By John Christensen
The drop in wholesale milk prices and the steadily increasing power of giant dairy cooperatives have many small dairy farmers in the U.S. selling off their herds, discouraging their children from continuing their way of life, and an increasing number committing suicide.
Last month, a meeting was organized in Woodhull by Anthony Marco, a Steuben County dairy farmer who is demanding action from state and federal representatives. Speaking to Ian Golden, one of the Democrats running to be the party’s challenger to Rep. Tom Reed (R-Corning) Marco said, “With our milk checks, they’ve started including suicide prevention hotline numbers,”
Marco added, “If Walmart started sending letters home with their employees saying ‘If you can’t deal with working for us, here’s some suicide phone numbers,’ everyone would be up in arms. But with us, nobody cares.”
The Evening Tribune reported that farmers at the meeting outlined a treacherous litany of problems they say are being ignored in Albany and Washington, claiming:
• Farmers have little choice in dairy cooperatives that give local farmers access to national and international markets.
• Large, "corporatized” dairy farms are advantaged by better access to capital and technology.
• Large dairy farms are releasing too much milk onto the market.
• Small farms are not being fairly compensated by federal insurance programs (Margin Protection Program). Payouts for the program are so poorly weighted that more than $100 million in farmers’ premiums sit idle in the U.S. Treasury — money that many say could spur investment and growth.
• Government stockpiles about to reach their expiration date will soon create another flood on the market.
• Dropping resale value of cows and equipment threatens farm equity.
Marco said that after counting six farms closed since the beginning of the year in the region, he and other farmers want answers. They say they’ve gotten no such promise from Reed — who he’s consistently voted for — so he reached out to his Democratic opponents.
Farmers want a permanent fix
“We don’t want a financial fix to this. We want a permanent fix, which is some kind of supply management in this country,” Marco said. “How could we wish the question of, ‘Will I feed my kids or feed my cows?’ on a new generation?” Marco asked.
May 15, U.S. Sen. Kirsten Gillibrand, a member of the Senate Agriculture Committee, called on U.S. Department of Agriculture (USDA) Secretary Sonny Perdue to authorize $300 million in emergency relief funding for dairy farmers immediately.
“Dairy farms are at the heart of New York’s rural economy, but milk prices are so low that more than 1,200 dairy farms have shut down in just the last decade, and many more are on the brink of failing. This is a crisis right in our own backyard,” said Gillibrand in a press release. “I’m calling on the USDA to immediately provide financial assistance to our dairy producers. I want this emergency funding to go directly to the farmers who need it, so they can keep producing milk without going bankrupt. The USDA should do the right thing and give our dairy farmers the help they need now.”
Dairy farmers could receive $8,000 on average if the USDA complies with Gillibrand’s request. This funding would be paid directly to farmers as part of their milk check. New York is the third-largest dairy producing state, with more than 4,400 dairies producing nearly 15 billion pounds of milk each year.
“These farms are the bedrock of the agricultural economy and rural communities throughout the state. Every dollar of on-farm milk sale generates $2.29 in the local economy, and for every full-time worker on a dairy farm, another 1.5 jobs are created in other parts of the food industry,” said Gillibrand.
Makan Delrahim, Assistant U.S. Attorney General, speaking at the Open Markets Institute in the Justice Department’s roundtable discussion about antitrust exemptions and immunities, said, “America’s liberty and democracy depend on competition. Open and competitive markets promote innovation, resiliency, and prosperity. For this reason, we generally view exemptions and immunities from the antitrust laws with skepticism. But we believe that, in select and narrow circumstances, exemptions and immunities can play an important role in promoting open markets and fair competition, and in protecting the authority of states and municipalities to structure local markets.”
Mutant Dairy Cooperatives
The exemptions dairy cooperatives were given in the early 20th century to form the small, regional monopolies have now mutated into an abusive set of business practices by giant interstate co-ops that have adopted cutthroat business practices.
Some New York farmers have complained that the largest dairy co-op in the US, Dairy Farmers of America (DFA) uses its control over milk hauling firms to stop them from joining other small co-ops.
Small haulers and farmers hurt
More than one Yates County Mennonite dairy farmer says DFA milk inspectors have threatened them with violations if they complain about how DFA is doing business (Local farmers who shared their experiences with The Chronicle-Express are not identified to protect them from retaliation.)
One local dairyman says that the premium price he would receive for his top quality milk remains forever out of reach; just as he is about to get over the threshold of quality, the inspector will suddenly report one bad inspection. That farmer is now working for a larger farm for wages just so he can afford to feed his family and keep his herd. Another young Mennonite farm owner in the north of Yates County is also working as a laborer to pay the mortgage on his new barn that stands empty because DFA refuses to sign on any more small producers. Others who have tried to leave DFA say that other coops and producers have “an unwritten agreement” with DFA to not accept farmers trying to switch.
