DFA Agreed to Pay $50 Million Settlement

Posted July 15, 2014

The cooperative Dairy Farmers of America (DFA) have agreed to pay $50 million settlement to thousands of Northeast dairy farmers from a 2009 class-action lawsuit, according to an article on MSN by Lisa Rathke available here. The Portland Press Herald also published the article here and The Wall Street Journal here.

The lawsuit charged the cooperative, its marketing agency, Dairy Marketing Services (DMA), and dairy processor Dean Foods with monopolizing the market for raw milk in the area that drove down prices paid to dairy farmers.

DFA did not admit to any wrongful actions under the settlement terms.

“While we believe the allegations against us were without merit and the activities of DFA, Dairy Marketing Service (DMS) and other affiliated milk marketing cooperatives in the Northeast benefited cooperative members and independent producers alike, the cost to continue to defend ourselves has become too great," DFA said.

The settlement must be reviewed and approved by a judge.

In 2011, Dean Foods Co. agreed to a settlement of $30 million, but also did not admit to any wrongful actions.

For more information on agricultural cooperatives, please visit the National Agricultural Law Center’s website here.

Dairy Farmers Report Rise in Sales

Posted March 24, 2014

Dairy Farmers of America (DFA) reported a successful, profitable year for its dairy farmers and expects the trend to continue this year, according to an Agri-Pulse article available here.

DFA reported net income of $61.3 million for 2013 with net sales totaling $12.1 billion, up 6 percent from 2012.  Payments to members for marketed milk rose to $7.9 billion, from $7.3 billion in 2012, “primarily because of a higher U.S. all-milk price, which averaged $20.01 per hundred pounds for the year.”  Returns to members totaled $41.9 billion in 2013. 

“At DFA, we’re about making sure our members can farm successfully and profitably,” said Rick Smith, president and chief executive officer.

DFA is a national dairy marketing cooperative with over 13,000 members across 48 states.

Dairy farmers are optimistic that this success will continue this year, according to an article by Capital Press available here.

Producers are experiencing the highest milk-feed ratio in five years, said Katelyn McCullock, dairy economist with the Livestock Marketing Information Center.  U.S. dairy exports had a record-breaking year in 2013, “up 39 percent on a value basis and up $1.4 billion from 2012.”

Several factors have contributed to this success.  The milk-feed ratio for February was 2.55, the first time the ratio has been above 2.0 in two years.  Class III milk prices were at a record high in February and Class IV milk prices were at a record high in January.  Feed costs are also lower than recent years.

For more information on agricultural cooperatives, please visit the National Agricultural Law Center’s website here.

Potato Growers Confident in Price-Fixing Lawsuit

The Packer reports that the "United Potato Growers of America says it is confident the group will prevail in an expanding legal battle in which the co-operative and others are accused of engaging in 'classic cartel behavior' to control potato supplies and fix prices at artificially high levels."

Five different lawsuits have been filed against the United Potato Growers of America alleging this behavior.  For background on the lawsuits, click here to read a past US Ag&Food Law and Policy Blog post on the subject.  "Recently, the five cases were referred to the U.S. Judicial Panel on Multidistrict Litigation, which decides whether civil lawsuits in different districts can be consolidated into one district.  The panel's hearing was Sept. 30 in Nashville, Tenn., but as of Oct. 8, no decision had been announced."

"According to the lawsuits' claims, the defendants in 2004 formed regional and national United Potato cooperatives for the 'sole purpose of creating a national vehicle for potato growers and their co-conspirators ... to reduce potato output and fix prices."

Barb Shelley, spokeswoman for the United Potato Growers said that the group is careful to ensure that it is in compliance with the law and that they are confident that they will prevail.

To read The Packer story, click here.

Posted: 10/12/2010

Lawsuits Filed Against Potato Grower Cooperative Allege Antitrust Violations

A lawsuit filed on June 18 against the United Potato Growers of America alleges that it and other companies conspired to "control potato supplies and fix prices at artificially high levels" according to Bruce Blythe of The Packer.

