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March 30, 2010 - 8:20am

Ever bigger processors and large retail chains hurting dairy farmers, anti-trust attorney told

posted by Howard B. Owens in batavia, agriculture, Dairy Farms.

Bigness is killing New York dairy farmers.

Big and ever-growing milk processors and retail chains are controlling the market and driving down the prices paid to farmers, but not passing on the cost savings to consumers.

That was the message of a meeting yesterday at GCC of dairy farmers and the Assistant U.S. Attorney General Christine A. Varney, who is in charge of the Antitrust Division.

From the Buffalo News:

"Our farmers are getting paid less and consumers are paying more," said Sen. Charles E. Schumer, who invited Varney to the meeting. "Someone's walking away with all the money."

Schumer said processors are making record profits at a time when farmers are on the brink of losing their family businesses. He wants the Justice Department to investigate anti-competitive practices in the dairy industry.

Consolidation among milk processors is one of the chief reasons prices paid to farmers has gone down, Varney was told. There are simply fewer outlets for farmers to sell their product to, meaning less competition, and without the competition it's easier for the buyer to set ever lower prices.

In some states, Dean Foods controls as much as 90 percent of the market, and about 70 percent in New York.

From the D&C: 

Bill Cook, who milks 1,800 cows near Aurora, Cayuga County, said he used to deal with five different milk buyers who were willing to pay a premium for the high-quality milk his cows produced. Premiums can mean the difference between just paying the bills and actually making a profit.

Meanwhile, Cook said none of those buyers is still operating because they went out of business or were consolidated into larger operations, such as Dean Foods, a giant among dairy processors. Cook had to borrow $500,000 to cover his losses last year.

The Buffalo News quoted a sixth-generation Wyoming County Farmer who used USDA figures to point out that the dairy farm share of retail dollars have dropped from 37 percent to 25 percent in the past three years.

Bigger and bigger retail chains were also blamed for downward prices on milk products.  Walmart's outsized pressure for lower and lower prices isn't helping farmers.

"Walmart's 'everyday low prices' applies constant downward pressure on all commodities, squeezing the supply chain while demanding more," said Ed Schoen of Shoe-Acres farm in Phelps, Ontario County. Pricing at Wegmans, on the other hand, is sensitive to the prices farmers are getting, he said.

Barbara Brown, a county legislator in Oswego County, said her district once had 26 dairy farms. Now it has three. She recently sold off her cows and closed her farm.

Varney offered the farmers hope.

"We will not let you down," she said, according to the Buffalo News. "We know the problem you're facing."

Sen. Schumer has called on the federal government to take several steps to help dairy farmers:

