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DOJ wants to promote fairness in dairy industry

by Scott Bauer
| June 25, 2010 5:48 AM

The federal government's top antitrust investigator told hundreds of farmers, lobbyists and others at a hearing Friday that the Department of Justice is keeping close watch on the nation's dairy industry.

Assistant Attorney General Christine Varney's said at the hearing on antitrust issues that the department wants to promote fairness in the dairy industry, which has experienced massive consolidation in recent years.

"We are keeping a watchful eye on this industry," Varney told about 500 people gathered for the daylong hearing at the University of Wisconsin-Madison campus. "We know that dairy farmers are concerned about a lack of choices for buyers as well as how their milk is priced."

Dairy farmers have long complained that though the retail price of milk and cheese has risen their profits are still shrinking. The price of milk in stores has fluctuated wildly over the years, but dairy farmers are paid roughly the same for their product as they were 30 years ago.

Someone between the farmer and the consumer is making money, but given the complexity of the milk market it's difficult to target a specific culprit, said U.S. Sen. Russ Feingold, D-Wis.

Much of the focus has fallen on large co-ops and milk processors that have taken a larger portion of the market share in recent decades.

The Dairy Farmers of America, a co-op that has 17,000 members, and the nation's largest dairy Dean Foods, are defending themselves in a pair of class-action lawsuits filed in the Northeast and Southeast alleging that they engage in price fixing. In April, the DFA was sued in federal court in Illinois alleging that it engaged in a conspiracy to manipulate the cheddar markets at the Chicago Mercantile Exchange.

Both Dean and the DFA have denied the claims.

In January, the Department of Justice office, along with attorneys general from Illinois, Michigan and Wisconsin, filed an antitrust lawsuit against Dean Foods, alleging it purchased a smaller dairy company in Wisconsin, Foremost Farms, to quash competition.

Dean gained 57 percent market share in parts of Michigan, Illinois and Wisconsin through the deal.

Dean Foods issued a statement before the hearing saying volatility in the market was hurting everyone.

"The system is broken, and all of us _ farmers, processors, and retailers alike _ are paying the price in one way or another," the company said.

The recession and overproduction, not market consolidation, is the cause of low prices for farmers, Dean said.

Given the amount of consolidation in the industry, there is a need for strong federal antitrust enforcement, said U.S. Sen. Herb Kohl, D-Wis.

Friday's hearing was the third of five planned by the departments of Justice and Agriculture to investigate antitrust and competitiveness issues. Previous ones focused on crops, hogs and poultry.

U.S. Agriculture Secretary Tom Vilsack said the purpose was to gather information about whether the playing field is fair in the dairy industry. Vilsack cited statistics showing that the number of dairy farms nationwide has dropped from 111,000 a decade ago to 65,000 now while the market share of the largest processors has increased.

About 500 people attended the hearing in "America's Dairyland," where dairy is a $26 billion annual industry.