Justice Department to investigate milk processors

The Associated Press

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.

Meanwhile, U.S. Dept. of Agriculture's chief economist predicted that the nation's dairy farmers would receive as much as 25 percent more for their raw milk next year than they are currently getting.

Joseph Glauber noted 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 due to 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 had 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.