Anti-Trust Hearing Highlights Crisis Facing Dairy Farmers

On June 25th, Secretary of Agriculture Tom Vilsack and about 500 others attended the third in the Department of Justice's (DOJ) series of five anti-trust hearings across the nation. The series examines agricultural consolidation, a growing problem in America's farm sector. This hearing focused on the plight of America's dairy farmers and was held in — where else? — Wisconsin, "America's Dairyland."

The extra focus on dairy is certainly warranted. Dairy farmers are in the midst of a crisis. The number of dairy farmers has plummeted to almost half of what it was 10 years ago. Farmers have been dropping like flies due to years of little to no profit. While consumer milk prices have remained fairly steady over the years, the price paid to farmers has declined at an alarming rate, putting thousands out of business. Since December of 2008, the price farmers are paid for their milk has dropped more than 50 percent.

Most of the complaints voiced at the hearing blamed two factors for the crippled dairy industry: the dismaying and oftentimes mysterious methods by which milk prices are set, and the influence of a few big processors over the majority of the marketplace. Milk prices are determined by a complicated government formula based on the price that a block of cheddar cheese sells for in the Chicago Mercantile Exchange, making selling milk as much of a gamble as playing the stock market, and about as transparent. Other targets of farmer frustration were Dean Foods, the nation's largest dairy company, and, interestingly, Dairy Farmers of America, the largest dairy cooperative. The cooperative controls 20 percent of the market share and has been accused of just as many anti-competitive tactics as its private counterparts. Farmers complain that they are pressured to join or else they don't have the ability to sell their milk. As for Dean Foods, the company is already the target of an anti-trust lawsuit filed by the DOJ in January.

Experts disagree about the level of co-op market influence, but one thing is clear: The biggest co-ops are growing their market share at a significant rate. In 2008, the top four co-ops controlled nearly half of the market share, up from about a third in 1987. I am a huge fan of the co-op model, but as Organic Valley's recent decision to ban the sale of raw milk by its members demonstrated, even co-ops seem capable of growing too big for their britches and working against the interest of its members in favor of the organization itself. Currently co-ops are exempt from anti-trust laws thanks to the Capper-Volstead Act, but Assistant Attorney General Christine Varney has suggested that perhaps this law should be re-examined. Secretary Vilsack himself said that cooperatives were not the target of the hearings.

While individual co-ops and private processors may not seem to have too much control nationally, it is important to remember that dairy markets are very regional. If you only have one processor in your area, then market share for that processor is 100 percent as far as you're concerned.

There are two more hearings in this series scheduled, and then Vilsack and company will fly back to Washington, tasked with finding a way to fix this mess. It's a daunting challenge, and I hope they find the political will and the sheer grit to make a dent in the damage Big Ag has done to small farmers. In the meantime, sign this petition asking Attorney General Eric Holder to enforce antitrust laws and restore fairness to the dairy industry.

Photo credit: Senor Ryan via Flickr