Farmers call for federal probe of dairy industry

Dairy farmers large and small from all over the country urged federal regulators Friday to investigate their industry and help determine why the prices that they're paid for milk aren't keeping pace with what consumers are charged at the store.

That united position, which comes among sinking dairy prices and increasing costs, wasn't there a year ago and speaks to the depths of the problem, said U.S. Agriculture Secretary Tom Vilsack. The departments of Agriculture and Justice organized the hearing that attracted more than 500 farmers, lobbyists, politicians and others.

"The crisis is moving people to consensus," Vilsack said during a break in the daylong meeting. It was the third of five hearings jointly called by the USDA and DOJ to investigate antitrust and regulatory issues in agriculture. Friday's meeting focused on the dairy industry, which brings in $26 billion a year to Wisconsin.

"The dairy industry is not in good shape," said Frances Horton, a New Mexico farmer who milks 14,000 cows. "In the 32 years that we've been dairying there have been ups and downs but now there's only down."

Her despair over the state of the dairy industry was echoed by others from large dairy states California, Wisconsin, Minnesota and New York.

Ed King, whose New York dairy farm includes 900 cows, said the market lacks transparency and farmers don't have the power they used to.

"We've become the target of this feeding frenzy for lower prices," he said.

Joel Greeno, who milks 48 cows on his Kendall, Wis., farm, said the problem rests with the complex system in which milk prices are determined at the Chicago Mercantile Exchange. He and others urged regulators to investigate that system.

The federal government's top antitrust investigator, Assistant Attorney General Christine Varney, tried to reassure farmers that her agency was keeping a "watchful eye" on the dairy industry.

"We know that dairy farmers are concerned about a lack of choices for buyers as well as how their milk is priced," she said.

Dairy farmers have long complained that though the retail price of milk and cheese has risen their profits are still shrinking. The price of milk in stores has fluctuated wildly over the years, but dairy farmers are paid roughly the same for their product as they were 30 years ago.

Someone between the farmer and the consumer is making money, but given the complexity of the milk market it's difficult to target a specific culprit, said U.S. Sen. Russ Feingold, D-Wis.

Much of the focus has fallen on large co-ops and milk processors that have taken a larger portion of the market share in recent decades.

The Dairy Farmers of America, a co-op that has 17,000 members, and the nation's largest dairy Dean Foods, are defending themselves in a pair of class-action lawsuits filed in the Northeast and Southeast alleging that they engage in price fixing. In April, the DFA was sued in federal court in Illinois alleging that it engaged in a conspiracy to manipulate the cheddar markets at the Chicago Mercantile Exchange.

Both Dean and the DFA have denied the claims.

In January, the Department of Justice office, along with attorneys general from Illinois, Michigan and Wisconsin, filed an antitrust lawsuit against Dean Foods, alleging it purchased a smaller dairy company in Wisconsin, Foremost Farms, to quash competition.

Dean gained 57 percent market share in parts of Michigan, Illinois and Wisconsin through the deal.

Dean Foods issued a statement before the hearing saying volatility in the market was hurting everyone.

"The system is broken, and all of us - farmers, processors, and retailers alike - are paying the price in one way or another," the company said.

The recession and overproduction, not market consolidation, is the cause of low prices for farmers, Dean said.

Given the amount of consolidation in the industry, there is a need for strong federal antitrust enforcement, said U.S. Sen. Herb Kohl, D-Wis. He said the system is clearly broken and he called for an investigation into how the Chicago Mercantile Exchange works.

While there appeared to be agreement that the industry was suffering, there was no unanimity among farmers about what to do.

"I'm not sure what the problem is," Horton said. "I don't think there is one perfect solution."