Organic Meadow Coop seeks financial protection

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Producers are fortunate that DFO has a financial protection plan. It doesn't make sense that Organic Meadow was in the dark about the change in terms. Surely that would be the first question asked. For example why did you change our terms? If they owe DFO $800,000 that sounds like a lot. 22 days to pay sounds like a long time for a commodity. Compare that to the standard terms for meat or grain!

This morning's smile/groan/eye-rolling comes in response to DFO counsel, Graham Lloyd's denial that "any terms required were onerous". I mean, really, how likely is it for somebody with a DFO-style monopoly to see the world in any other way except the way that provides them with all of the benefits and none of the costs?

Mr. Lloyd, of course, would almost-certainly also see nothing "onerous" about the extra costs supply management inflicts on consumers thereby laying bare DFO's double standard when it comes to what is, or is not, "onerous".

One would think that with all the extra money being gouged from consumers in a declining market for milk, DFO would consider that favourable terms to a customer who is actually doing something to increase the sales of milk and dairy products would be an investment rather than a cost.

Alas, DFO has had things their way for so long that the mantra "everything for us, nothing for anyone else" is untouchable and once again demonstrates exactly why supply management is not well-liked and will not be missed.

Stephen Thompson, Clinton ON

Stephen let's say one of your clients wasn't getting paid within terms for a commodity and things weren't improving. Wouldn't you suggest COD at some point?

I don't think I would call that onerous.

The above anonymous (and probably quota-owning) poster ignores the fact that I'm not a monopoly whereas DFO is.

Because DFO refuses to give anyone a break on price, the least they could do to help about the only "player" actually doing something to reverse the price-induced slide in primary demand, would be to offer them some incentive on payment terms.

To look at it another way, dairy farmers should, to be fair, demand DFO pay them every time a milk truck leaves the farm. If DFO is going to demand cash-on-the-barrel from their customers, the least they could do is treat their own suppliers the same way.

Unless I'm mistaken, DFO pays farmers once a month and if DFO demands its money up front from its own customers, this leaves DFO with a huge,huge pile of cash working capital and a well-deserved reputation for being "a dog in the manger".

More to the point, the next time someone from the dairy industry prattles on about "growing the market" while ignoring DFO's own policies of doing everything they can to ensure the exact opposite, let's hope somebody has some rotten tomatoes handy.

Stephen Thompson, Clinton ON

This evening's smile/groan/eye-rolling comes in response to Thompson's most recent uninformed attack.

"Unless I am mistaken" is not a free ticket to spout garbage instead of facts. DFO pays farmers twice monthly by direct bank transfers and bills processors twice monthly. It is all done on a tight schedule with no "huge, huge pile of cash".

If DFO had not been on top of this, farmers may have lost twice as much. The loss was controlled and the loss is covered by a fund. They won't respond here because of a "no trolls" policy.

Remember Quality Meat Packers and many, many others over the years.

According to the story, the co-op owed about $800,000 for milk delivered during March which amounts to about $26,666.67 per day. Therefore, if the above anonymous DFO-loving poster is right, twice a month the co-op writes a cheque for $400,000 and has, on average some $200,000 in accounts payable to DFO which, in my books, is a "huge, huge pile of cash".

The Achilles Heel of any new business is working capital and forcing the co-op to come up with an extra $200,000 on short notice is the sort of thing that would kill most any business, and obviously did.

I guess the galling thing is that dairy farmer mentality seems to be (and is definitely supported by the anonymous postings on this site) to the point where they simply don't understand anything about working with their customers and suppliers during a bad year or a bad season.

What's worse is that I don't believe anyone around or at DFO has any sort of background in banking and/or new enterprise management and, in this case, became judge, jury and executioner without the benefit of either experience or ability.

The bottom line, however, comes down to one of the "C" aspects of credit, and that is "Character" - therefore, and especially since I spent a lot of time in the early 1980s arguing (successfully as it turns out) on behalf of farmers at the Farm Debt Review Board, would I give someone like Ted Minten extra time to pay in the expectation that he will soon become a major, and rock-solid customer? - Most definitely!