  • Deal with the consolidation of milk processors and the lack of competition.
  • A program called MILC provides aid to farmers when milk prices fall to a certain level. That target price needs to be raised.
  • Raise MILC reimbursement from 45 percent of the price difference.
  • Reform the milk marketing order system, which helps set commodity prices, used by the USDA. The current system doesn't adequately measure the cost of milk production in the Northeast.
  • Return to a dairy compact system that helps New York farmers set prices.
  • Pass a Milk Import Tariff act to ensure that milk producers and processors in other countries are playing by the same rules as the United States.
Lorie Longhany
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Cross posting this from the barn photo thread - We need to join our dairy farm neighbors and fight for their very survival. My hope is that the DOJ listened to the plight coming from farmer after farmer as they spoke at the forum yesterday and that swift action will be taken before it's too late. Wal-Mart and Dean foods were mentioned by a few. No surprise. Someone's making all the profits but it's not our neighbors. Prices are falling again on the amount the farmer gets per 100 weight. Action needs to be taken now or the dairy farms that are all around us are going to disappear and with it a very intrinsic part of our rural landscape. I heard, for the first time, about a farmer who shot his herd and then turned the gun on himself. It made me weep when the farmer from Oswego recounted this horrific tragedy. http://www.huffingtonpost.com/2010/01/23/dean-pierson-dairy-farmer_n_434... As consumer's and advocates for buying and eating local we have started a facebook page 100 Mile Lifestyle for Genesee County. A farmer contributor to the 100 mile lifestyle facebook group informed us about Project 36. The #36 stamped on milk cartons assures consumers that the milk is from New York dairies. To support our local dairy neighbors we can simply buy their products in the grocery store. I buy only Upstate products so I can support my dairy neighbors, but you can look for that stamp on all milk cartons. I stay far away from dairy labels from big box stores that I've never heard of before.
william tapp
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i think we just have to many cows milking then we have a market for the milk, i know farmers over the years have been putting on more cows adding on and getting bigger and bigger now we got more milk then we can use, might help for the stores to lower there prices but we just have to much milk. that is just my option from want i see around me
Bob Harker
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As much as I am opposed to governmental intervention in the private sector, this is one of the few instances in which I believe it is justified. Major processors can and should expect greater profits through consolidation and increased efficiency. Unfortunately, greed has taken over and they are wielding their power to lower the price paid to the farmer and paid by the consumer. Anti-trust laws exist and should be enforced. If they were in this case the problem would evaporate through increased competition. I am, however, not a proponent of the MILC program as described in the article. It does nothing to alleviate the problem, and simply throws money at it as a temporary band aid. It's a given that Schumer would support such a program. To him, spending money is the only way to solve any given problem. Enforce the laws that will hold the processors accountable. Encourage competition in that industry. Ensure that dairy (and all) farmers are treated fairly and equitably. Don't pretend to be addressing the problem by inserting tax payer dollars. That's the American way.
Mark Janofsky
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Where does the Upstate Milk Cooperative fall in this issue?
C. M. Barons
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When I was very young, there was a dairy in LeRoy called the Elm Dairy. It delivered local milk, door-to-door to most of the county and supplied schools. Later, there was a dairy in Stone Church, Sheard's. Not only did Sheard Farms have a farm store, they had vending machines around Bergen that dispensed quarts of milk for 25 cents apiece. Explain why local dairies cannot revert to marketing their own milk and setting their own prices? Dean Norton needs to think outside the box. He couldn't even find the horsepower to answer whether a monopoly on dairy products exists! If he can't recognize that one processor is a disadvantage, maybe he's too close to that one processor.
tim raines
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Dairyman Bill Cook From Cayuga County says he had to borrow $500k to cover his losses last year. Mr Cook received over $318,000 in USDA farm subsidies in an 8 yr span. Much of it for crops he would never grow anyway. Show me the money.....
Howard B. Owens
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C.M., you've probably seen me mention the Pittsford Dairy before. The best milk in WNY, imho. It's pasteurized at a lower temperature, so it retains more flavor, and if you get the glass bottles, the flavor lasts longer. It's more expensive to produce, so a little more expensive to buy, but well worth the few extra pennies. The dairy stopped milking its own cows several years ago and buys all of its raw milk bulk from other local dairies. The point is, you're right -- independent producers can sell to local markets. Enforcing anti-trust laws against bigness is well worth considering, but the flip side of some companies getting too big is it creates disruptive opportunities underneath for any entrepreneur willing to take the risk. There is certainly an opportunity in Genesee County for a dairy owner, or a collective, to start a retail operation -- maybe something serving all of the GLOW region.
Lorie Longhany
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Howard, I went to a seminar a few years back on the health benefits of drinking raw, un-pastuerized milk held at Lori's Natural Foods in Henrietta. There are a number of farmers across NY that offer their raw product directly to the consumer, but none so far in Genesee County. Farm to consumer -- no middle man. http://www.realmilk.com/ Some of the markets like organic might be able to compete for a better price from nitch consumers that are willing to pay more. http://www.organicvalley.coop/our-story/organicsense/article/article/cri...
Debbie Crossett
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Lorie, Reading your article and then the one with the gentleman that shot his cows and himself, made me cry,, that had to be so hard to do.. I grew up on a dairy farm myself in Niagara County, cows are like pets if not family.. broke my heart to read that.. As for Mr Tapp.. there can never be enough milk. Yes I was a past County Dairy Princess. My job was to promote dairy and dairy products to all people and childern. Going from school presentations,to store demos. newspaper articles, radio announcements.. Milk isn't just milk, Milk is what ice cream, cheeses, yogurt and sour cream just to name a few is made of. I like Lorie's idea on supporting your local farms.. and the idea of the 36th stamp= New York dairies.. but don't for get to check for the real seal symbol on milk and milk products(made with real milk)... :)
Richard Gahagan
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Other private businesses are allowed to fail without any government subsidies at all. The government is partially responsible for the current market conditions and shouldn't just throw money at the problem. Let the free market decide who wins and who looses. Here we go again the democrats blaming the "evil" large corporations begging the governmet to bail out the poor farmer so they get the rural vote.
william tapp
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last i knew its agent the law for a farmer to sell milk direct to the public , if im wrong let me know, i would like to buy direct from the farmer .i think the farmers need a new c0-op that works for them.
kevin kretschmer
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Pittsford Farms Dairy.
C. M. Barons
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In New York, raw milk sales are legal on the farm. The farmer must have a license from the state Department of Agriculture and Markets. The farmer must post a sign at the point of sale that states, "Notice: Raw milk sold here. Raw milk does not provide the protection of pasteurization." Raw milk vendors can only sell to consumers. From http://www.realmilk.com/

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