For Dairy Farmers, the Depression is Here. Is Industrial Agriculture to Blame?

If you drink milk, you probably haven't noticed any drop in the price of a gallon anytime recently. But if you were a dairy farmer, you'd know quite well that the price you'd received for the milk has dropped, because it has fallen so far so fast -- by half since December, the largest single drop since the Great Depression. At present, farmers are being paid a price that is far below the cost of production. As a result, we stand to lose as many as half of the nation's dairy producers by the end of the year.

How did this happen? Some suggest the root of the crisis is a surplus in supply, but other likely culprits include market manipulation (by groups like the "cooperative" Dairy Farmers of America, which controls 40% of the market and was fined $12 million last year for price fixing), lack of government oversight and increased dairy imports (which, according to the National Milk Producers Federation, have risen from $80 million to almost $3 billion in the last 10 years). Adding fuel to the fire, just as the prices fell out from under dairy farmers, so too has the credit market collapsed, making it all but impossible for farmers even to borrow their way out of this mess. From Jim Goodman at Grist:

Milk prices, like the rest of the world economy, crashed because of a globalized, unregulated free market system, not because of surplus product. According to New York dairy farmer/market analyst John Bunting "dairy markets are run by an oligarchy-a few elite players-with little or no government oversight." The parallels between the current dairy price crash and the Wall Street financial crash are pointedly exact.

In an attempt to staunch the massive hemorrhaging, both Farm Aid and Food Democracy Now are gathering signatures and encouraging calls to Secretary of Agriculture Tom Vilsack, asking that he:

halt this injustice and adjust the price of milk paid to farmers to "reflect the price of production" by invoking his authority under Section 608c (18) of the Agricultural Marketing Agreement Act of 1937. This legally mandated "floor price" should be at least $17.50 per cwt (a cwt is the standard measure for milk producers).

This solution, should Vilsack implement it (which, because of the act referenced above, is actually part of his job and not something consumers should have to nudge him toward, especially in the midst of such a crisis) won't be any miracle cure, in particular for small-scale producers, whose operating costs are much higher than that of the industrial-scale producers. According to this recent NY Times article, organic producers, who in the past few years have enjoyed some security in higher prices and rising demands, are feeling the pinch now, with decreased demand as a result of the weakened economy -- and those who are in the middle of transitioning to organic may be hit the hardest.

In related news, last week, a federal court in St. Louis dismissed 19 class-action lawsuits brought by consumers around the country against "phony" organic dairy company Aurora, which in 2007 was found to have willfully violated 14 federal organic regulations. (This fight has been going on for years. Basically, the Cornucopia Institute and the Organic Consumers Association both have taken issue with Aurora over the size of their herds -- up to 7,000 in a single feedlot -- and the fact that the cows are confined to the feedlots rather than the pastures organic consumers might expect). The same year, Dean Foods, the parent group of Horizon (also related to Aurora) was sued for price fixing. Parke Wilde of US Food Policy blog notes that in spite of the current pricing crisis, Dean is actually raking in the dough because of the rock-bottom prices they're paying to their producers.

Times are tough -- have been tough for quite awhile but are acutely tough now -- for all of America's farmers, and the decks are stacked against the little guy, as well as consumers, to whom the plummeting price of milk doesn't translate to lower grocery bills.

All of this adds up to a decidedly un-level playing field for small-scale producers, one that wouldn't necessarily be addressed, should Vilsack install a higher price. If we want to continue to have clean, safe, dairies in this country, rather than filthy, polluting factory farms, and if we want to have farmers who aren't merely reduced to the status of serfs, something must be done to account for the difference in operating costs based on scale, but asking for a price increase based on production costs across the board is probably a good first start in a time of emergency.

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Comments

[APhilpott]

09:30 AM on 06/15/2009

The Holstein Association, a dairy trade association asked its readers: "Would you vote for or against a price support milk program...?" It is still early in the polling, but dairy farmers themselves appear to oppose a mandated floor for this very reason - it would increase supply, further depressing actual prices and making dairy farmers dependent on government.
http://www.allbreedsblog.com/2009/06/13/early-reaction-to-holstein-world-polling-question/

[Dragonflies]

09:10 PM on 06/14/2009

I wonder if there has been any anaylsis done on what a legally mandated floor of $17.50 per cwt, will do to the future of the industry? I ask that question because In certain parts of the country, if farmers received $17.50 or even $16.50 as a guarenteed price, they would be making good money because they have lower production costs. So they would add cows and produce more milk. This would lead to over production, which would either force the government to buy the excess product or reduce the floor price and the cycle will start all over again. .