Dairy Farmers of America

Dairy Farmers of America & Dean Foods

(#1 U.S. Farm Milk Marketer + #1 U.S. Milk Processor)

Dairy’s Anti-Competitive Duo

Speech by Peter L. Hardin, editor/publisher of The Milkweed

at the Dairy Concentration meeting in Syracuse, New York—April 1, 2004.

Consolidation of buyers and processors … seen earlier in grain, beef, hogs and poultry … came belatedly to dairy. But in the past decade, competition has eroded on two vital fronts:

* Far fewer buyers of farm milk, and * Far fewer firms processing and distributing packaged fluid milk.

This declined competition is, in part, a deliberate strategy between the largest farmers’ cooperative and the largest milk processor. Dairy farmers, consumers, and competing milk marketers and processors all lose.

Dairy Farmers of America--the nation’s largest raw milk marketer—(DFA) … and Dean Foods (the nation’s largest fluid milk processor) …have rigged a system that:

--Controls sale of one-third … or more … of U.S. farm milk. In areas where DFA has far greater control of all farm milk … such as the Southeast … producers’ milk prices suffer dramatic underpayments. DFA’s “market power” is a tool used against farmers.

--Meanwhile, Dean Foods controls perhaps 35% of all fluid milk processed in the U.S. But that 35% market share of all milk dramatically understates control in certain markets where Dean Foods’ share of packaged milk ranges as high as 80% to 90%. Dean Foods’ growth continues unchecked. The company has a long list of potential East Coast dairy acquisitions that, if gained, would give Dean Foods between 70% and 80% of all fluid milk sales from central Maine to the Florida-Georgia line, in my estimation.

This anti-competitive alliance between DFA and Dean Foods doubly taxes society: First, by underpaying the dairy farmer for his/her milk … and second, by extorting unduly high retail prices for consumers. In the coming turbulent times of food and energy cost inflation, it’s socially inequitable to let money-hungry interests depress farmers’ income and inflate consumers’ costs.

DFA and Dean Foods must be analyzed together and separately.

DFA was formed by merger of four dairy co-ops in late 1997. The predecessor co-op was Mid-America Dairymen (Mid-Am), which absorbed the other three. Three of the merging co-ops were “financially challenged.”

Meanwhile, the “new” Dean Foods was formed through merger, in late December 2001, of the nation’s two largest fluid milk processors—“old” Dean Foods and Suiza Foods.

Before and since the “new” Dean Foods was created, many inside deals have taken place between the nation’s largest milk cooperative and the nation’s largest fluid milk processor: *

Example--DFA has sold its Southern Foods Group fluid milk business to Suiza Foods in early 2000. As part of that deal, DFA acquired a one-third interest in Suiza’s fluid milk subsidiary. Co-op representatives sat on the board of directors of that fluid processor, while the same co-op priced Suiza’s raw milk supply. Conflict of interest?

Example—Before to the Suiza/Dean Foods merger, DFA was proposed as the exclusive raw milk supplier to the merged entity. Federal Antitrust officials temporarily blocked that effort. But DFA eventually got what it wanted.

Example—To complete the Suiza/Dean merger, DFA traded in its shares of Suiza’s fluid milk subsidiary, converting those assets as a grubstake in Dean Foods “competitor”—National Dairy Holdings (NDH). “Competitor” is a relative term, here. NDH was formed earlier in 2001 by DFA and three former top-level Dean Foods executives. NDH was the “Designated Buyer” of 11 milk plants spun off by federal Antitrust officials, to “preserve competition.” Dean Foods chose most of the plants to spin off and picked the “friendly” buyer.

Example--Despite the fact that DFA held a 50% interest in Dean Foods’ major competitor (NDH), in January 2003, Dean Foods dumped its 2500 producer milk supply to a joint venture controlled by DFA—Dairy Marketing Services (DMS). DMS is DFA. DMS typifies DFA’s behavior in recent years to surrogates to do the dirty work.

Thus, in tandem, the nation’s biggest fluid milk processor now receives its raw milk supply from a subsidiary of the nation’s largest milk co-op—trapping thousands of dairy farmers in DFA’s precarious financial system. And DFA owns half-interest in NDH—currently the nation’s second largest fluid processor. Serious questions arise about DFA’s independence, relative to the interests of the processors it supplies with milk … and in the case of NDH, half-owns.