According to the lawsuit, the defendants "formed regional and national cooperatives [in 2004] for the sole purpose of creating a national vehicle for potato growers and their co-conspirators ... to reduce potato output and fix prices."

The plaintiffs also allege that the defendants are not protected under the Capper-Volstead Act of 1922, 7 U.S.C. sections 291-292.  The Capper-Volstead Act "provides limited exemption from antitrust laws to agricultural producer cooperatives."

Another lawsuit filed on June 23 against the United Potato Growers and others "is intended to represent consumers, or indirect purchasers."

Both lawsuits are seeking class-action status and treble damages.

For more information on cooperatives, click here.
To read The Packer story, click here.
To read the complaint in the lawsuit filed on June 18, click here.

Posted: 07/06/2010

Illinois, Wisconsin, and Michigan Attorneys General join in Dean Foods’ antitrust suit

Nick Rees, of Legal News Line online, reports that Illinois Attorney General Lisa Madigan has joined the federal lawsuit “challenging Dean Foods Company’s acquisition of the milk business of one of its major competitors.”

The complaint against Dean Foods, which is being brought by the US Department of Justice’s Antitrust Division and the attorneys general of Michigan, Wisconsin, and Illinois in US District Court in Milwaukee, alleges that Dean Foods’ acquisition of Foremost Farms “substantially reduced competition in the sale of milk to supermarkets, grocery stores and other commercial customers throughout northeastern Illinois, the Upper Peninsula of Michigan and Wisconsin. Retailers, the complaint says, were deprived of the benefits of substantial head-to-head competition between Dean Foods and Foremost Farms as a result of the acquisition.”

As Brent Kendall reports for the Wall Street Journal, this is the first time the “Obama administration’s antitrust team at the Justice Department, led by Christine Varney, has sued to block or undo an acquisition.” Kendall reports that Varney had pledged to look into competition issues in the agriculture industry. Further, the administration could have been motivated to take up this suit because of the potential effect of the acquisition on competition in milk sold to US schools.

According to Kendall, “[t]he lawsuit not only seeks to undo the transaction but also seeks to require that Dallas-based Dean Foods, the country's largest processor and distributor of dairy products, notify the Justice Department at least 30 days in advance before any future acquisition of a milk-processing operation.”

In court documents, antitrust regulators said the acquisition “substantially weakened competition in certain dairy markets” when Dean Foods acquired Foremost Farms USA’s consumer-products division, eliminating a serious competitor even though Dean Foods only acquired two Wisconsin dairy-processing plants from Foremost.

For their part, “Dean Foods’ spokeswoman Marguerite Copel said the company was disappointed the Justice Department chose to challenge the transaction nearly 10 months after it closed. The lawsuit, she said, was ‘unsound, both legally and economically.’. . . ‘We are anxious to have the opportunity to defend this pro-competitive transaction in court,’ Ms. Copel said.”

Foremost Farms is not a party to the lawsuit and would not comment on the suit.

To read the Kendall article in the Wall Street Journal click here.
To read the Legal News Line story click here.

Posted: 01/26/10

Farmer who sold raw milk is acquitted

Ontario dairy farmer Michael Schmidt won a 16-year-old legal battle for himself and for those advocates wishing to expand the ability of Canadians to eat what they want without dealing with the government.

As Adam McDowell reports for the National Post, Schmidt is now free to bring raw, unpasteurized milk to the Canadian consumer. Schmidt was acquitted in a Newmarket, Canada court “on 19 charges relating to his distribution of raw milk and chesses.” Schmidt celebrated the long sought victory by drinking a glass of raw milk in front of his supporters.

It is up to the Crown to appeal, but until then consumers will have the choice of purchasing pasteurized milk or raw milk, “but only, the judge in the case stressed, provided the milk is distributed via the kind of ‘cow-sharing’ arrangement Mr. Schmidt had with his raw dairy enthusiasts.”

