WEST DES MOINES, Iowa — Farmers paid close to twice as much for seed in 2011 as they did in 2005, said NFO dairy policy director Brad Rach. He asked NFO members attending the recent national convention in West Des Moines if their milk price doubled.
"What we get never seems to keep up with what we pay," Rach said. "Why do we always seem to pay enough to keep everyone else in roses, but no one we do business with treats us that same way?"
A troubling trend Rach sees is foreign buyers are taking over U.S. milk processing plants.
Saputo, 12th largest dairy processor in the world and the largest dairy processor in Canada, has purchased $775 million in U.S. milk processing plants. LaLa, a Mexican dairy conglomerate and one of the largest dairy companies in the world, recently bought National Dairy Holdings and gained 18 U.S. processing facilities.
It isn’t just foreign companies assembling processing conglomerates so big that dairy farmers have to be concerned, Rach said.
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The Department of Justice filed a civil antitrust lawsuit against Dean Foods Company in 2010 challenging its 2009 acquisition of Foremost Farms USA’s Consumer Products Division, Rach said. By buying Foremost, Dean’s controlled 57 percent of the market for processed milk in northeastern Illinois, the Upper Peninsula of Michigan and Wisconsin. The Department of Justice worried that Dean could unfairly charge more for milk when they sold it to schools and grocery stores. Dean’s was required to reduce its market share by selling some plants in Wisconsin.
"The Department of Justice knows that if you get a big enough slice of a market, you can move the price in your favor," Rach said.
He urged farmers to consider economist Richard Levins’ advice that farmers working together is the key to moving price.
The answer isn't for farms to get big enough to play buyers against each other, Rach said. In 2009, the largest processor had a national market share of 13 percent. For a dairy to match that, it would have to have over 1 million cows.
"Here at NFO, we know that you must work together if you are to get the price you deserve for your milk," Rach said. "You can’t get big enough on your own to take on the biggest processors, but dairy producers as a group have 100 percent market share. That’s bigger than any processor can ever have."
If dairy producers market their milk as a group by using a common marketer, all of a sudden they are the ones gaining strength in the market place, Rach said.
The Capper-Volstead Act allows dairy producers to work together maintaining their chosen size but acting "like a giant in the marketplace."
Rach said NFO’s goal is to get dairy farmers the price they deserve for the milk they produce.
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"We’re tried government programs, we’ve tried tightening our belts, and we’ve tried getting more cows," Rach said. "It’s time we tried strength in numbers."
He urged dairy farmer members to ask others to join NFO’s MaxiumumMarketing Program.