Dairy Farmers of America Let’s look specifically at DFA. Based in Kansas City, Missouri, DFA operates coast-to-coast. DFA business volume last year totaled $6.9 billion. DFA claims marketing 33% of the nation’s milk last year … but I think that’s purposely understated. For both member and non-member producers, a portion of DFA’s milk supply has been achieved by coercion … denial of other market opportunities.

Before detailing DFA, it’s important to note that if there’s a journalist with a more adverse relationship than I enjoy with DFA, that journalist might be me and Monsanto. Let me show you a small article from several years ago which describes my relationship with DFA and its ceo, Gary Hanman:

(From The Milkweed, January 2000)

“Is Gary Hanman ‘Bugged?’ by Pete Hardin

“Gary Hanman, ‘Great Leader’ of Dairy Farmers of America (DFA), is “bugged” about the accuracy of confidential financial information about the cooperative that has been disclosed in The Milkweed. In this case, “bugged” means Hanman thinks he is the subject of electronic surveillance.

“Word is that Hanman has hired a security expert to “sweep” DFA’s offices and his home for electronic surveillance devices, in a fruitless attempt to find monitoring devices disclosing confidential DFA information to this publication.

“Hanman has bragged in the past year that the 100+ DFA directors hadn’t leaked information to the press. Wherever the info is coming from, it bothers Hanman, a control freak. Hanman’s time would be better used honestly depicting DFA’s financial condition to members, in light of collapsed inventory values and milk-check receivables.

“Yes, we admit it. The Milkweed IS ‘bugging’ Gary Hanman. However, it’s not the kind of bug that requires a security expert. Rather, Hanman’s ‘bug’ requires a proctologist.”

To best understand DFA, in my opinion, one must look at its Enron-like financial condition. DFA coerces more farmers into its milk marketing payroll—and then pledging as collateral—the unpaid milk revenue--to help cover DFA’s massive debts and obligations. What’s the bottom line? Let’s look at financial data from DFA’s December 31, 2002 annual audit. DFA’s 2003 audit became available last week, but I haven’t thoroughly analyzed it. At early glance, numbers still stink.

December 31, 2002 … DFA claimed “equities” (or net assets) of approximately $630 million dollars.

But the 12/31/02 audit also revealed: *A massive $120 million net deficit in pension programs (including a $160 million deficit in retirees’ projected pension obligations). * An “accumulated deficit” (an unrecognized operating loss) of $105 million. * “Intangible assets” totaling $400 million. (Following Enron, the financial community is much more skeptical about “intangibles.” These are not rock-solid assets. * Unexplained debts and obligations—as high as $900 million.

If one takes away, from DFA’s claimed assets, the pension deficit, unrecognized losses, and “intangible assets” from DFA’s claimed equities, one can conclude that DFA—the nation’s largest dairy cooperative—had a true net worth roughly $5 million— virtually zero as of December 31, 2002 … before trying to figure out where the nearly $900 million in debt fits into the picture.

Debt? In October 2003, as part of an effort to borrow against DFA’s “equities,” one of the major financial ratings services noted that DFA’s debts and notes totaled $900 million dollars. That figure is roughly two and a half times DFA’s monthly average milk payments to members during 2002.

DFA formerly denied that its receivables (farmers’ unpaid milk checks) were pledged as collateral to the co-op’s creditors. But that lie was disposed of in a March 4, 1999 press release from Moody’s Investors Service, which read in part:

“By the by-laws of the co-op and the marketing agreements signed by the members, payments to third-party creditors, including debt service, have seniority over payments to members for milk.”

DFA’s members’ milk checks are subordinated to DFA’s creditors. DFA’s debts equal far more than one month’s member milk checks. DFA’s pension fund hole, accumulated deficit and “intangible assets” virtually offset its “equities.” Draw your own conclusions, but “Remember Enron.”

Whatever DFA’s debts, obligations … and internal inefficiencies may be … it’s obvious that DFA is draining members’ milk checks, where it can, while pursuing goals other than maximizing members’ milk revenue and financial security.

