Milk Monopolist Moves to Increase Power Over Dairy Farmers
Photo from Flickr user katesheets.
Dairy Farmers of America, the largest dairy processor in the country, recently threatened to terminate its contracts with around 900 independent dairy farmers in the Northeast. Farmers in the region say this move is yet another step from DFA to undermine independent producers and to suppress earnings for farmers in the dairy market.
On January 19, Dairy Marketing Services, the marketing arm of DFA, sent farmers a letter that informed them that DFA was likely going to stop marketing their milk. Those who received the letter were independent dairy producers, meaning they aren’t members of a formal cooperative. Independent farmers are on average paid a higher price for their milk than cooperative farmers, who pay marketing fees to DMS.
DMS and DFA intend to remove the farmers’ milk from the collective supply it aggregates from thousands of farmers. DFA says such “de-pooling” is intended to address a milk oversupply. DFA is technically a cooperative, the largest in the country, though the company’s monopolistic behavior and history of acquisitions have caused many to question whether it truly represents its farmer members.
The farmers were given the choice to “explore other marketing options,” join a DMS-affiliated cooperative (namely DFA) and take lower prices for their milk, or stay aboard with DMS and risk being dropped altogether in the spring. Mike Eby, the president of the Northeast Dairy Producers Organization, says these options amount to DMS “saying you either do it our way or you’re gone.” He says other marketing options for farmers are basically non-existent in the region, and that “nobody else [is] taking on new members.”
Milk production in the U.S is organized into 10 regions, called Federal Milk Marketing Orders. FMMOs are overseen by the Agricultural Marketing Service of the Department of Agriculture. They were created to, according to the USDA, “provide orderly marketing conditions for milk and dairy products.”
The cuts come at a time when dairy farmers are desperately struggling to stay afloat. As we reported last summer, dairy prices are nearing historic lows, and the USDA has failed to produce any successful solutions. Its 2014 attempt at a dairy insurance program, the Dairy Margins Protection Program, was seen as a complete failure by most of the farmers it was meant to serve.
Pete Hardin, the editor of a dairy newspaper in Wisconsin, called DFA’s move “open season” on independent producers, with the intent to “wipe out” independent dairy production in the Northeast. Mike Eby and other farmers in the region believe DFA’s goal is to “continue to consolidate the dairy industry to have all dairy farmers under one umbrella” as DFA members.
DFA appears to be eager to take advantage of the change in administration in Washington to increase its direct control over farmers. In a January 12 letter to the administrator of FMMO 1, which represents Northeast farmers, DFA asserted it was “uniquely qualified” to discuss the state of milk marketing across the country due to its dominant market position. The company requested more autonomy in how it handles pooled milk, saying the milk market “will become even more disorderly if our request is denied.”
DFA has been sued multiple times by dairy farmers for anti-competitive conduct. In 2015, DFA and DMS paid $50 million to settle a lawsuit from thousands of dairy farmers in the Northeast that alleged that DFA, DMS, and Dean Foods had colluded to decrease the price of milk paid to farmers. In 2013, DFA paid $158 million to settle a lawsuit from dairy farmers in the Southeast who also alleged that DFA and Dean Foods had colluded to suppress farmer wages.
DFA controls about 30% of all the milk consumed in the U.S. The cooperative counts over 14,000 members. DMS claims to market over 13.7 billion pounds of milk.
In 1970 there were around 650,000 dairy farmers in the U.S. Today, there are under 60,000. In New England, the decline has been particularly steep, with a 50% loss in dairy farms between 1992 and 2007.
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