Dairy antitrust workshop might be most complex, emotional yet

Federal officials will gather in Madison, Wis., Friday for the third of five scheduled national discussions on competition in the agricultural industry. To date, the joint U.S. Department of Justice and U.S. Department of Agriculture events have opened doors and heard testimony on possible antitrust violations within the seed and poultry industries.

U.S. Sen. Russell Feingold, D-Wis. (Lauren Victoria Burke/WDCPIX.COM)

But, the focus of the Wisconsin workshop on the complex dairy industry, combined with the raw emotions of long underpaid producers, might make this event one of the most revealing of the entire series.

“I expect this forum will clearly demonstrate the dairy community’s lack of confidence that the current markets and pricing are treating them fairly,” U.S. Sen. Russ Feingold, D-Wis., said in a statement to The Iowa Independent. He later added that his hope was the workshop could spur the USDA and DOJ to “dig further into the threat posed by concentration within the dairy industry, the need to reinstate proper oversight of agricultural markets and the wide spread between farm and retail prices.”

Dairy farmers, for their part, have been sounding the alarm for quite some time. The first e-mail messages from dairy producers arrived more than a year ago in typical text and paragraph form, describing in detail the milk price needed to break-even and the much lower price being paid for raw milk. As time has passed, and prices have remained volatile, the messages have morphed into something akin to hysterical electronic graffiti — awash in different text sizes, run-on sentences and all-capital words.

“WE NEED ACTION NOW,” reads the latest such message sent by New York producers Dave and Robin Fitch. “WE THE UNITED STATES DAIRY FARMERS ARE UNITED, STRONG AND FED UP.”

The Fitches hope to organize a “July 4th Milk Dump” — a day where producers will literally dump their raw milk instead of selling it to processors.

“We work long and hard for little pay and we are all fed up with the political run around thinking no one is listening,”  the Fitches said. “Many remember other milk dumps in the past but never in the history of this nation have prices been so low that are paid to the farmers and costs to the farmers so high. You can’t afford not to dump. Just think about the money you lose every time the milk truck pulls away from your farm, now add in the costs you pay for hauling, stop charges and promotions…”

The e-mail sent out by New York producers Dave and Robin Fitch calling for a "July 4th Milk Dump."

It’s a sentiment of pure frustration that is widely shared by producers throughout Iowa and the nation who have endured a patchwork of temporary government fixes that have somewhat bolstered their milk checks but have done little to address larger problems faced by the industry. The vast majority of producers that have maintained their dairy operation continue to receive at least $1 less per hundredweight (cwt) than their costs to produce the same — a situation that can easily and quickly result in the producer being thousands behind break-even within a month.

Government officials and industry experts, for the most part, have argued that the volatility in the market is linked to an over-supply of milk. To remedy the situation, it has been suggested that when enough producers are forced out of business, the market will correct itself without government intervention. Over the past 18 months, however, producers that have been able to move beyond the psychological attachments to their operation have sold or culled their cows. The market has not yet stabilized.

According to U.S. Rep. Bruce Braley, D-Iowa, the House Democratic Caucus was visited by Secretary of Agriculture Tom Vilsack on June 14, who discussed the need to develop “a comprehensive national strategy to address some of the concerns” faced by dairy producers. Much of what Vilsack discussed was already known by Braley, who was meeting with northeast Iowa producers last year to discuss the challenges they face.

“It is a complicated and complex problem to solve because of the dairy compacts — the regional dairy compacts,” Braley told The Iowa Independent during a conference call with reporters on June 16. “There is no clear, one-size-fits-all solution.

“I know that the dairy producers I represent in northeast Iowa are extremely concerned about taking action that is going to lead to better outcomes for their marketing opportunities going forward. I’m hopeful this [workshop] will be the first step in getting to some solutions that make sense not just for the people that produce dairy products in my district, but throughout the country.”

John Buting, another New York producer and member of the National Family Farm Coalition, was commissioned in early 2009 to write a report on the dairy industry. He specifically addressed the belief that over-supply was causing the low prices and concluded that a few “elite players, with little or no government oversight, are running the dairy markets.”

…The current financial situation provides an opportunistic moment for key players to unduly depress farm milk price and reap both profits and market power.

Farm milk prices began to fall in late 2008, in spite of data which suggests it should not have happened:

• Nearly as much nonfat dry milk was exported in December 2008 as was exported in December 2007.
• December 2008 imports of milk protein concentrates were massive.
• Imports of casein, another dairy derived protein, also increased in December 2008.
• “Butter and other milkfats” imports increased nearly 60 percent in December 2008 compared with December 2007.
• Cheese imports for December 2008 increased 15 percent over December 2007.
• Commercial disappearance of dairy products increased in December 2008, and, for the 2008 year, increased 2.6 percent according to USDA data.

If, indeed, as most experts believe, too much milk drove farm milk prices down, there is no easy explanation of the dairy exports and imports of December 2008.

The premise of Bunting’s arguments — that a lack of oversight is playing a major role in the dairy crisis — was exactly the message dairy farmers carried to the Iowa Capitol during a rally in April 2009, when they called for a congressional investigation into dairy and commodity price manipulation, passage of a milk marketing improvement act and enforcement of existing antitrust laws.

Although the investigation is not congressional, it still appears as if a portion of the producers’ requests will soon be a reality.