Tuesday, May 21, 2013
ST. ALBANS, Vt. — The head of the U.S. Justice Department's antitrust division said on Saturday she has launched an investigation to determine whether giant milk processors are unfairly squeezing the nation's dairy farmers, who are experiencing their lowest prices in more than a quarter century.
U.S. Assistant Attorney Gen. Christine Varney, testifying at a U.S. Senate Judiciary Committee hearing on the current crisis in the dairy industry, said she wanted to find out ''why our cooperatives are the captive of one distributor.''
That distributor, according to U.S. Sens. Patrick Leahy, D-Vt., and Bernard Sanders, I-Vt., is the giant Texas-based milk processor Dean Foods Co. Sanders noted that Dean controls as much as 80 percent of the milk markets in many areas of the country and 70 percent in New England.
Dean, which was not invited to testify, has denied it controls the milk market, but the senators said the milk processor is reaping huge profits while dairy farmers are suffering. Dean Foods says it buys less than 15 percent of the nation's raw milk.
Over the past 25 years, consolidation among milk processors and retailers has resulted in a system in which there is little competition, leaving dairy farmers with few options for selling their milk, said Dale Cole, president of the Maine Dairy Industry Association.
In addition, although it costs more to produce milk in New England, the higher costs are not reflected in the prices farmers get, said Cole, who has a dairy farm in Sidney, Maine.
''This is good news,'' he said of the Justice Department investigation. ''We need competition, and we need ways to cover the cost of making local milk.''
Maine, which has more than 300 dairy farmers, is the second largest milk-producing state in New England, behind only Vermont.
Joseph Glauber, an economist at the U.S. Department of Agriculture, said that raw milk prices fell from record highs of $21.70 per hundred pounds in 2007 to less than $12 per this summer.
He blamed the current situation on overproduction following 2007's record prices as well as a hike in feed prices and lower demand because of the worldwide recession and other factors such as the melamine scare in China. Reduced production and the improving economy will bring prices back up, he said.
Several Vermont farmers testified that they are seeing the toughest conditions they have ever seen, noting that 35 Vermont farms have failed this year alone.
A federal milk supply management system is urgently needed to stop the boom-bust cycles that have repeatedly wracked the industry, said organic dairy farmer Travis Forgues of Alburgh.
Most farmers produce as much milk as they can to pay their bills, he said. ''This leads to chronic oversupply, depressing prices and farmers in too much debt to survive,'' he said.
-- Staff Writer Tom Bell contributed to this report.