Pete Hardin, the editor of The Milkweed newspaper and website, wrote in 2010, “For many years, the anti-competitive actions by Dairy Farmers of America have been characterized as ‘mafia-like.’ But now those allegations are official: DFA has been recently named as a defendant in a privately-filed ‘RICO’ lawsuit (Racketeer Influenced and Corrupt Organizations Act).” RICO laws are protections for individuals and businesses that have been victimized by mob-style conspiracies. “On April 9, 2010, a massive new lawsuit was filed against Dairy Farmers of America by a trio of plaintiffs alleging that DFA engaged in a mafia-style conspiracy to manipulate cash Cheddar markets and related Class III (cheese milk) futures/options trading at the Chicago Mercantile Exchange (CME) during May-June 2004.”
Leah Douglas, a reporter and policy analyst with the Open Markets Institute, writes that DFA has upset the balance that once existed between the farmer, the coop, the processor, and the consumer. “The organization says it represents more than 13,000 member farmers in 48 states. But it simultaneously has grown to the point that it owns or controls entities up and down the entire dairy industry supply chain, from milk truckers to food processors to marketers. It’s an obvious conflict of interest: the less these entities have to pay DFA farmers for their milk, the more money they — and DFA — make.” She reports that according to DFA’s 2016 financial statement, “60 percent of DFA’s net income that year came from ‘non-member business earnings,’ none of which was shared with members.”
The obvious reason for this move to vertical integration is profits for the high-level executives in DFA rather than the dairy farmers. “In 2006, DFA got rid of its private jet after it became too controversial,” writes Douglas, “but today its executives are still doing quite well for themselves. In 2017, they moved into a spanking-new $30 million world headquarters in Kansas City that they had built to their own specifications.” Douglas reports the “sprawling” 110,000-square-foot building has executive luxuries like bocce and basketball courts, a gym, family rooms, a milk bar, and artistic features like a 25-foot-high molded sculpture meant to evoke an unending cascade of milk. “Other flourishes include faux barn boards and walls decorated with molded white patterns depicting old-fashioned milk bottle caps, cow tags, cheese graters, and ice cream scoops,” says Douglas. “Acquiring and installing these objets d’art cost $1.5 million.”
CEO Rick Smith said in a trade publication, “This building is a testament to our family farmers and the sustainable practices they employ on their dairies each and every day.” Monica Massey, DFA senior vice president and chief of staff, also commented, “Our goal is to be an employer of choice in Kansas City and this building and all its amenities reflects that commitment to focus on employee satisfaction.”
Douglas writes, “The distance DFA has traveled from a traditional dairy co-op is breathtaking.” The co-op reported a net income of nearly $132 million in 2016; meanwhile, the number of dairy farmers in the U.S. continued to plummet, hitting a new low of 58,000. DFA controls about 30 percent of all milk sales in the U.S., but has a much bigger share in some areas. “That means that many, if not most, dairy farmers don’t have a way to even get their milk off their farms without accepting the terms imposed by DFA,” writes Douglas. Nate Wilson, a journalist for the Milkweed covering the dairy industry, says “You can’t look at DFA as anything now but a corporation,” adding, “The management of DFA is consistently working against the rank-and-file members.”
Douglas says the U.S. Secretary of Agriculture is empowered to take action against any co-op that uses anti-competitive tactics, but that power has never been used. “Because of that, Dairy Farmers of America has been able to expand into all aspects of food processing, marketing, and distribution while still being protected as a co-op from antitrust prosecution.”
Anti-trust suits by DFA members against DFA in recent years have resulted in some limited compensation for the plaintiff farmers, and limits placed on DFA. In 2013, DFA agreed to a settlement of $140 million in the Southeast. In 2006 DFA was forced to sell its interest in Southern Belle Dairy Co. to settle an anti-trust suit filed by the Department of Justice and the Commonwealth of Kentucky. In another, almost 9,000 Northeast farmers shared a $50 million settlement (only around $4,000 per farmer). However, some of the plaintiffs in the Northeast suit have charged “that DFA colluded with their attorney and strong-armed other farmers into signing the settlement.”
Meanwhile, DFA continues its tactics, collects its profits, and pays the occasional lawsuit its teams of lawyers don’t manage to win as simply a cost of doing business.
So what can the dairy farmers do? What can consumers do? At the moment, little more than what any citizen can do; write and call elected representatives. Only they can force a change in the federal laws and USDA practices that permit this level of exclusivity and bully behavior, say farm advocates. “It’s high time for Congress to take a hard look at the laws governing co-ops,” says Douglas, “It needs to be made clear that no corporation gets the legal privileges of a co-op unless it truly represents the little guy without any conflicts of interests. While there is nothing wrong per se with co-ops becoming vertically integrated, the law should ensure that the money co-ops make on all their operations goes back directly to their members.”
Next: More reporting on the local dairy economy. Dairy farmers who would like to share experiences are encouraged to contact John Christensen at 315-536-4422 or email@example.com.