Dairy Industry Fixed Prices by Killing Cows; We Each Get 71 Cents Back

If you’ve bought cream, half and half, yogurt, cottage cheese, or sour cream since 2003, you can get some money from the dairy industry. On August 25, Land O’ Lakes, the National Milk Producers Federation, Dairy Farmers of America, and Agri-Mark settled a five-year-old federal class action lawsuit (Matthew Edwards v. National Milk Producers Federation, Case No. 11-cv-04766) over killing dairy cows to inflate prices:

The dairy producers were accused of conspiring to prematurely slaughter more than 500,000 cows between 2003 and 2010 to limit the production of raw milk and drive up prices for yogurt, sour cream and other dairy products.

…The class includes all consumers who from 2003 to present purchased cream, half & half, yogurt, cottage cheese or sour cream in California, Kansas, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Hampshire, Oregon, South Dakota, Tennessee, Vermont, West Virginia, Wisconsin and the District of Columbia.

…In their motion for settlement approval, the plaintiffs estimate 73 million class members are eligible to receive a portion of the $52 million fund [Nicholas Iovino, “Dairy Producers Pay $52 Million for Price-Fixing,” Courthouse News Service, 2016.09.07].

$52 million for 73 million customers—that’s about 71 cents for each of us. You can apply for your six bits online at www.boughtmilk.com.

The dairy herd retirement program probably benefited Big Corporate Ag more than individual farmers, who often took the herd kill-off as an easy exit from desperate financial straits. The dairy herd retirement program didn’t lead to a total herd reduction of 500,000; nationwide, from 2005 through 2010, the national dairy herd still increased, despite a big recession-era drop:

US Dairy Herd

The dairy herd retirement program may have functioned more like a dairy retirement program: through the period covered by the class action suit, South Dakota’s dairy farms decreased from 585 to 321. Dairy concentration continues: by 2015, South Dakota’s dairy count was down to 221.

11 Responses to Dairy Industry Fixed Prices by Killing Cows; We Each Get 71 Cents Back

  1. Darin Larson

    Prepare for sarcastic response: Yes, if prices had been lower we would have saved the small dairy producers and they would not have gotten out of dairying. They only got out of dairying because somebody paid them for their cows. It’s not like they could haul their cows to the sale barn any day of the week.

    Seriously, I know midsize dairies that were losing $3,000 a day in 2009. Essentially, some dairies were losing more money in one year than they had made in the previous 10 or 20 years. Did the plaintiffs think that dairy farmers were going to continue to produce milk for less than $10 for a hundred pounds of milk?

    The only thing that the dairy herd buyout did was accelerate the time frame in which dairy prices rose from catastrophic levels. Prices were still going to go back up, but it would have been after most dairies in the US were out of business. The laws of economics still applied here: if you are losing massive amounts of money in a business, you are going to go out of business.

    Of all the cartels, oligopolies and monopolies that we have operating in the US, the dairy industry should be the least of our worries. They will inevitably overproduce milk and dairy products. it’s what they do.

  2. mike from iowa

    So why has butter doubled its price this year? Milk and half and half haven’t gone up much.

  3. Darin Larson

    Wholesale butter prices have been pretty flat it looks like to me.

    If the dairy farmer isn’t seeing a rise in the wholesale dairy prices, they aren’t seeing it in their pockets. That would leave the processors or more likely the retailers making the money.

    Milk prices for dairy farmers right now are the only reasonably bright spot in the entire farm sector of the economy. I think cheese demand rising has been the driving force for this, but I’m not a dairy farmer so I could be wrong.

  4. mike from iowa

    Less than 6 months ago I could get butter-on sale- for 99 cents. Usually about twice that. Now it is just under $4 a pound. I read recently that US supplies were dumped overseas. I’ll see if I can find that report again.

  5. Darin Larson

    Mike, that was 2 years ago when exports surged. It is a global market for butter. But as your bloomberg citation predicted:

    The surge in butter may not last. Global dairy output will exceed demand by at least 2 billion liters annually through 2018, fueled by increased output in New Zealand, Europe and the U.S., Goldman Sachs Group Inc. said in a June 11 report.
    U.S. butter is no longer cheaper than competitors. Prices at GlobalDairyTrade, the international dairy auction owned by New Zealand’s Fonterra Cooperative Group Ltd., fell 34 percent to about $1.43 a pound on July 15, compared with $2.15 on March 4, when U.S. spot prices were at $1.88.

    I don’t know why your butter was $1 six months ago and now is $4. As I pointed out the wholesale prices have been relatively stable. That probably means your retailer was selling butter as a loss leader six months ago and now decided to cut a fat hog, as they say, and charge $4. The farmers share has not changed appreciatively.

  6. A couple of observation questions, why, if the dairy industry is dumping cows to inflate market prices, do we need more CAFO’s here in South Dakota? For all these years, it has been clear that there was this ongoing price fixing that was known by state government as they are in the lawsuit, why are we polluting our air and water so that we can be a part of the corruption of price gouging? Oh wait, I think I know the answer, our state government cannot operate without corruption. In the last 40 years, they have only gotten more rotten to the core, EB5, Gear Up, etc, and etc. We need to clean the place up and toss out the corruption. Vote for honest new faces to get behind the broom for a clean sweep.

  7. Pretty simple really.. it is driven by the processors who have been investing in the large cafo’s and refusing to pick up the milk from the smaller producers. now we have huge dairies providing cheep milk for cheese, lots of cheese… the market is saturated so we talk uncle sam into buying the excess to give away to the needy… full speed ahead!

  8. Very good link Dave. Another observation then, when I hear South Dakota ag producers complain about the SNAP program and other commodity programs, they are really complaining about themselves for the subsidies they are receiving. In short, they are just as much on welfare as those that are disabled, without jobs and in general, needy. As we are all dependent on the government in one way or another, why not embrace that fact to make our lives better? Why should we have to put up with the likes of Thune, NOem and Rounds for examples of not being able to make the changes we need for a better tomorrow while they line their pockets. Why should we even consider a goof off like Mickelson, that is full bore CAFO, for further consideration to a higher office.

  9. Where is the beef?? So, where are the cattle producers on this scam to defraud? The milk prices are one thing on the list, but what about the dumped beef that came on the market to drive down the cost to producers? What remedy to they have to pursue this corrupt bunch?

  10. Cheese surplus?! Wow! I suppose I should be glad that, once again, America is producing so much wealth that it can afford to give free food to the poor. But yes, as Jerry notes, the socialist implications are obvious. If the free market were working, the dairy industry could afford to produce food at prices that every hungry worker could afford and that would pay back the cost of production plus reasonable profit. If some producers misread the market and made too much cheese, they’d suffer the consequences of excess inventory and wasted effort, and they’d learn from those consequences.

    Instead, we give more producers EB-5 money and other state assistance to enter an apparently already sufficiently equipped market, then insulate them from the natural consequences of their production decisions by buying their surplus.