Are dairy farmers milking consumers?
Like gas, the price of milk is at about $4 a gallon, and the U.S. government suspects price fixing might be to blame. Dan Grech reports why the Department of Agriculture thinks the Dairy Farmers of America may be spoiling themselves.
Milk cartons in a crate (Tim Boyle/Getty Images)
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Scott Jagow: The price of milk is now about the same as the price of gas: almost $4 a gallon. There may be a lot of reasons milk prices have gone up so much, but one of them could be that dairy farmers are manipulating the price. Wall Street Journal says the government is about to bring charges of price fixing. Dan Grech has more.
Dan Grech: Over the past four years, consumer milk prices have risen about 32 percent. That's more than double the rate of increase for food prices in general.
The Department of Agriculture alleges the Dairy Farmers of America drove down what it paid for raw milk by misreporting prices to the USDA. And the dairy co-op allegedly drove up the price retailers paid for the milk through trading at the Chicago Mercantile Exchange.
Henry Kinnucan is an agricultural economist at Auburn University. He found in a study that while prices increases are passed onto consumers, milk price drops are pocketed by the middlemen like the Dairy Farmers of America.
Henry Kinnucan: When farm prices go down, the retail prices tend to be sticky, which means that the margins are widened. And that's a fairly classic symptom of market power being exercised by middlemen.
Revenue for the Dairy Farmers of America grew to $11.1 billion in 2007, up nearly 50 percent from the year before.
I'm Dan Grech for Marketplace.
Comments
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From Orland, ca, 08/25/2008
Could you possibly look into the average age of CA farmers in the business vs. average CA farming age entering the business....This fact could speak for itself..perhaps not only for CA...Also, what about looking into the price super markets charge a farmer to put that product in their store....that might lead you to conclude where the high dollars are actually going..or perhaps the taxes Tillamook pays (Oregon Coop) to sell their products in CA vs our own CA farmers? Does it pay to import from Oregon? Or agricultural products from China, Korea etc.(apples, wheat) Like PG & E we will continue to pay more if we don't use what we have...But hey, Save the Salmon!
From Orland, CA, 05/26/2008
I agree with Steven Gallego's comment.
Shoddy reporting leaves a bad taste.
The vast spread between "farm price" and consumer price should be discussed.
There is not been parity since I started farming 45 years ago.
From orland, CA, 05/21/2008
Mr. Grech-
Your May 19 morning report about milking consumers was a very misleading bit of information. Your negected to distinguish between dairy farmers of america (the population) and DFA (the coop) giving your listeners the misconception that all dairy farmers are price fixing. A much more fair report would have included the farmers historical expense to produce a gallon of milk and the price paid to him for that gallon. I think you'd change your report or better yet do a much more indepth report. I have a very vested interest in this matter as I am a veterinarian watching as my dairy clients have closed their doors and sold their cows because of the incredibly volatile milk prices paid to them by processors (middlemen).
Steven Gallego DVM
Livestock Veterinary
Orland, CA 95963
530-865-5899
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