Milk monopoly: How the dairy “mafia” compromised their own industry

The milk industry is in trouble. As consumption declines and dairy farmers increasingly close up shop, many are pointing fingers at those within the industry for its current woes. The responsible parties have even been nicknamed the “milk mafia” to illustrate the control the Dairy Farmers of America, Dean Foods and big milk processors and retailers have over the market.

The name may sound sensational, but it’s not an exaggeration. In fact, Dairy Farmers of America (DFA), a national milk marketing cooperative, has faced RICO lawsuits in court; federal RICO laws aim to protect victims of mafia-like conspiracies. In 2010, a lawsuit was filed against the DFA by plaintiffs who alleged they carried out a mafia-like conspiracy to manipulate the prices of cheddar cheese.

DFA also made payments to dairy farmers as part of a $50 million settlement nearly nine years after dairy farmers filed a class action lawsuit against them. The suit accused the DFA of using its marketing arm to monopolize the milk market by pushing milk prices down. They never admitted wrongdoing in the case and said they were only settling it because their defense costs were getting too high. One of the country’s biggest dairy companies, Dean Foods, had settled separately a few years earlier for $30 million.

And when Dean Foods filed Chapter 11 bankruptcy in November 2019, the milk industry feared the situation was about to get worse. Dairy farmers who don’t sell milk to processors like Dean can sell it to dairy cooperatives, who negotiate milk sales to retailers and processors on behalf of their members. However, as dairy co-ops continue to consolidate, the options are getting slim. Alongside the bankruptcy, Dean announced it was in talks with DFA about an acquisition, which is a huge conflict of interest as the DFA is supposed to be advocating for farmers and would instead be a processor – which would mean they’d want to keep milk prices low, to the detriment of the 13,000-plus dairy farmers they represent.

A former attorney for the U.S. Department of Justice’s antitrust division, Peter C. Carstensen, told the New Food Economy: “The problem with DFA is the conflict of interest that will result from [trying] to lower prices to farmers in order to increase their revenue as a milk processor.”

With the DFA already controlling just under a third of the nation’s milk production, acquiring Dean Foods gives them a monopoly over the market that would also see milk prices rise for consumers.

Last year, a lawsuit was filed against 75 members of the DFA’s leadership claiming the co-op has been running “a milk cartel which has shattered our nation’s crucial dairy industry.” The complaint argues that DFA has been unfairly expanding its reach with its recent acquisition of most of Dean Foods’ assets.

Milk prices dropping, dairy farmer suicides rising

All of this comes at a time when low milk prices are seeing dairy farmers going out of business. Wisconsin farmers got nearly 40 percent less money for their milk in 2019 than they did in 2014. And in 2018, nearly 700 of the state’s dairy farms were closed, many of which were small operations. The problems stemmed from companies who send their milk to grocery stores refusing to pay the farmers enough to cover the costs of milk production. While northeastern farmers claimed the DFA and Dean Foods conspired to monopolize the market and drive prices down, taking advantage of the fact that their member farmers had nowhere else to sell their milk, cooperatives on the West Coast were accused by members of keeping millions of dollars as part of a complex accounting scheme.

Meanwhile, dairy farmer suicides are rising as more and more farms are forced to close their doors – and the problem is getting so bad that one cooperative sent its farmers charts with dismal milk price forecasts and a list of suicide prevention hotlines along with their milk checks at one point.

In addition, milk consumption is dropping dramatically. In 2018, Americans consumed roughly 17.5 gallons of milk per person; the figure was 29.6 gallons in 1975. While some blame this on the availability of plant-based milk alternatives and other beverages, the truth is that many people are abandoning milk because of the way it is processed, with concentrated animal feeding operations producing milk in filthy conditions and then heating it until the pathogens are gone – along with the beneficial organisms naturally present in the milk.

Sources for this article include:

HealthImpactNews.com

BizJournals.com

TheMilkweed.com

NPR.org

FoodDive.com