Dairy Companies Play Dirty

Photo from striatic's photostream 

Behind that glass of milk, there are BIG problems. Not only is it almost impossible for a consumer to choose to buy healthy unprocessed milk, the dairy farmers are being forced into what amounts to either slavery or bankruptcy.

The price of raw milk paid to farmers has dropped to its lowest level in 40 years. Dairy farms are going under across the country, and a few dairymen have grown so desperate they've taken their own lives.

Since December 2008, dairy farmers across the country have experienced the greatest economic crisis they have faced since the Great Depression as the price they are paid for their milk has dropped by almost half.

It may be hard to believe, but the story behind the milk your children drink or the ice cream they eat this summer is more murky than the scandals that have rocked Wall Street in the past several years. In fact, speaking about an investigation into dairy price fixing during the George W. Bush administration, one Department of Justice official said the dairy industry was “more corrupt than Enron.”

While dairy farmers suffered historic low prices in 2009, the dairy processors and the “farmer-owned” co-ops that are supposed to offer them a fair price, have been skimming off all the profits. In 2009, Dean Foods' (the largest milk processor in the US) profits soared to $76.2 million, more than 254% higher than 2008. During this same time, farmers have been taking on record debt, with a 100 head dairy farm losing more than $10,000 per month on average.

The other large dairy player in the US is the the nation's largest dairy cooperative of over 17,000 members, Dairy Farmers of America. Over the past decade, through mergers and acquisitions of co-ops and dairy processors, both Dean and DFA grew bigger and bigger. Then, the goliaths linked arms: DFA entered into a 100 percent, full-supply agreement with Dean.

So as Dean came to dominate regional markets, any dairyman who wanted to sell to one of Dean's 50 brands had to go through DFA, whether they wanted to or not.

Milkmen have been gaming the system for years. 

Back in the 1980s, prosecutors in two dozen states got 100 convictions or guilty pleas for milk processors who were charged with bid-rigging on school milk contracts. 

In 2008, two former executives of Dairy Farmers of America (DFA) were fined more than $12 million for “pricing fixing” and “manipulating” milk prices. DFA was fined by the Commodity Futures Trading Commission in 2008 for attempting to manipulate cheddar cheese prices. 

As of 2009, 17 dairy farmers are suing DFA, alleging that it is engaged in anti-competitive behavior by setting up a monopolistic "cartel" in the southeastern United States.

The antitrust division of the Justice Department spent two years investigating anti-competitive conduct in the dairy industry. Congressional and legal sources told NPR that in 2006, investigators recommended charges be filed against Dairy Farmers of America and Dean Foods, among others, for violating the Sherman Antitrust Act.

Under President Bush's Justice Department, the case was shelved.