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New federal report shows dairy cooperatives struggling with power imbalances and competing interests

By Jessica Fu
Fifty-five years ago, the Beatles made their American debut, Disney released the original Mary Poppins, and 1,244 dairy cooperatives across the country represented milk farmers’ interests in negotiations with processors and retailers. Since then, the dairy industry has undergone rapid consolidation, and co-ops have followed suit. Today, just 118 remain, per the most recent Department of Agriculture (USDA) numbers.
With every merger, more and more farms of different sizes, business models, and geographic locations have found themselves grouped under the same organizational roof. This phenomenon, as a result, has created power imbalances within the very associations founded to mitigate them, according to a new Government Accountability Office (GAO) report on the issue.
The GAO report was issued in response to a request by Democratic Senator Kirsten Gillibrand of New York, and is based on a review of USDA publications, peer-reviewed research, and interviews with various stakeholders. (For her part, Gillibrand has a history of advocating on behalf of dairy farmers, likely because New York is the third highest dairy-producing state.)
The report affirms the growing complaint among farmers that modern dairy cooperatives are no longer working solely on behalf of farmers’ interests. Some allege that co-ops, many of which have entered the business of developing retail products like yogurt and cheese from fluid milk, now have competing interests that incentivize them to keep milk prices low in order to maximize their own profit. Then there’s the problem of power imbalance, as evidenced by the voting structures among diverse co-op memberships. Typically, co-ops have abided by a “one member, one vote” rule, but that’s changing. According to the report, more states are greenlighting voting structures that allocate votes based on production, which can squeeze smaller dairy producers.
Historically, the co-op movement was a response to a lopsided industry made up of a handful of buyers—food processors, cheese producers, private label brands, and so on—and thousands of dairy farmers from California to Wisconsin. Co-ops gave sellers the power to collectively bargain with buyers, and legislators even carved out a special exemption, via the Capper-Volstead Act of 1922, to spare co-ops from having to deal with antitrust laws.
Today, co-ops no longer work solely on behalf of buyers. Dairy Farmers of America, the country’s biggest dairy co-op representing 13,000 farmers, has expanded its dealings along the milk supply chain, from processing to delivery, leading to what many farmers believe are conflicts of interest that actually drive down milk prices. (Read Leah Douglas’s comprehensive history of the charges here.) Now, it appears that the government’s watchdog agency has drawn some of the same conclusions.
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