U.S. Midwest Brokers Form New Firm Amid Dairy Consolidation

(Bloomberg) -- Two traditional U.S. Midwest brokerages serving the dairy market are combining their businesses as the industry consolidates.

Chicago-based Rice Dairy LLC and Commodity Risk Management Group of Platteville, Wisconsin, are partnering to form a company with about 1,700 clients, the firms said in an emailed statement. The new company, Vault Ag Holding Company LLC, will be based in Chicago and offer services including hedging of dairy, livestock, grains as well as crop insurance.

The dairy industry has been struggling to make money as farmers in states such as Wisconsin are being squeezed out by alternatives like almond milk. Processors are also finding it harder as retailers such as Walmart Inc. step into the market. Still, U.S. fluid-milk prices have recovered this year.

Farmers are increasingly using risk management tools like futures and options to help them navigate volatile commodity markets. Dairy farmers in particular have been boosting their participation in derivatives markets and now they want more help hedging their exposure to grain and feed markets, Brian Rice, founder of Rice Dairy, said in a telephone interview.

“Dairies were pushing us to get more involved in the ag space,” said Peter Turk, a principal at Rice Dairy.

Demand isn’t coming from just grain farmers and dairies. Cattle and hog sectors have seen consolidation, but there’s still demand for risk management tools from privately owned operations, said Mike North, who owned Commodity Risk Management Group.

Rice, Turk and North will each hold stakes in Vault. Ownership details and terms of the deal weren’t disclosed. The newly formed company will also have seven branches in five American states.

To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Isis Almeida, Anna Kitanaka

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