Stephen Thompson, Clinton ON

If, as pointed out by one of this site's "never-wrong" anonymous posters as well as what is claimed in the original article, DFO bills processors twice a month, and if they have 22 days to pay this bill, a processor who had zero owing on day one, and who, like this co-op, appeared to buy $26,667 of milk daily, would owe 15 X $26,667 = $400,000 on day 15 and pay it on day 37 by which time they'd owe 37 X $26,667 or $986,679.

When the cheque for $400,000 clears on day 37, the processor would still owe $986,000 - $400,000 = $586,000. By the time the next $400,000 installment is due on day 55 (day 30 plus 22) the processor would owe $586,000 + 18 X $26,667 = another $986,679.

What this means is that, if the "never-wrong" anonymous poster and the article are both correct, the processor will never owe less than $586,679 and will never owe more than $986,679 and will, therefore, owe, on average, $786,679.

Therefore, when DFO changed the co-op's credit terms to COD, this effectively wiped out $786,679 of the co-op's working capital, rather than the smaller amount I noted earlier. I had initially assumed the co-op's accounts payable would go to zero every time a bill was paid, but it now appears that under the previous credit terms offered by DFO, they would never would go below $586,679.

I will now go on record to claim that wiping out what appears to be $786,679 of any company's working capital is absolutely onerous, in direct contrast to what is claimed by DFO's Graham Lloyd.

Stephen Thompson, Clinton ON

Wow. That's like the never-wrong pot calling the never-wrong kettle black.

There are two components to accounts payable - one is payables due and the other is payables owing but not due. In this instance payables due would be the $400,000 in semi-monthly payments while the payables owing but not due (at that moment) would be the amount accrued and which is to be paid 23 days from now. Payables owing but not due become due the moment the prior two week's $400,000 is paid.

In my first iteration, I used payables due which is a perfectly legitimate methodology - in my second iteration I used payables due plus payables owing but not due which is also a perfectly legitimate methodology. Normally this type of distinction isn't a big deal, but when there are hundreds of thousands of dollars and the very existence of a company at stake, it's all a very-big deal.

Purists who insist that all payables are due have a point, but it's when the payables are due which makes the all-important cash-flow difference.

For example, if DFO receives processor payments even as little as one day before it makes payment to producers, it is, given the total volumes involved, still a huge amount of "float" money.

DFO obviously receives money from processors before it remits payment to farmers - if it's one day it might be OK, but if they sit on it for 15 or even 30 days, DFO is (pun very-much intended) a cash-cow.

Finally, it simply doesn't matter whether accounts payable are calculated as an arithmetic function of the actual payment or as a dynamic function of the amount due plus the amount owing but not due, it's still a lot of money and way more than enough to sink even the strongest company when denied the ability to include any sort of accounts payable component in its working capital structure.

Stephen Thompson, Clinton ON

There is right , Right and RIGHT !
For some when you are wrong you are right , when right your Right and then there is RIGHT because you are and can be RIGHT ! Sort of like Gov being right when wrong but still RIGHT in their eyes so every one else is just wrong because your right . Same as you don't know what you don't know because you don't know you don't know !
Or to put it in easier terms . It would be like trying to win a pissing match with a skunk !

(A) When it comes to trying to turn around the decline in milk consumption directly related to the price gouging caused by supply management, DFO has, in effect "sent its best pitcher to the minors"

(B) Ian Cumming was entirely correct about DFO's distrust of the organic milk industry when, in his column in the October 9, 2007 edition of the Ontario Farmer, he wrote -

- "The fact remains that "those people" (organic producers) were infringing on our normal producers' domestic markets, with the potential to take away more and more of the consumers' dollars. Imagine."

(C) No matter how one measures accounts payable, the claim by Graham Lloyd that DFO's new credit policies are not "onerous", is a porky of the highest order and exactly why DFO is to be neither admired nor trusted.

