Farmers say investigation into No. 1 dairy cooperative deepens

By CAIN BURDEAU
The Associated Press
11/14/2004, 12:53 p.m. CT

NEW ORLEANS (AP) — Farmers say an investigation has deepened into allegations of anticompetitive practices by the nation's No. 1 dairy cooperative, which controls a third of the U.S. milk supply.

The U.S. Department of Justice announced in August an antitrust investigation into the Kansas City-based Dairy Farmers of America Inc. in connection with its expansion in the South. The cooperative, commonly referred to as DFA, has been accused by farmers across the country of unlawfully trying to monopolize the nation's production and distribution of milk.

Since the probe was made public at an Aug. 5 meeting in Louisiana, investigators have expanded their investigation to include over a dozen states and commissioned Yale University to look into how the cooperative could be split up, according to farmers who are fighting the expansion of DFA.

Jerome Walker, a Louisiana farmer and an outspoken critic of the cooperative, said investigators told him that Yale had been hired to study "busting up" DFA's network of dairy plants, milk bottlers and marketing agencies.

Justice Department officials declined to comment on the ongoing investigation or on whether it has commissioned a study. DFA officials said they were unaware of a study being undertaken.

Agnes Schafer, a cooperative spokeswoman, said DFA believes the Justice Department "will find that our relationships are consistent with the law."

Calvin Covington, chief executive officer of Southeast Milk Inc., said it is common practice for the Justice Department to hire outside help such as academics in an investigation. Southeast Milk is a cooperative of Florida and Georgia farmers which has charged that DFA has forced its farmers to take less money for their milk at two plants.

Covington said federal investigators are sending out questionnaires to other cooperatives and milk marketing agencies across the country to understand how the industry works and DFA's role within it.

Walker said a team of investigators is expected to come to Louisiana early next year to conduct field interviews with farmers in the state.

"The number of states participating has ballooned. It's not just the number of states, my sources tell me they are moving with great speed," said Pete Hardin, editor and publisher of The Milkweed, an industry market report that is opposed to DFA.

"It sounds like the investigation has widened," said Jerry Dryer, a market analyst. "It sounds like it's including more state attorney generals."

Farmers independent of DFA believe the probe was sparked by the purchase of the Dairy Fresh Corp., a company based in Greensboro, Ala., which operates milk processing plants in Mississippi, Louisiana and Alabama.

Schafer said that in November 2003, Dallas-based milk processor National Dairy Holdings — of which DFA owns half — bought Dairy Fresh.

The cooperative says federal authorities customarily review its actions, but that it has not been charged with any antitrust violations.

"This co-op cannot really represent farmers in the Southeast while also representing dairy farmers from everywhere else. They don't have our best interests at heart," Walker said.

"There still isn't near the concentration in the dairy industry as there is in many other sections of the food industry. DFA is just one of many players out there," Dryer said.

The analyst added: "Breaking up for the sake of breaking up is not appropriate, but if something illegal or dastardly has been done, then something has to be done about it."

Dairy farms have struggled in recent years as the industry has consolidated and imports have increased. Ten years ago in Louisiana there were about 1,000 dairy farms. Now there are about 340.

Nationwide in 1989, there were about 203,000 dairy farmers. Today, that number has dropped to about 85,000.

Farmers in four major cooperatives got together six years ago and formed DFA to resolve their problems.

With farmers continuing to struggle to be profitable, Schafer said farmers "need to be working together" rather than fighting each other.

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Dairy Farmers of America Inc.: http://www.dfamilk.com/

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