Following a 2006 sting operation in which the Ministry of Natural Resources joined the cow-sharing program Schmidt had implemented and obtained raw milk, Schmidt was charged under the Health Protection and Promotion Act and the Milk Act, both statutes were upheld despite Schmidt’s acquittal. Schmidt didn’t violate either statute because he was distributing the milk to co-owners of the cows and they understood they were drinking raw milk. Schmidt was not distributing raw milk to the general public.

The Ontario Health Protection and Promotion Act makes it illegal to sell, try to sell, or distribute milk and other dairy products that have not been pasteurized or sterilized, yet consumption of such products is legal.

With Schmidt, for the membership price of $300 a person becomes a part owner in a cow in the cooperative and are able to consume the milk provided by the cows they co-own.

To read more about the case and Mr. Schmidt’s cooperative program for milk, click here.

Posted: 01/25/10

Dairy Cows to the Slaughter

Michael J. Crumb with the Associated Press is reporting that low milk prices have forced some dairy farmers to take their cows to slaughter houses in order for their farming operations to stay financially afloat.

Dairy farmers are not immune from the current global recession. In good times, as the AP reports, farmers expanded their herds because the growing demand for milk in developing nations caused prices to rise. Now, with exports down, farmers have too much milk, and subsequently processors have cut the price they will pay farmers. In many cases the prices are so low that they don’t match the cost of production.

So, over this past year farmers have taken to killing cows—viewing this as the only way to reduce supply and raise prices. As Crumb reports, some farmers have taken to slaughtering whole herds. One program these farmers are turning to is called Cooperative Working Together (CWT), which is an industry run program “which pays farmers going out of business to kill - rather than sell - their cows and help remaining dairy operations by reducing the milk supply. Until this year, the 6-year-old program had paid for about 275,000 dairy cows to be slaughtered. This year alone, it has paid for more than 225,000 to be killed.” At current rates roughly 3 million cows may be killed this year.

Still, even with this development there is more milk available than demand, and so processors continue to pay low prices per hundred weight of milk, which means many farms still can’t pay for the cost of production. This can be attributed to the fact that some farms continue to expand their operations even as their neighbors kill entire herds. Wisconsin is the second-largest dairy producer, behind California, and in Wisconsin the number of dairy cows has increased by 5,000 from a year ago. Some of this growth can be linked to state tax credits and grants that help the industry modernize and expand. This credits and grants became law when times were still good for the dairy industry.

For now, simple truisms of economics are causing many dairy farmers to consider an option that years ago would have been shockingly inconsiderable.

To read the Crumb article for the AP click here.

Posted: 10/30/09

Online Farmers Markets May Get Boost

Reuters is reporting on a story about a collaboration between two companies designed to make it easier for online farmers markets to make an income without increasing costs. From the Farm, Inc., America’s Online Farmers Market (Stockton, CA) announced “today the creation of revenue generating streams for Succeed Corp.`s iSpeedway of Mesa, Arizona, independent web store owners. The system works through a banner advertisement campaign tracking banner clicks generating sales at From The Farm`s Online Farmers Market, and allows independent web store owners and bloggers to share in profits from the sales. The independent web store owners and bloggers are given the opportunity to add the www.FromTheFarm.com banner ad to their website through their iSpeedway website management system.”

General Manager of FromTheFarm.com, Dean Davis, says the benefit to this system is ‘“There is no cost, programming or re-design work needed by store owners and our systems handle all accounting of generated sales for each website. Bloggers and online store owners alike will now have a way of generating revenue without any expenses [.]”’ And perhaps the effort will yield more traffic and purchases from FromTheFarm.com and drive internet traffic to other online farmers markets.

The system put together by the two companies will allow independent website owners “to generate residual income for new FromTheFarm.com customers that result from the click of a banner ad.”

To read the Reuters story click here.
To visit the From the Farm website click here.