Stephen Thompson, Clinton ON

Sm Boards (milk and chickens, hens) need to work harder to make sure these producers can run outside the board or the gov. should do it .

It is just good business for DFO to protect the producers as they should . If OM can not get it's finacial house in order then they should not get any thing on credit . It is not up to DFO to carry debt for OM . The best thing would be for DFO to stop all business with OM until they get their credit/finances in order . It is not being mean it is just business !

My question to you Stephen would have the same response whether or not it was a monopoly involved. If you provide credit you have to manage the situation. When customers don't pay you can't ignore it.
Excellent management by DFO!

If I recall correctly, nobody used the Farm Debt Review process more than dairy farmers - therefore, given all the whining and pleading by dairy farmers for better repayment terms when it suited their purpose, it is, indeed, galling to see how quickly and how completely they forget when the "shoe is on the other foot".

Furthermore, when, not if, supply management folds, we'll once again be deluged by requests from dairy farmers for debt relief and they will be told - "Why should you be given any favours when you granted none to the organic co-op?"

Stephen Thompson, Clinton ON

I sold corn to a beef farmer (grain dealer) 2 years ago and not yet paid for it. This cattle dealer has done this to many others as well. The G.F.O. was unable to anything and (some of)the beef farmers got very upset when the judge may rule that i get the proceeds from the sale of the cattle minus the stocker(s) cost. I agree with Stephen Thompson on (this one) as all the organic milk groups have cost issues at this time.

Some thing is not right . You said you sold corn to a "beef farmer (grain dealer)"
What was he a beef farmer or a grain dealer ? If he was a so called grain dealer then he was not licensed and you were not covered under the GFPP was he ?
So you sold corn to a farmer and got stung .
Further what was the quality of the grain you sold ? Could have been low test weight or moldy distressed grain that would not be accepted any where else .
Could be a lot more to your story .

HE was a cattle dealer and a unlicensed grain dealer i sold the rest to another market and got paid in full I did not know that he did not have a licensed elevator

Goes to show that you need to know the market and who you are dealing with . There is a reason that there is the GFPP to protect farmers . That is why you should be glad to support the Grain Farmers of Ontario with your check off fee for looking out for farmers . Selling to an unlicensed buyer is well just seller beware !

People that live in glass houses should not throw uninformed stones.

For many years Organic Meadows has seemed to struggle financially, but I wonder if their struggle hasn't been self inflicted, it wasn't to long ago they paid Murry Mclaughlin to go around Ontario playing music sponsored by Organic Meadows, or the Music video they made for YouTube, that cost thousands of dollars to produce.

They seem to always spend more then they have ever made and always hired CEO's and staff who got paid huge wages and not a single one of their CEO's ever worked a single day in the dairy industry before working for them.

The Co-op has always figured they needed to keep spending money and soon their wishes will be answered, but that never works and they have never had a reality check and stopped and realized they have missed the boat and that Saputo and Harmony have cornered the market and they have been left in the dust.

Organic Meadow members seems to have a difficult time understanding, that Harmony Organic Milk, which is owned by a former Organic Meadow member, has been hugely successful and has been because they didn't spend more money then they had and they ran a business with no frills and focused solely on the quality of there product.

From what I understand OM is the only organic milk processor that has to pay cash on delivery and that is only because of their financial situation that has caused this, DFO has a responsibility to their farmers to ensure all debts are collected to the best of their ability and this seems reasonable in this situation, DFO is not a charity that can write off $800,00 if OM can't make the payment and I would suspect that they put this requirement in place due to an ongoing history of late payments or unpaid invoices that were going beyond the 22 day terms, the rest of agriculture either grains or livestock have to be paid in 10 days.

In good faith I can not understand why OM in their press releases did not stress just how dire their situation is rather then continuing to tell people this process will only make them stronger. They are on the brink of collapse and they are still trying to to convince their members it's not as bad as it sounds.

