Gannet News Story 6/23/10
WASHINGTON — For dairy farmer Paul Rozwadowski of Stanley, Wis., this Friday won't begin with the usual chores of milking cows and tending fields.
Instead, Rozwadowski will travel to Madison, Wis., to participate in a workshop on competition in the dairy industry co-hosted by the Department of Agriculture and the Department of Justice.
The town-hall-style event is a response to charges from farmers and legislators that giant dairy cooperatives and processors are crushing small farmers.
As production costs increase and milk prices remain low, dairy farmers across the country are facing debt and bankruptcy, despite receiving $350 million in emergency federal aid last fall.
The Agriculture Department predicts that farmers will receive an average of $1.35 for a gallon of milk this year, down 30 cents from 2007's average and below many farmers' break-even points.
Who is to blame?
Rozwadowski blames large dairy processors and cooperatives for farmers' strife, arguing that these giants stifle competition and force smaller farmers to accept unfairly low prices for their milk.
The main culprits, in his mind, include Dean Foods, a Dallas-based processor, and Dairy Farmers of America, a cooperative based in Kansas City, Mo., that buys milk from farmers and sells it to Dean Foods and other processors.
Others have pointed fingers at these giants, also. The players are targets of class-action suits contending that they joined forces to dominate the market and drive down milk prices. Democratic Sens. Russell Feingold of Wisconsin and Chuck Schumer of New York and independent Bernie Sanders of Vermont have pushed for antitrust probes into both groups' activities, asserting that Dean Foods controls up to 80 percent of the fluid milk market in some regions.
Rozwadowski accuses large cooperatives and processors of pocketing profits that should be passed along to farmers. He points out that while consumers at grocery stores pay more than $5 for a pound of cheese, farmers receive little more than $1 for that same pound.
"Where's the rest of the money?" he questioned. "These are the types of issues we're trying to expose at the workshop in Madison."
But Dean Foods accepts no blame for the industry's trouble. "Processor consolidation and concentration is not the root cause of the problem — rather it is the antiquated government-controlled pricing system," communications vice president Marguerite Copel said in a statement.
In Vermont, where more than 250 dairy farms have closed in the past five years, one farmer has found a way to beat the big guys — at least for now.
Selling raw milk
Rob Baum of Canaan, Vt., has opened a "raw milk" farm, selling milk directly to consumers instead of to cooperatives and retailers.
"Big agribusiness is very against raw milk, because it takes away the monopoly they have over the farmer," Baum said. "As it is, they can buy their raw materials at an absolute rock-bottom price."
National Family Farm Coalition director Katherine Ozer hopes Friday's workshop will encourage the government to intervene.
"The failure of the Department of Justice to enforce existing antitrust laws has contributed to this collapse," she said.
But the bigger players insist that consolidation is not the most important concern to address at the workshop.
"The major issue is price volatility. We need to find a milk-pricing system that works," said Peggy Armstrong, spokeswoman for the International Dairy Foods Association, which will represent Dean Foods and other processing giants in Madison.
Jerry Kozak, director of the National Milk Producers Federation, which represents Dairy Farmers of America and other large cooperatives, said there "isn't important work to be done" at the workshop.
"The competitive forces and cooperative process within the industry have served it very well," he said, adding that he is "a little concerned about whether there will be an objective perspective."
Baum, meanwhile, is not holding his breath for a turnaround.
"The government has the power to fix this, but because of corporate interest, they don't," he said. "I don't know what the future holds, but nothing in the equation tells me it's going to be good."