Such behavior goes way back. In the early and mid-1970s, DFA’s predecessor co-op, Mid-America Dairymen, Inc. (Mid-Am), restricted competitors in the Plains and Upper Midwest, resulting in loss to the National Farmers Organization (NFO) in the longest running, private Antitrust lawsuit in the history of the federal judicial system. Farmers suing farmers ….

Predatory behaviors against competitors back in the 1970s also earned Mid-Am a binding Consent Decree with the Antitrust Division of the U.S. Department of Justice. Portions of that 27-year old Consent Decree are still in effect against DFA. These restrictions against DFA’s behavior include: --No “coercion” against competitors and non-members --No forcing producers shipping to a milk plant acquired by the co-op to join DFA for the first year, following take-over of the plant. --No shifting of money between various marketing regions to enhance the co-op’s pay price, either to attract “new” members or to retain current patrons.

This Consent Decree is in force and covers DFA, its employees, directors … and other related organizations such as joint ventures and subsidiaries, and marketing agencies in which DFA participates. Violation of these sections, and other sections of the 1977 Consent Decree, constitute a federal felony. I would argue that DFA has, and is, repeatedly violating the Consent Decree.

For many of the past seven or eight years, Antitrust officials have been repeatedly reviewing complaints about Mid-Am’s and DFA’s predatory behaviors, from dairy producers and competing dairy co-ops. But Antitrust has taken little or no action.

Let’s review a few examples:

UTAH AND NEARBY STATES—early 1998: In fall 1997, Mid-America Dairymen, through its Southern Foods Group subsidiary, acquired the remaining fluid milk operations of Borden. DFA was formed in January 1998. But by late January and early February 1998—four to five months later— DFA officials severely pressured independent producers (and a co-op) supplying Borden plants in the Intermountain states to immediately join DFA … or lose their milk markets. This illegal coercion of producers into DFA-controlled milk plant took place only a few months after the Borden fluid division purchase.

In Utah, there was a big stink, because one of the dairy farmers affected was the governor’s father. Utah’s attorney general launched an investigation of DFA’s behaviors. The feds were aware of the situation. I know of no corrective action taken by either state or federal authorities.

Before and since that time, coercions have taken place in many states across the country—forcing dairy producers into DFA … or into “marketing agencies” controlled by DFA, such as DMS. These so-called “marketing agencies” serve as fronts to disguise DFA’s role and heavy-handedness. DMS is based right here in Syracuse, New York.

NORTHEAST: DMS is the biggest marketer of farm milk in the Northeast. DMS hauls, markets, tests and pays producers for milk from several thousand Northeast dairy farms. Some belong to co-ops, like DFA and Dairylea. Others are independent farmers who were shipping to markets such as Crowley’s Foods, Tuscan Dairies, Lehigh Valley, etc. Independent dairy farmers have very few markets left not controlled by DFA.

I want to play for you an “inspirational tape” featuring DFA president/ceo Gary Hanman’s comments on September 13, 2000. Hanman talks about the attempts to corral Northeast independent producers, and related Antitrust problems. Here’s what he said:

“We’ve got some stress going on out in New York and in New England. One of our joint ventures is in the country trying to maintain a non-member milk supply that they’ve had. And yet our leadership up there says, ‘I thought we had an understanding that … these producers would become DFA members.’ “… We’ve pretty well got the rest of it where the milk supply is coming from DFA members, but we haven’t integrated fully the milk supply function for these affiliates, primarily Suiza and affiliates, there in the Northeast and Mid-East Council. “We will get that done, given time. This fall is probably not the time to put pressure on this membership. But we will get that done over time …. Plus the oversight of Justice today, which is very severe, very significant … And we have a lot of government oversight over what we … and our joint ventures are doing, just because of our size. And so, what we could do as an individual co-op, a small cooperative, we cannot do as DFA, the size they we are today.”