It is highly unlikely and unfortunate but the reality of their situation had in part been brought upon them self's over the past 25 yrs of mismanagement, over spend and never saving for a rainy day, but instead spending, spending, spending .....

Clearly the organic milk model works or Harmony wouldn't be so successful, the lesson learned here is that its only as successful as the person or people at the top who are managing it.

fellow Ontario farmer

Why do anonymous types continue to appear on this site and make claims which are complete conjecture?

Furthermore, how can any anonymous person be so daft as to claim they are writing "in good faith"? - most readers would prefer facts to faith and this poster, by being short on facts, is brazenly trying to persuade readers that his/her faith is good even though, by definition, it is highly-questionable.

Finally, how can anyone tell whether the above poster truly is a "fellow Ontario farmer" or a DFO mole writing under orders in an attempt to whitewash DFO high-handedness?

Stephen Thompson, Clinton ON

I agree someone should not be able to comment on some else credit without putting on it. I am going to court with my insurance company. So with out knowing what is behind it we can not make statements. The D.F.O. is in a very difficult position on what to do. stephen webster

Organic Meadow's financial institution would of changed there operating loan capacity if they thought OM was stable enough .DFO did the right thing.

Many good company have shut down by less

The real crime in all of this is that 70% of the organic milk produced in the province comes from Organic Meadow producers. However, Organic Meadow
(the processor) is being denied the right to produce their milk for other classes than class 1. The larger companies get to use up all of the class 1 product (fluid milk and cream) before Organic Meadow is allowed to use the milk to make yogurt, ice cream, butter etc.

Because all of the milk is pooled, Organic Meadow is not at the front of the line for the milk that their owners produce. This causes the co-op to short the market product. DFO is giving milk to Saputo for PC branded milk first. Harmony somehow gets special treatment and isn't subject to the milk pooling that OM is subjected to. Yet Organic Meadow somehow can't have its members' milk pooled first and delivered to have their own products made first. DFO has caused a large shortage of Organic Meadow product in the marketplace. You don't meet demand, eventually you get discontinued in the store. The DFO by shorting Organic Meadow has helped lead to the poorer performance. Then, as a kicker, they have taken 22 days out of their cash cycle.

DFO can claim that they are following milk class rules. But the rules have arbitrarily changed over the last 20 years. The DFO never used the manage the organic pool when first created. Organic Meadow did that. Once Organic Meadow began to get successful, the large dairy producers wanted the margin. So DFO took the Organic pool over claiming it was the Ontario law. Somehow it wasn't the Ontario law 10 years before that.

Another case of big businesses trying and succeeding to end the success of smaller companies. Take away the organic milk pool because the large companies say so. Then, short the small companies milk because the large companies need it. Then comes the working capital hit.

That is why the DFO should stay out of the organic milk supply. and the CFO. should allow small flocks up to 2,000 birds or 1,000 laying hens per location with no quota. All organic milk producers should able to produce the first 4,000 kg (per year)of butterfat free of quota.

The DFO needs to work with the organic producers or be shut down

The above (albeit anonymous and therefore un-provable) posting is pretty-much exactly what Ian Cumming, in his October 2007 article in the Ontario Farmer, warned was going to happen when DFO took command of the growing organic milk market while simultaneously trying to appease traditional dairy farmers who, quite-rightly, saw organic as cutting into their highly-profitable, albeit declining, market. Of course, Cumming portrayed DFO in a more-colourful light by referring to DFO's command-and-control style as socialism.

If the above poster knows what he/she is talking about, and can verify it, others know it too. It's, therefore, likely only a matter of time before Cumming once-again excoriates DFO for the systematic mismanaging of the organic milk market, and since the above posting is anonymous, he might be already have done so.

Finally, if we're going to keep the wretched supply management system, there needs to be two completely-different supply management organizations for milk, one for organic and one for non-organic and let them (gasp!) actually compete for market share - but, of course, that will never happen because doing anything for the consumer is, in the minds of supply management supporters, completely-unthinkable.

