Who Decides How Much We Pay for Milk?

By David Goodman, "Who’s Milking It? ," July/August 2010

Are farmers getting a fair deal?

"Very well written and informative. I come from a family of dairy farmers that have been in the business over 150 years. Today, my grandmother told me there is a high possibility that my uncle will have to sell the farm due to the terrible...

Since the 1930s, the price of milk has been set by the federal government and tied in part to the value of a 40-pound block of Cheddar cheese sold on the Chicago Mercantile Exchange. So the price that cheese trades at in Chicago is a major factor that determines what a dairy farmer earns.

The problem is that the dairy industry is dominated by a few large companies that buy and sell milk. With so few players, these companies can manipulate the price of milk and cheese. And that is just what has happened: in 2008, Dairy Farmers of America (DFA), an 18,000-member milk-marketing cooperative, paid a whopping $12 million fine to the government to settle charges that it manipulated the price of fluid milk in 2004.

Last fall, dairy farmers filed a class-action lawsuit against DFA and Dean Foods, accusing the two companies of “monopolizing a level of distribution of fluid milk in the Northeast and forcing dairy farmers to join DFA or its marketing affiliate, Dairy Marketing Services, to survive.” DFA has responded that the lawsuit is “without basis.” Then in January, the Justice Department, along with state attorneys from Illinois, Wisconsin and Michigan, filed an antitrust lawsuit against Dean Foods following its purchase of competitor Foremost Farms.

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