Posted: 10/13/09

Dairy Discontent Continues

Colorado’s herd retirement program is up and running and its goal is the same as most new dairy purchasing and selling decision—how to get the most out the herd to keep the farm going. The problem spreads across the nation and the globe. The situation has gotten to the point where Members of Congress are holding “field” agriculture hearings so they can learn first-hand from producers what the problems are—even if the problems are anti-trust practices by the biggest dairy purchasers.

The goal of the Colorado herd retirement program is simple, “shore up prices for struggling dairy farmers.” The program is part of a 225,783-cow retirement that “removed 4.5 billion pounds of milk from the market stream nationwide in three phases this year.” The retirement in Colorado was the second largest “since the Cooperatives Working Together CWT) program began in 2003.” Christopher Galen has said the CWT program is funded by dairy co-ops and individuals in order to “manage production to make dairy farming viable.” The idea is simple, cutting production means less milk on the market, which means higher prices for milk. “Farmers and ranchers who want to participate submit a bid on the number of cows they want to retire. They are paid based on the previous year's production of the cows and on the value of the cows going to slaughter.”

There is an ongoing debate on whether such retirement programs can actually sustain dairy farmers in the long run. Farmers who stay in the business “should see a boost in prices by about 66 cents per 100 pounds of milk” according to Dr. Scott Brown of the University of Missouri’s College of Agriculture, Food and Natural Resources. Bill Wailes, head of Colorado State University’s animal sciences department think there won’t be any significant changes unless “100 percent of the nation’s dairy farmers agree to participate.”

‘“Right now, only about 70 percent take part, and you need full participation to get the benefits in higher prices,”’ says Wailes. Wailes also points out that consumers are paying about the same price per gallon of milk as they were in the 1970s.

For now, farmers have to make a decision as to whether or not they want to participate in the retirement programs.

To read the article from the Denver Post click here.

Posted: 09/28/09

More Dairy Pricing News

Yesterday, this blog did a post on the ongoing antitrust lawsuit between several dairy farmers and dairy co-ops. Now, the United States Senate is starting to look into the issue of dairy prices with a little more vigor. Yesterday Senate Democrats “said they would investigate whether a few companies are monopolizing the dairy industry and keeping retail milk prices high, even as struggling farmers cope with falling revenue.”

According to New York Senator Charles Schumer, ‘“dairy farmers are in the worst shape I’ve ever seen.”’ The Senator is concerned that without providing the farmers with some immediate financial assistance then several farms will ‘“ . . . go under[.]”’ In 2007, dairy prices were $21.70 per hundredweight, according to Jennifer A. Dlouhy’s article for the Houston Chronicle. Now farmers are getting less than $12 per hundredweight. This is a bad reality for dairy farmers as one financial services firm estimates it cost more to produce a hundredweight of milk (roughly $17.58) than the farmer can hope to recover at the market.

This is why Senator Patrick Leahy (VT), Chairman of the Senate Judiciary Committee, plans to hold a field hearing this coming Saturday in St. Albans, VT to look into ‘“the state of competition . . . in the Northeast dairy industry [.]”’ Officials from both the Justice and Agriculture Departments will testify. Specifically, Leahy is interested in the disparity between what milk costs at the store (roughly $3 a gallon) and what farmers are being paid. Leahy is also concerned that anti-competitive actions might be behind the disparity, and he is concerned by ‘“the fact that the market is controlled by a couple of monopolies . . .” Dallas-based Dean Foods Co., may end up being one of the top targets of any hearings, just as the company is major part of the antitrust lawsuit.

Congress and the government have taken some steps, as of late, to try and provide some relief to the struggling dairy farmers. For instance, US Department of Agriculture Secretary Tom Vilsack “temporarily increased the amount the government pays for nonfat dry milk and cheddar purchased through its Dairy Product Support Program — an increase that will cover August through October.” Additionally, last month the Senate voted for a measure that provides an additional $350 million to the Dairy Product Support Program, but similar language was not a part of the House’s bill. Regardless, Senator Bernie Sanders (VT) and Schumer said they will push to keep the measure intact during negotiations on a compromise bill.

