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About Food & Water Watch
Food & Water Watch is a nonprofit consumer organization that works to ensure clean water and safe food. We challenge
the corporate control and abuse of our food and water resources by empowering people to take action and by transforming
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Copyright © October 2008 by Food & Water Watch. All rights reserved. This report can be viewed or downloaded at
www.foodandwaterwatch.org.
Dairy 101
Introduction............................................................................................................................................................1
Beyond the Farm Gate: Processing and Retail Consolidation Squeeze Dairy Farms & Consumers............................................3
Pumping Up Production.................................................................................................................................................6
Endnotes..........................................................................................................................................................8
Y ou’re not getting what you pay for in the dairy aisle these days. While shoppers
are led to believe that the milk they purchase comes from tranquil pastures, where
farmers watch over happy milk cows grazing on green fields, the reality is not so idyllic.
There are some good options in the dairy case, but consumers need to know what to
look for.
Over the last 20 years, the dairy industry has been trans- Industrial Milk Production: A Beast
formed at all levels, from the cows that produce its raw
materials to the cooperatives that secure its prices and the
of a System
processors that turn milk into finished products for con-
sumers. Massive mega-dairies, whose herds may receive In recent years, our country’s small- and mid-sized dairy
antibiotics and growth hormones to boost production, ship farms have been disappearing, squeezed out by the consoli-
milk across the country to be mechanically separated and dation of industrial mega-dairies that now dominate milk
resold as everything from ice cream to industrial protein production. The United States is hemorrhaging dairy farms
concentrates. Consumers no longer know where their milk and farmers: Between 1997 and 2007, an average of 5,000
comes from — or what is actually in many of the dairy dairy farms were lost annually, for a total loss of more than
products they consume. 52,000 dairies in just a decade.1
Today’s dairy industry doesn’t work for consumers or Milk production has remained constant, however, because
for small- and mid-sized family farmers. These men and more and more cows are pushed onto the farms that re-
women — the ones who spend their time with herds and in main. As late as 1998, the majority of milk produced in the
pastures, who milk their cows twice daily, help them calve United States came from small farms housing fewer than
and ensure they receive proper veterinary care — receive 200 cows. Only 10 years later, that breakdown has flipped,
subsistence-level prices or less for their milk and their and the majority of U.S. milk is produced on large dair-
labor. At the same time, consumers are paying higher prices ies with more than 500 animals each. In fact, more than a
at the grocery store. It seems like everyone is losing, except quarter of all milk now comes from industrial dairies with
for the corporate middlemen and speculators who skim off more than 2,000 cows, nearly 20 times larger than the
all the cream. national average herd size.2
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Dairy 101
prices, they cannot simply “turn off the cow” until prices Blocking out the competition
rise again. That leads them to continue to produce even Even worse, the pricing formulas are now vulnerable to
more when prices are low, sending prices further south manipulation by large dairy companies like Kraft.25 Here’s
with the increased supply. why: The price of cheddar cheese blocks traded on the
Chicago Mercantile Exchange (CME) is the basis for the
Recognizing that this pattern in the market could mean government’s milk price formulas. Because the trades take
the death of the U.S. dairy industry, Congress stepped in place between a very small number of huge dairy compa-
during the 1930s to help balance supply and demand and nies, Kraft and others can actually influence the price of
keep prices stable. It did so by setting a minimum price that cheese at the CME — and thus the price paid to farmers
farmers must receive for their milk, which is determined for their milk — by holding or selling cheese at strategic
using a complex series of formulas. The policy was sup- moments. The federal Government Accountability Office
posed to provide fair income to dairy producers, much like (GAO) recently concluded an investigation of cheese trades
a minimum wage.23 But beginning in 1981, this approach at the CME and found that they were prone to manipula-
was abandoned. Congress lowered milk minimum price tion.26
levels, keeping formulas in place but bringing an end to the
“minimum wage” concept of pricing. The price farmers re- There are alternative models out there. Some farmer-
ceive for their milk has declined steadily in real terms since owned companies try to offer their members a higher price
that point, as the treadmill of overproduction and lower than the going market rate and compensate by reducing
prices speeds ever faster.24 overhead costs and/or raising retail prices. But given the
consolidation that’s taking place even in alternative dairy
markets, all farmers are feeling vulnerable. They’re also
all seeing skyrocketing prices for their inputs. Due to bad
weather, the hay needed to feed cows in the winter is scarce
and expensive, and rising fuel costs are tightening the
squeeze even more.
4
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Dairy 101
To cut costs further, dairy processing companies like Kraft When rBGH is injected into cows, it increases their pro-
have begun to import something called Milk Protein Con- duction of another growth hormone called IGF-1. IGF-1
centrate (MPC), a dried dairy byproduct produced in India, is resistant to pasteurization; the European Commission
China, New Zealand and other countries.36 MPCs don’t found that consumption of milk from rBGH-treated cows
have to come from cows’ milk; in fact, they often come from increases daily intake of IGF-1 by humans.43 IGF-1 has been
water buffalo, yak and sheep. Although the Food and Drug linked to breast and prostate cancer.44 While less than 10
Administration (FDA) has never approved MPCs as a food percent of small dairies use rBGH, 42 percent of industrial
ingredient,37 U.S. companies have been integrating them dairies do.45
into food products anyway, using them in place of pow-
6
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17
Silverstein, B. (2007). “Silk Soymilk: Smoooth.” Brandchannel. 25
Grant, J. (2006) “CME in Cheese Price Fix Investigation.”
com, Brand Features: Profile. December 31. Accessed August Financial Times, August 17. Available at http://us.ft.com/ft-
19, 2008. Accessible at www.brandcameo.net/features_profile. gateway/superpage.ft?news_id=fto081720061727374434. See
asp?pr_id=367. also: Mueller, W.F., B. W. Marion, M. H. Sial, and F.E. Geithman
18
Martin, A. (2008). “Yes, it’s a Cooperative. But for Whom?” The (1996). Cheese Pricing: A Study of the National Cheese Exchange.
