Low milk prices have gained the attention of the U.S. Attorney General’s office.

U.S. Attorney General Eric Holder was to have attended Friday’s dairy competitiveness workshop in Madison, Wis., but he ended up attending a friend’s funeral instead.   

Assistant U.S. Attorney General Christine Varney did attend, along with Justice Department staff, U.S. Secretary of Agriculture Tom Vilsack and the two U.S. Senators from Wisconsin, Herb Kohl and Russ Feingold.

All of the dairy producers who spoke at the meeting agreed that something needs to be done to fix a system that does not adequately compensate farmers for the milk they produce.

“The dairy industry is not in good shape,” said Frances Horton, co-owner of a 14,000-cow dairy operation in Hatch, N.M. “In the 32 years we have been in farming, there have been ups and downs. Now, there are only downs,” she added. “Our debt is three times what it was two years ago.”

Financial difficulty was a common theme at Friday’s hearing. Other themes included:

·         The need for better pricing mechanisms for dairy products. Many speakers pointed to the Chicago Mercantile Exchange and the influence it has on cheese prices. Less than 1 percent of the nation’s cheese is traded on the CME’s spot cheese market, but it is still influential. “Any market that is that thinly traded is open to manipulation, whether intentional or not,” said Wisconsin Agriculture Secretary Rod Nilsestuen.

·         There is too much discrepancy between what the consumer pays for milk and what the farmer receives. Dairy producer Ed King, of Schuylerville, N.Y., cited numbers from the USDA’s Economic Research Service showing that the farmer’s share of retail dairy prices fell dramatically in two short years from 37.7 percent in 2007 to 25.3 percent in 2009. “This is particularly evident in the fluid-milk market because consolidation in the retail food-marketing industry has reached the point where major chain marketers can flex their buying-power muscle and demand price concessions from milk processors,” he said. Later, in public testimony, another producer suggested that farmers band together and tell Wal-Mart what they are willing to sell their milk for rather than letting Wal-Mart dictate what it will pay.

·         When producer pay prices go down, milk prices in the grocery store don’t.  If we have a surplus, why can’t the grocery store reflect our price? asked Christine Sukalski, partner in a Minnesota dairy. Reducing consumer prices in these instances would encourage consumption, she said. But, later in the day, Ron Cotterill, professor of agricultural and resource economics at the University of Connecticut, said there has been a fundamental shift in the way supermarkets price milk. “Milk used to be a loss-leader,” he said. “Now, it is a cash cow.”

·         Cooperatives are OK. Most speakers were supportive of their dairy cooperatives. “The cooperative system is the best marketing tool we have,” Sukalski said. And, the government officials at Friday’s hearing seemed willing to put cooperatives on the back-burner when it comes to investigating possible anticompetitive behavior in the dairy industry. Secretary Vilsack acknowledged the “important role that cooperatives play.” Assistant Attorney General Varney added her support for cooperatives and the Capper-Volstead Act, which gives agricultural co-ops limited exemption from antitrust laws. “We don’t have an agenda here that is in any way anti-co-op,” she said.

Many people offered public comments later in the morning, but none of the elected officials or Secretary Vilsack stayed around to hear the comments first-hand.