Hundreds gather for hearing at UW-Madison
By Rick Barrett Milwaukee Journal Sentinel 6/26/10
The current system leaves dairy farmers with little or no profit, several
said at a U.S. Department of Justice hearing on antitrust issues in the
dairy industry. The hearing attracted hundreds of farmers from around the
country to the University of Wisconsin-Madison.
"What we are hearing is a consistent message, which has not always been the
case. Dairy producers, large and small, are hurting," U.S. Agriculture
Secretary Tom Vilsack said at the hearing.
In the past 10 years, the number of U.S. dairy farms has fallen from
111,000 to fewer than 65,000, Vilsack said.
Some of that has come from farm consolidations and voluntary retirements.
But much of the loss has come from farmers who have been forced out of
business, especially in the past two years.
"I have a growing concern about rural America" and the nation's food
supply, Vilsack said.
Some farmers complained bitterly about the Chicago Mercantile Exchange,
where the price of cheddar cheese blocks serves as the basis for
determining farm milk prices. A few Mercantile traders can influence milk
prices by selling or buying cheese at strategic moments.
It's a thin slice of the dairy market, yet it sets the milk price for
everybody, testified Joel Greeno, a dairy farmer from Kendall.
All of a farmer's hard work, and awards for high-quality milk, mean nothing
when low prices force someone out of business, according to Greeno, whose
parents lost their farm to foreclosure on their 29th wedding anniversary.
Dairy farmers currently get about 97 cents from a gallon of milk sold for
$3 at the grocery store. The rest of the money goes to the store, a
processor and others involved in the handling, buying and selling of the
product.
Some farmers blame Dean Foods, the nation's largest dairy company, and
Dairy Farmers of America, the nation's largest dairy farm cooperative, for
reducing competition.
In January, the Justice Department filed an antitrust lawsuit against Dean
Foods, alleging that it purchased two Foremost Farms bottling plants in
Wisconsin to quash competition in school milk programs. The suit signaled a
shift of antitrust policy in Washington, where regulators had done little
in the agriculture sector in the past 20 years.
It was highly unusual, said Pete Hardin, who publishes The Milkweed
industry newsletter from his farm in Brooklyn, Wis.
Adding to that consolidation is the growth of Dairy Farmers of America,
which has about 18,000 members. Farmers are pressured to join the co-op or
they're not in a position to sell their milk, Hardin said.
Christine Varney, head of the Department of Justice antitrust division,
said she is committed to pursuing cases against those in the dairy industry
engaged in anticompetitive practices.
"We are keeping a watchful eye on this industry," she said. "We will go to
court and block mergers" that reduce competition.
Dean Foods and Dairy Farmers of America deny that they are responsible for
low farm milk prices. Milk prices are set by the U.S. government based on a
survey of wholesale prices for non-fat dry milk, cheese, butter and whey.
It's not something that a large processor or dairy cooperative controls,
according to Dean Foods.
"The system is broken, and all of us - farmers, processors, and retailers
alike - are paying the price in one way or another," Dean said in written
remarks. "We share dairy farmers' frustration with the increasing
volatility in milk prices.
"While we cannot eliminate price volatility, the industry clearly needs
better tools to manage it."
A small number of critics have made false accusations against Dairy Farmers
of America, said John Wilson, vice president of the Kansas City-based
cooperative.
"Some people say that we have lost the connection to our members, but that
rings hollow to me," Wilson said. He defended the size of the cooperative,
saying there's strength in numbers.
Last year, Dairy Farmers of America sent $37 million in special aid to its
members to help them through hard times.
Varney and Vilsack said that they were interested in farmers' complaints
about the Chicago Mercantile Exchange, but that it would take a lot of work
to determine whether the complaints were valid. Years ago, farmers had
similar complaints about trading on the now defunct Green Bay Cheese
Exchange.
The price that farmers receive for their milk is based on a government
formula and a complicated system patched together over decades.
"There are five people who understand how dairy products are priced. Four
of them are dead, and the fifth one is lying," quipped David Ward, director
of government relations for Cooperative Network, a Wisconsin trade
association that represents cooperatives.
The purpose of Friday's hearing was to gather testimony from dairy farmers.
It was the third in a series of USDA workshops on anticompetitive issues in
agriculture.
"If anything comes out of this, I hope it's that we are able to create a
pricing system that is transparent and makes sense, and that nobody is
manipulating anything," Ward said. "Especially in a period of low prices,
people always look to see if anyone is gaming the system."
