New York State ranks 3rd nationwide in dairy production. Dairy farming is a 2 billion dollar industry in New York State accounting for more than 50% of New York’s farm receipts in 2004 (USDA-ERS New York State fact sheets). Most of these farms are family or sole proprietorship operations that rely heavily on dairy cooperatives for the “procurement, processing and marketing of milk and dairy products and in representing farmers politically at both the state and national level. Dairy farmers have relied more heavily upon dairy cooperatives to market their milk than have farmers of any other commodity (See The History and Role Of Dairy Cooperatives [pdf warning]).
A recent article in The Watertown Daily Times explores the role of dairy cooperatives in New York State. Over the last few decades the trend has been towards closer relationships with milk processors and other production plants and the consolidation and mergers of coops with increasing control of an ever-growing majority stake in dairy production. And increasingly the larger cooperatives have appeared to promote policies and price structures that favor larger farm operations at the expense of the small farm operations.
Small farms have struggled for years with sluggish milk prices and rising costs. But the newest threat to north country farmers isn’t fading federal subsidies or high taxes: It comes from the farmers’ own bargaining cooperatives.
The nation’s biggest dairy cooperative, Dairy Farmers of America, has gained control over a majority of the region’s milk, including Ms. Parish’s, by combining with other co-ops and forging what critics say are unusually close business relationships with plants that buy milk. And that, critics say, threatens one of the strengths of the region’s industry: the competition among small and medium-size dairy cooperatives that bargain with milk plants on behalf of farmers.
...The federal government encourages dairy cooperatives to merge through a 1922 law called the Capper-Volstead Act, which allows farmers to form marketing groups to set prices collectively. The cooperatives, in turn, may combine almost without limitation, as long as their deals are voluntary and do not “unduly enhance” milk prices, courts have ruled. The anti-trust protection weakens only when cooperatives form partnerships with non-cooperatives, such as milk plant owners and trucking companies, say legal experts.
The result in Northern New York is that hundreds of farms have seen control of their milk turned over to Dairy Farmers of America. The biggest players in the region’s dairy industry—Great Lakes Cheese Co., Kraft Foods and Crowley Foods—have agreed to supply their plants in Adams, Lowville and LaFargeville almost exclusively with milk from DFA and Dairylea, shutting out other co-ops or farmers who would try to sell milk independently.
For farmers who belong to the big cooperatives, those arrangements guarantee a market for their milk and reduce the chance they will have to pay to have milk hauled out of the region. But security comes with a price, critics say: cozy relationships with milk processors whose interest is in paying farmers as little as possible for milk, even if they have to move out of the north country to do it. Critics say DFA loses little by a plant closure in New York, as happened with Kraft Foods in Canton, and may even come out ahead if the owner opens a plant in another state and supplies it with milk from DFA.
See Dairyfield For a 2004 listing of the top dairy cooperatives in the US.