To read the Houston Chronicle article click here.

Posted: 09/16/09

Farmers Market Near White House Gets OK

It is usually better to have the White House advocating for your cause than not—particularly if your cause involves the White House. To that end the White House has helped a nonprofit organization get approval to set up a farmers market near the Executive Mansion, according to city officials.

As Rachel L. Swarns reports for The Caucus, a politics and government blog for the New York Times, the nonprofit Fresh Farms Markets received approval on Thursday for their open-air market in the heart of the nation’s capitol. The group, which operates several farmers markets in Washington, DC and Maryland, applied last week for a permit from the city that would close part of Vermont Avenue Northwest near the White House. The city’s department of transportation issued the permit yesterday, September 10, 2009. The permit allows the market to operate on Thursdays from September 17 through October 29.

While the White House would not comment on its involvement in the effort, city officials did say that Sam Kass, former personal chef for the Obamas and current White House assistant chef, did make an appearance at a community meeting last week to give support for the project. According to Bernadine Prince, co-director of Fresh Farm Markets, eighteen local farmers and producers will sell their goods at the market. It is not known if any produce from the White House garden First Lady Michelle Obama established this year will be available for sale.

Previously, President Obama made the following statements about farmers markets:
“One of the things that we’re trying to do now is to figure out, can we get a little farmers market—outside of the White House . . . That is a win-win situation . . . It gives D.C. more access to good, fresh food, but it also is this enormous potential revenue-maker for local farmers in the area . . . Those kinds of connections can be made all throughout the country, and — and has to be part of how we think about health.’’

It remains to be seen if the First Family will also be the farmers market’s First Customers. To read the Swarns post click here.

Posted: 09/11/09

Community Garden Thefts in St. Louis

Community gardens stories are usually of the “feel good” variety. They tell the story of neighbors coming together to raise healthy fruits and vegetables, learn about the land, and save on some grocery costs. They tell stories of communities coming together to raise food for local food banks and charities. Unfortunately, in St. Louis today, the story is one of crime, and the victims are often those with the least.

According to a report filed by the Associated Press, St. Louis has “180 community gardens with up to 120 growing vegetables. Many of the gardens provide extra vegetables to homeless shelters and community organizations, meaning the thieves are taking from some of the most needy, gardeners said.”

Previously, community gardens could expect a few fruits and vegetables to go missing from time to time, but this year is different. This year, entire gardens are being raided. This has caused the Fox Park community garden to put the garden behind a locked gate. Gardeners contend the number of thefts has increased a great deal over the past two years, and this year in particular. Many believe the economic struggles individuals are facing are a motivating factor behind the thefts.

City Seeds Urban Farm has found a way to protect their garden from theft—have homeless people work the garden. Additionally, signs were installed that explains the mission of the garden. Since the signs were put in the garden has not reported any more thefts.

Community gardens are unique in the way they provide fresh fruits and vegetables to the local community and the way they educated people about the land. Perhaps it will be employing other unique methods to help combat the current thefts?

To read the AP story click here and then scroll down.

Posted: 09/08/09

Community–Supported Agriculture May Be On the Rise

A promising new type of cooperative agricultural model is starting to take hold on farms near urban areas. Scott Malone’s Reuters story on community-supported agriculture (CSAs) describes how one such cooperative, located 20 miles southwest of Boston, operates. Essentially, the farmers sell shares of their predicted seasonal crops to customers. When the crops are ready, the customers come to the farm on certain times and pick up their share of the produce for that time period.

The owner of the CSA southwest of Boston has been very happy with the results since she turned to the CSA model. Laura Tangerini, who operates a CSA on her farm outside of Boston, said in the Reuter’ story ‘“What I’m seeing with the CSA is a future for my farm past me.”’ According to the Reuter’s story the CSA has been so successful that Tangerini no longer borrows money to cover seed and other early-season expenses.