DMS personnel deny that DMS is tied to DFA, misrepresenting this fact to dairy farmers whose hatred and fear of DFA is so strong. But … --DMS “independent producers” have been paid milk checks issued from the same bank accounts as DFA members get their milk checks from. --DMS employees are paid from bank accounts controlled by DFA. --DMS employees have pension programs through DFA. --In fall 2001, when New Hampshire’s agriculture commissioner sought additional bonding from DMS under that state’s dairy producer security program, the check for the bond came from DFA. --Finally, I found this hilarious … very recently a DMS employee in Michigan--who denied that DMS was tied to DFA--was challenged by an argumentative milk hauler to pull out the registration of her company-vehicle … which was registered to DFA!

ACTIONS AGAINST FLORIDA’S CO-OP DFA has engaged in repeated, coercive actions against Florida’s predominant dairy cooperative—Southeast Milk, Inc.

Florida is a unique dairy state, featuring strong seasonal shifts in both milk production and consumer demand … and the nation’s highest milk prices. Controlling Florida has been a goal of Mid-Am/DFA for at least a decade. DFA does control much of the Southeast farm milk supply, directly or indirectly.

But those stubborn folks in Florida don’t want anything to do with DFA. In late January 2003, DFA’s John Collins got so angry he threatened Southeast Milk, Inc. in writing--demanding extortionate payments from Southeast Milk, Inc. … or else DFA would take away milk supply function for the Dean Foods and NDH plants in Florida.

Coercion? Think about that Collins letter: He threatened to take away the Florida co-op’s sales at fluid milk plants in that state, unless Florida paid a hefty fee to DFA. There’s more: A December 18, 2001 press release from the Antitrust Division of the DOJ specifically stated that in markets where dairy plants’ sale was forced to maintain “competition” at the time of the Dean Foods/Suiza Foods merger, that DFA could NOT be the exclusive milk supplier to Dean Foods or NDH plants in that region.

Thus, Collin’s letter to Southeast Milk, Inc. violated the 1977 Consent Decree, and DOJ’s rules for the Dean/Suiza merger!

Antitrust knows of this letter …and has done nothing.

Florida’s dairy co-op members approved, one year ago, a milk check assessment to help the co-op cover legal expenses, protecting itself against DFA. Due to high costs, the co-op has been reluctant to file a private Antitrust complaint against DFA. Antitrust’s failure to do its job is becoming legendary.

Oh, by the way … DFA’s ceo Gary Hanman is a close personal friend of U.S. Attorney General John Ashcroft.

SOUTHEAST MARKETING AGENCY—RED INK In recent years, DFA has moved through subsidiaries (like DMS) and marketing agencies to disguise its dirty work. A marketing agency is a Capper-Volstead chartered association of cooperatives—co-ops commonly marketing their products. In the Southeast, DFA is the major force in the Southern Marketing Agency (SMA), this coercive agency has turned into a red-ink machine during the second half of 2003.

SMA lowered its premium costs to milk buyers, just as the cost of importing supplemental raw milk supplies into the Southeast skyrocketed last summer and fall. SMA’s pricing formula lowers processor surcharges, as Class 1 prices rise through the federal order system. This formula is simply backwards.

From last August or September, through at least December 2003, SMA failed to cover its costs with charges to fluid milk processors for providing their raw milk supplies. SMA lost nearly $1.00/cwt. in the fall months of 2003. Those losses were turned back to SMA’s co-ops’ producers. In the Southeast, during the last four or five months of 2003, DFA consistently paid its members about $1.20 to $1.40/cwt. below the prevailing federal milk order statistical blend prices.

Small wonder that Southeast dairy farmer numbers and milk production are crashing. Farmers’ incomes have been bled dry by their inept cooperative marketers— lead by DFA. DFA is killing the Southeast dairy industry. Because the DFA-driven marketing agency in the Southeast cannot recover its costs from milk buyers, deducts from farmers’ milk checks subsidize the profits of the major milk processors.

What is the relationship between DFA and major milk processors like Dean Foods … National Dairy Holdings? … H. P. Hood? Is DFA maximizing the value of members’ milk … or shilling for processors’ bloated profits? Do DFA and its related marketing agencies operate independently of their buyers???

It’s important to note that DFA uses the rules of the federal milk order program to perpetuate its control over raw milk marketing, even beyond members and non-members whose milk it actually markets. Many federal milk orders require that all marketers ship a percentage of their total milk, monthly or seasonal, to Class 1 (fluid) markets. DFA uses its control of access to the nation’s two largest fluid milk processors—Dean Foods and NDH—to force other firms to play ball by DFA’s rules.

