thank you, Mr. Harding. Thank you, Mr. Stark. Is there anyone else here that has anything they'd like to offer? Yes, sir. Just like to make a short comment, my name is Tom Bellavance, a dairy farmer from Allberg, Vermont. I'm also been an agricultural lender for 38 years here in Vermont, so in all the back roads of Vermont, I served with Diving Bradley on the Vermont Land Trust for six years, so I understand the investment the state has made to protect and preserve a farmland. The whole goal for that time was to make sure that it was a working landscape, and this is going to help ensure, this merger is going to help ensure that Vermont remains a working landscape versus a bunch of idle fields. I listened to the comment by the gentleman on the phone, and I listened to the young lady talk about her, about we as DF, I'm also a board member of St. Louis Coal. DFA has handed us every piece of information we have requested. I personally have a degree in economics in the university of Vermont. I've read thousands of financial statements, I understand the preferred securities that are understanding, so we're not going into this blind. I mean, we really researched what we're getting into, and options, Senator Huron, the end of the group. Okay, having options are only good if they're good options. Okay, just having an option for the sake of having an option does not make sense. Okay, and what we are going to do is Vermont is changing. I grew up in the Northeast Kingdom when I continued to have a farm up in Hardwick, Vermont. There were five operating dairy farms on that section. There were zero today. I do use that farm to support what's happening in all of it. So, as we sit here today, as a fifth, sixth, seventh generation of Vermont, this is the right thing to do for our farmers. It is the right thing to do for the agricultural community in Vermont as a whole, because not only does it stabilize our milk markets, DFA and state office, but these investments that are going to be made in Vermont will also help stabilize agri-mark upstate. This is good for all of us dairy farmers, because again, I think of myself as a dairy farmer before an actual member of a co-op. So again, I want to thank you for your time and interest, but rest assured, the directors of St. Auguste did their research, did their homework, look at all the alternatives. We have worked with this DFA board, which is a farmer board. What I'm giving up is farmer-controlled board, and what I'm getting is a farmer-controlled board. I look at the management we are getting. The management at DFA is committed to the well-being of the farmers. The same thing that we had that management here with Leon. I can't think of a person who's better committed to the farmers than Leon, but with a small co-op, the depth of our management is very limited, because we just don't have the assets to support a larger one. Again, thank you. No. The other three senators are here, or anything that you'd like to offer? Well, you usually all got a lot to say here. You're just a lot off the day. But anyways, I think this was great here. We didn't shut anybody off. We heard the whole story from everybody, and which is the way you should do things. And I want to especially thank Brad and the directors and general manager of the co-op for coming and presenting to us. And I think we're all going to be better off from this moving forward. So thank you very much. I want to thank the committee for their work, and I want to wish you two co-ops well. And if the merger happens, well, we'll see you next winter. Yeah, we're all going to be back next winter. The three of us this winter, we just don't know about the next winter.