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Dairy Competition Workshop Provided USDA, DOJ with Insights
Wisconsin Ag Connection - 06/28/2010

U.S. agriculture and justice officials heard a lot of different concerns about competition within the nation's dairy industry in Madison last week, but one common theme echoed throughout Friday's workshop was that milk and cheese prices are being influenced by too few at the top. The forum, which is the third in a series of five joint public workshops being held around the nation, was indended to examine competition and regulatory issues in the dairy industry. About 500 people attended the program at the University of Wisconsin's Union Theater.

U.S. Agriculture Secretary Tom Vilsack kicked off the meeting. He said the dairy industry has been hit particularly hard over the past eighteen months, and that a competitive marketplace is important to both producers and consumers.

"Dairy, like other agricultural sectors, is experiencing consolidation and shrinking farm numbers," Vilsack said in his remarks. "Today, we hope to hear open and transparent dialogue that will provide us with an understanding of the complex issues in this important industry to help us determine how we ensure competition and fairness in the dairy industry."

Among those testifying at the hearing were U.S. Senators Herb Kohl and Russ Feingold. Kohl is the chairman of the Senate Antitrust Subcommittee and heads the Senate Agriculture Appropriations Subcommittee. He was bothered by the fact that while farm milk prices plummeted, the price consumers paid for dairy products saw only a modest price decline.

"This discrepancy in price changes forces us to ask whether or not consolidation in the industry is leading to excess market power by some firms," Kohl said. "We have to ask if our farmers are getting a fair shake."

Kohl further reminded the hosting agencies that in 1997, the spot market for cheese was moved from Green Bay to Chicago due to concerns that it was thinly traded with only a small number of buyers and sellers who could potentially manipulate the market. But now the same issues are occurring at the Chicago Mercantile Exchange. Feingold urged Vilsack and Assistant Attorney General Christine Varney to use the information from the meeting as a way to take action before it's too late.

"This is just the beginning of the education and evidence gathering and that will spur your agencies to dig further into the threat posed by concentration within the dairy industry," Feingold said. He also pressed the need to reinstate proper oversight of agricultural markets, and the wide spread between farm and retail prices.

Wisconsin Farm Bureau President Bill Bruins said another factor to consider is the price support program, which he says no longer serves as an adequate safety net for producers.

"The price support program does not provide a true floor price and increasing the price support will trigger over production of milk and the subsequent purchases of dairy products by the federal government," Bruins said. "Due to changes in the way cheese is manufactured and marketed, the price support program and the Commodity Credit Corporation purchase program are not as valuable to the government as they were in the past. In fact, the products now being purchased are not those in high demand or of high value."

Missouri-based Dairy Farmers of America, the nation's largest dairy cooperative, is often blamed for having too much control in the dairy processing sector. But the WFB and Cooperative Network did urge Vilsack and Varney to maintain and support the Capper-Volstead Act, which is the federal government's long-time law on establishing cooperatives. CN CEO Bill Oemichen proclaimed that Wisconsin is one of the leading cooperative states in the nation and our dairy cooperatives market more than 85 percent of the milk produced by our dairy farmers and manufacture more than 60 percent of the state's cheese.

Meanwhile, the Wisconsin Farmers Union said in its testimony that the proposed Dairy Price Stabilization Program may be another effective solution. WFU President Darren Von Ruden says under the proposal, dairy farmers producing more milk than their farms' bases would pay a fee that would be paid to farmers who produced at or below their bases.

"It's more obvious than ever that depending upon the current pricing system--established by a handful of companies and only a few sales--isn't getting the job done for dairy farmers," Von Ruden said. "The DPSP is one of many proposals floating out there, and we think it's important for farmers to get good information about it."

Others attending the forum included Reps. Tammy Baldwin, Ron Kind and Steve Kagen; as well as Governor Jim Doyle and State Ag Secretary Rod Nilsestuen.

Vilsack says the information gathered from the various workshops will be taken back to Washington and discussed by the two departments to determine what can be done to address producer concerns.


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