To conclude about DFA’s misdeeds, it seems that, whether the producers are direct DFA members, or “non-members” whose milk is marketed by DFA, or one of its subsidiaries like DMS, the aim of the game is to garner as much milk check income passing through the co-op, so DFA can use those receivables as loans to bankroll its sorry financial condition. With massive debts, pending obligations, “intangible assets,” huge hole in pension liabilities … it’s a scary scenario that sees probably more than 33% of the nation’s dairy farmer milk income cycled through DFA’s financial house of cards.

Despite repeated complaints … federal Antitrust officials have done nothing to protect dairy farmers from DFA’s coercive, illegal predatory actions.

Dean Foods: Dean Foods was formed by merger of Suiza Foods and “old” Dean Foods in late December 2001. In the seven or eight prior years, Suiza had literally come out of nowhere to become the nation’s leading fluid milk processor, through acquisitions. That late 2001 merger married the nation’s two leading fluid milk processors—a merger that surprised many observes in its boldness and ultimate approval by federal Antitrust authorities.

Dean Foods owns about 95 milk and dairy plants around the country. Last year, Dean Foods marketed over $7 billion worth of dairy products—milk, ice cream, yogurt, etc.

Through acquisitions, Dean Foods has gained massive market shares in key markets and regions. With this market power, Dean Foods is virtually unchallenged to set consumer costs for raw milk. The unchecked profit power of a highly concentrated milk processor has been documented by Dr. Ronald Cotterill’s work at the University of Connecticut. An example: In the fall of 2001, the controversial Northeast Dairy Compact expired. The Compact formed a “floor” under fluid milk prices for dairy farmers in New England. Politics killed the Compact, which was bitterly contested by major dairy processors. That fall, a huge drop in farm milk prices hit—roughly six dollars per cwt. New England consumers only saw half that decline in their retail milk prices. The processors—led by Dean Foods—and retailers pocketed the other $3.00/cwt.—or 25 cents per gallon.

In several states and regions around the country, Dean Foods has amassed previously unheard of market shares around: New England–70%, Massachusetts—80%; Northern Alabama and Tennessee—well of 80%; Michigan—well above 80% … probably close to 90% … and Texas—probably over 66%, but you know, anything goes down in Texas. Watch carefully as Dean Foods moves to gain from bankruptcy Parmalat’s fluid processing businesses in Atlanta and the Northeast. I know of no other significant competitors in the Atlanta market. And if Dean Foods gets Parmalat’s Farmland and Sunnydale businesses in the New York City area, then Dean Foods will control 85-90% of all fluid milk in that region. Eighty-five to 90 percent!!!

Late last fall, Dean Foods and Parmalat were in talks about closing Dean Foods’ Union, New Jersey milk plant, and shifting that volume to its major competitor. Then Parmalat’s global corporate parent’s problems hit the fan.

From a logistical standpoint, it’s wrong, in my opinion to concentrate a high percentage of the fluid milk processing for the New York metropolitan area in one plant—particularly the Farmland plant at Wallington, New Jersey. About a decade ago, the New York Times reported that Wallington had the most polluted municipal water supply in the state of New Jersey.

SCHOOL MILK CONTRACTS: NO COMPETITION IN NORTHERN NEW JERSEY

Even worse … if that’s possible … if Dean Foods gets Farmland Dairies and Sunnydale Farms in the NYC metro area … there will be ZERO competition for school milk contracts in highly-populous northern New Jersey. Recent years’ school milk bidding history shows that only Dean Foods and Farmland … and their sub-dealers … bid on school milk contracts in northern New Jersey. There is no other fluid milk plant in the region that even makes half-pints of milk. Trenton … we’ve got a problem.

But word I’m getting from New Jersey indicates that the governor’s office is hot to trot to let Dean Foods acquire Farmland Dairies, because State of New Jersey officials want to build a highway interchange at the site of Dean’s Tuscan/Lehigh Union, New Jersey milk plant. By the time higher consumer costs for milk are factored in, that could be the most expensive highway interchange in history!

