NSAC's Blog

USDA/Department of Justice Hear from Dairy Farmers

June 30, 2010

On June 25, USDA and the Department of Justice held the third in a series of workshops to hear about the impacts of market concentration and consolidation on farmers and ranchers around the country.  The third workshop, held in Madison WI, focused on dairy farmers.  In addition to USDA Secretary Tom Vilsack and U.S. Assistant Attorney General for Anti-Trust Christine Varney, officials participating included Wisconsin Senators Herb Kohl and Russell Feingold, and the Wisconsin Governor and Secretary of Agriculture.

Several dairy farmers testified about their rapidly decreasing profit margins.  In 2008, milk prices tumbled and since then thousands of farmers have faced bankruptcy and foreclosure.  Farmers at the workshop criticized the methods for price setting in the dairy market, pointing to the Chicago Mercantile Exchange process for pricing milk as a source of unfair pricing.  The price for milk at the farm gate is determined on the Exchange by a small amount of trade in cheddar cheese blocks, which is open to manipulation by a few traders.

U.S. Assistant Attorney General Christine Varney indicated that the Department of Justice will likely meet with the Commodity Futures Trading Commission and USDA to discuss how well the Exchange is working in light of the thin market on the Exchange.

Farmers also emphasized that the prices they receive have decreased dramatically in comparison to milk’s retail price. Milk processing has become much more concentrated in the last few decades, with the Dean Foods company and the Dairy Farmers Cooperative of America taking large control of much of the processing of fluid milk in many regions. Dairy farmers received historically low prices in 2009.  At the same time Dean Foods profits increased by 254% over 2008, reaching $76.2 million.

Earlier this year, the Department of Justice filed an anti-trust action against Dean Foods alleging that the company bought out two Wisconsin milk bottling plants in order to stifle competition in the Wisconsin, Michigan, and Illinois school milk programs.  Senators Russell Feingold (D-WI), Chuck Schumer (D-NY) and Bernie Sanders (I-VT) have pushed for antitrust probes into activities of the Dairy Farmers Cooperative and Dean Foods, asserting that Dean Foods controls up to 80 percent of the fluid milk market in some regions.

The next workshop will be held August 27, 2010 in Fort Collins, Colorado.  This workshop will address beef, hog and other livestock sectors.  Issues will include the concentration in livestock markets, buyer power, and enforcement of the Packers and Stockyards Act.

Categories: Competition & Anti-trust

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