Stephen Thompson, Clinton ON

No need to wonder . DFO looks after the marketing of milk be it organic or non organic . Organic milk comes from cows the same as non organic milk . Organic milk can and has many times been shipped as non organic milk .
So is the above poster thinking that there should also be be different systems because of different breeds of cows ?
DFO is likely in a tail spin because of the market loss to soy milk and the likes . A market that they can't and should not be able to get their sticky fingers in .
Alas the above poster needs to stick to one story here and that is the fact that SM is past it's "best before date" in it's current form !

With about 2 weeks to go has there been update on their situation yet ?

So far all talk has been about the milk side of the business, are they going to continue with their grain and egg businesses ?

Sean McGivern

I find it odd that it seems impossible to find on the Organic Meadow web site who their board of directors are.

Most organizations are rather proud to show case their board of directors, why has Organic Meadow chosen to keep it a secrete.

I even asked a few of the co-op members and even they weren't sure them self's.

Sean McGivern

I'm sure that if you phoned Organic Meadow Office ,you would be able to find out the information ( names ) that you want to know.
Why are you interested?
Didn't you used to work for Organic Meadow at one time?
I am getting only "mean spirited vibes" from your postings
Stan Holmes

Stan, I would suspect that a lot of farmers invested in good faith without realizing the financial web and financial situation and the relationship between organic meadow coop and organic meadow corporation.

I would say that there is a really good chance that some unsecured creditors have a huge potential of not getting their money. Unless some angle investor arrives asap.

For the past several years organic meadows has getting around $70,000 a month which is 4 cents a L t from DFO that ends in June. This was paid to them because they complained they built the organic dairy sector and didn't get any compensation I would guess it amounts to a few million they have received over the years, yet all that they talk about is DFO ruining them.

Sean McGivern


Comment modified by editor


While all of the points made by Mr. McGivern may be issues, they are not THE issue.

The undeniable fact, and the issue on which the whole issue turns, is that, as pointed out by Mr. McQuail, the co-op was ultimately denied access to the milk produced by its members.

Or to look at it in another way, Mr. McGivern is talking about how somebody could have succumbed to cancer, all the while ignoring the fact that the person got hit by a bus, a very-large DFO bus.

Stephen Thompson, Clinton ON

Harmony Organic has to function in the market place as Organic Meadow does and they are hugely successful, I think it's an escape goat for OM to blame the DFO. If they had 100% of the milk that was produced by its members they would never use it all, they likely have a possible market share of about 30% they have also got all the milk they needed from DFO for class one fluid drinking milk, they buy their cheese in from another processor and always have and so its only milk for yogurt and butter that I understand they are short on, and how any one can make money selling butter is beyond me it's a lost L T in the best of situations.

OM should have maybe once over the past 25 yrs hired at least one GM that had an ounce of experience in the dairy sector. it's insane to think that OM members can't see for them self's how poorly their coop has been run.

Here's a barometer for how successful they have been over the last 25 years, how many years have they made a profit and paid a dividend ?

OM has a long history of always blaming everyone else but them self's for their problems. If you want to look successful make a profit and give your share a holders a nice return on their investment.

Sean McGivern

Comment modified by editor.

It sounds like Organic Meadow should have had all their problems solved when you worked for them.
What is your interest in this issue?
Are you a Milk Producer, Shareholder or just a disgruntled former employee?
Stan Holmes

Sorry Stan your wrong on all accounts,

Sean McGivern

I would suggest the concept of a milk auction, every 30 days, whereby companies bid for so much milk every 30 days, the DFO sets the floor price and then all of the organic companies have a chance to bid for over and above the min volume they would be given. They would result in farmers getting more for their milk. The premium paid for organic milk in my opinion is way to low, an organic dairy farm would farther a head to sell their certified organic grain and sell their milk as conventional and buy in a prepared feed. I would suspect that most organic dairy farmers are subsidizing the actual price of organic milk.

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