For the past decade-plus, federal Antitrust officials have used school milk contract bidding as THE key measure of competition among dairy processors. Antitrust focuses on school milk contracts because one of dairy’s worst scandals was a multi-state school milk bid-rigging scandal that was uncovered in Florida in 1985 and was “rolled” to two dozen states and included 100 convictions and guilty pleas.

Without competition, school milk contracts become licenses to print money—at the expense of school children and taxpayers.

Repeat: if Dean Foods acquires Farmland Dairies from Parmalat, there will be zero competition for school milk contracts in northern New Jersey. Allowing the New York metropolitan area’s two largest fluid milk processors to merge is wrong. How can federal Antitrust officials sit on their thumbs and let such events transpire?

OTHER EAST COAST DEALS Dean Foods’ short-term strategy is to try to control the East Coast fluid milk business, from Bangor, Maine to Florida. Presently, Dean Foods is angling to buy two other major East Coast fluid businesses: the Giant Foods milk volume at Landover, Maryland; and the Rich Foods plant in Richmond, Virginia.

Throw Parmalat’s dairy businesses along with a couple other acquisitions Dean Foods is presently targeting, and this firm has the entire East Coast fluid milk business wrapped up—a 70% to 80% market share.

As if it’s not bad enough that the #1 and #2 Northeast fluid milk processors are engaged in a mating ritual, we see what are probably the region’s #3 and #4 fluid processors ready to merge. H. P. Hood is in the final stages of acquiring Crowley Foods’ Northeast dairy operations. John Kaneb, Hood’s main figure, has donated roughly $500,000 per year for the past decade to Republican political interests. They won’t deny Kaneb what he wants.

DFA, in the pending Hood/Crowley’s deal, would be a major investor and major milk supplier.

The reconfigured Northeast dairy industry—Dean Foods + Parmalat and Hood + Crowley Foods—would leave DFA controlling the milk supply to the two largest fluid processors in the region.

DEAN FOODS’ CONCENTRATION: DANGER TO ALL FOOD SECTORS

Dean Foods’ attacks against competition in dairy pose dangers trends to all sectors of U.S. food processing/distribution. Here’s why: a key concept in regulation of the food industry by the Antitrust Division of the U.S. Department of Justice rests on the concept of “allowable concentration.” That concept determines that the largest market share in food processing/distributing that Antitrust allows to pass in merger or acquisition, becomes the legal benchmark for market share (measured as a percentage) in future food industry mergers, either regional or national.

In other words, if Dean Foods can get away with 80% or 90% market share in a state or region, then federal Antitrust officials must allow other food processing/distribution mergers if those mergers’ market shares come in at or below the biggest market share allowed by Antitrust.

Thus, when we see the percentage market shares in fluid milk processing/distribution that Antitrust officials have allowed Dean Foods’ mergers to gain, it’s a simple leap to comprehend that these market shares become the benchmarks of “allowable concentration”—i.e., market share—for future deals in our nation’s food industry.

WHITE HOUSE ANGLE

Dean Foods is well-connected to the Bush administration. This connection goes back to Tom Hicks’ purchase of the Texas Rangers’ baseball team in the mid-1990s from a team of investors that included George W. Bush. For “All-Star” handling of his modest responsibilities in running that baseball team, Bush was paid a $12 million special “bonus” (by other investors) from receipts of the sale of the team. George W. Bush’s success in baseball eminently qualified him to become Texas’ governor … and you know the rest of the story.

Tom Hicks is top man at the Texas-based investment firm of Hicks, Muse, Tate & Furst. John Muse, number two, has served a long tenure on the boards of Suiza Foods, and now Dean Foods. Dean Foods is intimately connected to the Bush administration, during which Antitrust has rubber-stamped virtually everything we know Dean Foods has sought. Now, as the days of the George W. Bush administration may be dwindling, I believe what we’re witnessing is a grab by its friends for selected items they have not yet gained. That’s behind the big push by Dean Foods to lock down the East Coast dairy industry—just as Tom Hicks, through his Clear Channel Communications, is trying to secure a 75% market share of Hispanic radio.