New York Times, May 18. Prepared for the Wisconsin Department of Agriculture, Trade, and
19
Dean Foods Co. (2002). 10-Q SEC Filing, Item 2. Accessed Consumer Protection. Food System Research Group, Department
September 1, 2008. Available at sec.edgar-online.com/2002/0 of Agricultural Economics, University of Wisconsin-Madison.
8/14/0000950134-02-010148/Section7.asp. See also Oligopoly 26
US GAO (2007). Spot Cheese Market: Market Oversight has
Watch (2003). Oligopoly Brief: Dean Foods. Accessed August 15, Increased, but Concerns Remain about Potential Manipulation.
2008. Available at www.oligopolywatch.com/2003/10/08.html. Washington, DC: U.S. Government Accountability Office
20
Bureau of Labor Statistics (2008). Consumer Price Index, Milk. 27
Burros, M. (2006). “Survey Ranks ‘Organic-ness’ at Dairies.”
Accessed August 7, 2008. Available at www.bls.gov/cpi/#data. The New York Times, March 22. Available at www.nytimes.
21
USDA/ERS (2008). Price Spreads from Farm to Consumer: com/2006/03/22/dining/22milk.html.
At-Home Foods by Price Group (Dairy). Accessed August 7, 2008. 28
Phillips, D. (2005). Hood’s Dairy Nation. Dairy Foods, January
Available at www.ers.usda.gov/Data/FarmToConsumer/pric- 10. Available at www.dairyfoods.com/CDA/Archives/6a0047062e
espreads.htm. 0a7010VgnVCM100000f932a8c0____.
22
Bureau of Labor Statistics (2008), op. cit. 29
Cornucopia Institute (2007). Enforcement Hammer Falls on
23
Blayney, D.P. and M.A. Normile (2004). Economic Effects of Nation’s Largest Organic Factory Dairy. Press release, August 31.
U.S. Dairy Policy and Alternative Approaches to Milk Pricing. U.S. 30
Hendrickson, M., W.D. Heffernan, P. Howard and J. Heffernan
Department of Agriculture, Report to Congress, July. (2001). Consolidation in Food Retailing and Dairy: Implications
24
USDA/ERS (1982-2003). Dairy Yearbook. for Farmers and Consumers in a Global Food System. National
Farmers Union.
9
Dairy 101
31
Cornucopia Institute (2008). America’s Largest Corporate Dairy 40
Doohoo I. et al. (1998). “Report of the Canadian Veterinary
Processor Muscles Its Way into Organics. See also Cornucopia Medical Association Expert Panel on rBST”. Health Canada,
Institute (2007). Lawsuit Announced Against Nation’s Biggest November.
Organic Dairy. 41
Pew Commission on Industrial Farm Animal Production (2008).
32
Bradley, M. (2007). Notice of Proposed Revocation. Letter to Putting Meat on the Table. Washington, DC: Pew Commission.
Marc Peperzak, CEO, Aurora Organic Dairy, April 16. 42
Spellberg B, Guidos R, Gilbert D, Bradley J, Boucher HW,
33
USDA (2007). Aurora Organic Dairy Signs Consent Agreement Scheld WM, Bartlett JG, Edwards Jr. J, America IDSo (2008).
with USDA’s Agricultural Marketing Service. News Release no. The Epidemic of Antibiotic-Resistant Infections: A Call to Action
0228.07. for the Medical Community from the Infectious Disease Society of
34
NODPA (2006). Family Farmers Say No to Factory Farms in America. Clin Infect Dis 46.Curr Opin Microbiol 4: 493-9.
Organic Dairy. Press release, April 14. 43
European Commission (1999). “Report on Public Health Aspects
35
Ruff, J., Kraft Foods (2004). Re: Prior Notice of Imported of the Use of Bovine Somatotrophin.” In Food Safety — From
Food. Letter to the FDA, July 8. See also FoodProcessing.com Farm to Fork.
(2008). “Ingredients from Where?” Accessed September 3, 44
Yu, H., and T. Rohan (2000). Review: Role of the Insulin-like
2008. Available at www.foodprocessing.com/articles/2008/037. Growth Factor Family in Cancer Development and Progression.
html?page=print. Journal of the National Cancer Institute 92:1472-89.
36
Krebs, A. (2001). “Kraft ‘Cheese’: Adulterated Food?” The 45
USDA/APHIS (2007), op. cit.
Agribusiness Examiner, No. i115, May 7. 46
American Agriculture Movement, American Corn Growers
37
Bunting, J. (2005). Testimony Regarding Proposals Seeking Association, et al. (2008). Letter to Senator Patrick Leahy, Chair,
to Amend the Class I Fluid Milk Product Definition. Federal Senate Judiciary Committee. June 26.
Register, Vol. 70 No. 69, p. 19012-19015. 47
Ibid. See also NFFC (2008). Family Farm and Consumer Groups
38
Blayney, D., M. Gehlhar, C. H. Bolling, K. Jones, S. Langley, Urge Senate Judiciary to Investigate Dairy Farmers of America
M. Normile, and A. Somwaru (2006). U.S. Dairy at a Global (DFA). Press Release, July 6.
Crossroads. Economic Research Report No. 28. Washington, DC:
USDA/Economic Research Service, p. 8.
39
National Family Farm Coalition (2008). U.S. Dairy Farmers
Host Teleconference Outlining Crisis in Dairy Industry. Press
Release, March 3.
10
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Notes
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