Lawsuit alleges dairy co-op is depressing milk prices, hurting Vermont farmers
A new lawsuit filed in Vermont’s federal court alleges that one of the country's largest dairy cooperatives has artificially lowered milk prices for the region’s farmers.
The class-action suit says that Dairy Farmers of America, or DFA, has been “empire-building,” buying out other independent milk cooperatives, processors and haulers in the Northeast. Examples include the St. Albans Cooperative Creamery and its trucking service, McDermott's, which became fully-owned subsidiaries of DFA in 2019.
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The claimants say DFA, which has about 13,000 farmer members and is based in Kansas, has engaged in "predatory, exclusionary, and anticompetitive conduct" over the past six years to increase the organization's control over the Northeast market, such as signing agreements with independent processors to only take milk from DFA members.
Some estimates have DFA now controlling at least half of the Northeast’s fluid milk market.
"DFA structured its business to thrive in a low-price, high-supply raw milk environment — exactly the kind of environment that benefits its processor holdings, at the expense of its member farmers' milk checks."Class action lawsuit against Dairy Farmers of America
This allows DFA to depress the price of milk, according to the suit, because there are few other options for farmers to get help marketing, transporting and processing their milk.
Cheaper milk means more of it goes to processing plants, which in turn increases profits, according to the lawsuit:
"[There's] an inherent conflict of interest between its members' interest in receiving the highest price for their raw milk and its processor holdings' interests in buying raw milk at the lowest price. ... DFA structured its business to thrive in a low-price, high-supply raw milk environment — exactly the kind of environment that benefits its processor holdings, at the expense of its member farmers' milk checks."
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The lawsuit claims the processing profits don't go back to farmers, but rather into more "empire building" and DFA executive pay.
"DFA has hoarded that cash, using it (and a ballooning amount of debt borrowed against its members' equity) to undertake a seemingly endless series of mergers and acquisitions," the lawsuit says. "Unsurprisingly, DFA has also used that money to pay its executives exorbitant salaries, to build an extravagant $30 million headquarters in Kansas (replete with a twenty-five-foot-tall sculpture of milk and bocce and basketball courts), and to open offices in Asia."
Meanwhile, many farmers are struggling to stay in business.
Nearly half of Vermont's dairy farms have disappeared over the past decade. Data from the state's Agency of Agriculture show 12 farms stopped shipping milk in the past month alone.
"Any claim that a farmer-owned, farmer-governed cooperative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate."Kristen Coady, Dairy Farmers of America
Dairy Farmers of America issued a statement Tuesday in response to the lawsuit. Kristen Coady, senior vice president of corporate affairs, called the allegations "baseless" and "without merit," adding: "DFA is a cooperative that was formed by, is owned by, and is governed by dairy farmers. Any claim that a farmer-owned, farmer-governed cooperative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate."
Coady said the cooperative makes decisions that are in the best interest of its farmer members "now and for generations to come."
This is not the first antitrust lawsuit brought against DFA for trying to eliminate competition in the Northeast milk market. DFA settled with farmers in 2013 and 2020.
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