While the United States Department of Agriculture (USDA) has not previously counted CSAs in its census of agriculture, the department does have figures showing “12,549 U.S. farms had sold products through CSAs in 2007.” This represents less than 1 percent of the 2.1 million farms nationwide. Still, many farmers are turning to the model because they can grow a diversity of crops to attract a diverse group of customers who prefer fresh food. Additionally, the farmers do not have to take their produce to a farmer’s market to sell since the customer comes to them. Finally, because members of the CSA buy a share of the produce, they share in the farmer’s risk. As the Reuter’s story says, “If a particular crop fails, members typically have to go without or find another source.”

Ben Doherty, who runs Open Hands Farm in Minnesota, says he likes the shared risk of the CSA. According to the Reuters story, Doherty stated, ‘"It takes a lot of the risk and a lot of the fear out of the farming . . . If we have mediocre or bad tomatoes for the year, we don't make $5,000 or $10,000 less. Everybody gets a few less tomatoes."’

Whatever the reason a person likes CSAs, the model seems to have plenty of promising growth potential. To read the Reuters article click here.

posted: 08/27/09

USDA: Assistance For Those Struggling in Agriculture Industry

Today, August 10, 2009, United States Department of Agriculture (USDA) Secretary Tom Vilsack announced that the USDA is making an “unprecedented effort to use the department’s administrative flexibility to provide relief to individuals and businesses in struggling agriculture industries.”

According to the news release from the USDA, the Secretary has ordered both the USDA’s Rural Development and Farm service Agency to use all the means each agency has on hand to help the struggling agriculture industry. Among the type of assistance that will be provided includes an increased effort to deliver loan assistant to livestock producers and use the Rural Development Business and Industry Loan program to give needed relief to small agriculture-industry businesses and processors. The latter program is available for “cooperative organizations, corporations, partnerships, nonprofit groups; federally recognized Indian tribes, public bodies and individuals.

The American Recovery and Reinvestment Act made $1.7 billion available for business and industry loans. As stated in the news release, “[t]hese funds will be focused to create and retain quality jobs, and serve difficult-to-reach populations and areas hardest hit by the current economic downturn.”

For more information on the USDA’s efforts, see the news release issued by the department by clicking here.

Posted: 08/10/09

More dairy woes

Yesterday, the Associated Press featured a story on the problems facing the dairy industry in Idaho. For AP story click here. Although relatively a young industry in Idaho, it has become the third-leading milk producing state, according to the article. The article noted that:

the last two years, state profits reached record highs and dairy farms expanded. Now, with the waning national and international economy, dairy prices have dropped 44 percent. At the same time, high feed prices have some farmers thinning herds and cutting their losses.

One dairyman, Jack Davis, noted,

"We never just made money hand over fist, but since June I don't think anybody's made a lot of money at all," said Davis, whose father started milking cows in 1940 at the family farm in Kuna, about 20 miles southwest of Boise.

Davis also noted that he was losing about $80,000 a month on his 700 head herd.
Finally the story noted, that the federal government is not proposing a bailout of the dairy industry, but the National Milk Producers Federation has stepped in with its own bailout program. The National Milk Producers Federation program began five years ago, and

has shifted 275,269 dairy cows, including 75,000 in the last 12 months, into the beef industry.
The buyout program requires its members to contribute 10 cents to the organization for every hundred pounds of milk their cows produce. Its members produce nearly 70 percent of the nation's milk supply, and the 10 cent surcharge helps finance buyouts.
Galen said the industry needs to take hundreds of thousands of more cows out of the system.

Cooperatives

Subject Description: Farmers often form cooperatives so that they can enhance their economic market power. A farmer cooperative can serve one or more functions including but not limited to providing loans to farmers, supplying information pertinent to agricultural production, selling inputs necessary to agricultural production, bargaining on behalf of its members, providing transportation services, and marketing agricultural products for its members. A number of legal issues arise in the context of agricultural cooperatives, and this subject area will attempt to provide updated news and information on developments relative to agricultural cooperatives.