In a new report, “The Economic Cost of Food Monopolies,” Food & Water Watch turns a critical eye on consolidation and collusion in the New York dairy industry.
The Washington, D.C.-based watchdog organization says that concentration in agriculture “endangers the future of independent dairy farmers nationwide.” It recaps a lawsuit brought in 2009 by Vermont and New York dairy farmers that alleges illegal coordination between Dean Foods, Dairy Farmers of America (DFA) and Dairy Marketing Services (DMS), a milk marketing partnership between DFA and New York-based Dairylea Cooperative. The producers say these groups were colluding to control access to milk processing through mergers and plant closings — effectively requiring farmers to market their milk through DFA and DMS.
As the report points out, the producers’ allegations mirror how Dean Foods CEO Gregg Engles described the company’s strategy in 2002: “We acquire (rivals), we close smaller plants and consolidate their operations into our large, more efficient facilities.”
Of course, Dean settled its case last August with many of the dairy farmers (a few asked to be excluded) for $30 million without admitting any wrongdoing. And while Dean initially consented to buy 10 to 20 percent of its milk from non-DFA sources for 30 months, the final settlement deleted this injunctive relief, the report points out, noting that similar claims by producers against milk processor HP Hood were dismissed.
“As the milk processing industry has consolidated and specialized, farmers have fewer and fewer options for selling their milk,” the report notes. “Today, a tiny handful of companies buy the majority of milk from farms and process it into dairy products and industrial food ingredients. The four-firm concentration of fluid milk manufacturers doubled in the past decade, rising from 21 percent in 1997 to 46 percent in 2007.
“At the local level, concentration can be considerably higher,” the report continues. “The four largest firms processed two-thirds of the milk (66.2 percent) in the Boston metropolitan area in 1997, but the top four processed 88.1 percent of the milk by 1999. Of course, these plants sell milk to a retail sector that is also tremendously concentrated. When more than 62,000 dairy farmers sell into a supply chain with several, consolidated interests between farmers and consumers, they are unlikely to receive the best deal for their milk. Retailers buy three-quarters of fluid milk, giving them significant leverage over milk processors who, in turn, consolidate and put pressure on dairy farmers.”