Dairy’s concentration is merely part of this administration allowing concentration among key industrial sectors by its friends—in a fashion that may well never be taken apart again. Farmers beware. Taxpayers beware. School children and school boards beware. Dean Foods’ massive market shares are reconfiguring our dairy industry … 70% … 80% … 90% … and if the firm gets its way, 100% of school milk in northern New Jersey. Worse yet, these massive market shares in dairy are redefining what’s allowable concentration in the entire U.S. food processing/distribution sector.

State and federal governments have anti-trust laws on the books because it’s commonly recognized that healthy competition benefits society. But Antitrust does nothing.

Fair milk prices for dairy farmers … and fair milk prices to consumers … are most readily obtained by honest competition. Absent honest competition in dairy … particularly the way the Northeast is going … is critical. We’re heading straight for a time when our nation is going to be challenged to feed itself. Dairy farmers need fair milk prices, not rip-offs of their milk revenues. Consumers and school children need fair milk prices, because many families’ finances are tight. Only corporate GREED is served by allow the price-gouging that anti-competitive forces in dairy are conducting.

And federal Antitrust officials allow these events to continue.

CONCLUSIONS:

Let’s finally deal with SOLUTIONS. A person could go bonkers merely detailing criminal misbehaviors … without hoping that honest law enforcement would show up and get to work. Here are my suggested SOLUTIONS to these related problems concentrated extortion against dairy farmers and retail consumers and school children:

Make today’s presentations widely available. What we’re doing today is developing a citizens’ case for action against clearly dangerous trends in our industry … and society. Through the internet, through DVS’s … let’s make today’s program widely available. Today’s presenters have done a clear job of detailing what’s wrong.

We need Eliot Spitzer’s office to assemble a task force of East Coast … or better yet, national …attorneys general personnel to launch an investigation of raw milk marketing and dairy processing practices. Let the aggressive New York Attorney General take the lead, as he is so capable. Such an effort could focus on issues of competition, market share, potential school milk contract abuse, consumer retail costs for milk. Clearly, U.S. Department of Justice will not take substantive action on these issues during the current administration.

Let’s spark the U.S. Senate and House Judiciary Committees to hold hearings on dairy concentration, as a special focus on wider issues of concentration in food and agriculture. Such an idea bucks against all of the money that the big dairy interests are putting into Senators and Congress persons. But I’m sure there are persons of integrity on the respective judiciary committees, who, at the very least, can start this process rolling. Indeed, what we’re doing today is literally a field hearing. The massive market shares that Dean Foods is gaining, and is attempting to expand with the proposed takeover of Parmalat’s dairy processing operations in the New York City metropolitan area and Atlanta would give Dean Foods 85% to 90% … or more … of fluid milk distribution in those markets.

Even worse, if Dean Foods gains Parmalat’s Northeast dairy operations, there would be ZERO competition for school milk contracts in northern New Jersey. How can those officials charged with enforcing Antitrust laws let that one get by? Don’t bet on New Jersey officials—that state’s governor wants Dean to get Parmalat so the state can build another all-important highway intersection.

The way federal Antitrust laws work for food, bureaucrats and politicians in the Justice Department are redefining control of our nation’s food industries … by their inaction. In my opinion, Congressionally-mandated guidelines on allowable levels of concentration in food sectors would be an improvement upon the current system, which is inspired by greed and cronyism.

Personally, I think public interest would be served by allowing no food processing/distribution market share greater than 50% to 55%.

Demand that the Inspector General of the U.S. Department of Justice investigate top officials of the Antitrust Division for failure to enforce competition in the dairy industry. Antitrust’s failure to act is redefining the competitive landscape of food in this nation. Enforce Section 608 (c) (7) (A) of the law governing agricultural marketing orders. This obscure law requires that all agriculture marketing orders covering regulated farm commodities shall include terms and conditions: “Prohibiting unfair methods of competition and unfair trade practices in the handling thereof.”

Very clearly, DFA is using the rules of the federal milk orders in many ways to gain a unfair, anti-competitive advantage over other raw milk marketers. Such advantages include DFA’s huge share of Class 1 (fluid) milk sales in some regional milk orders, including the Northeast … and pooling of distant milk on faraway orders to siphon money out of monthly revenue pools.

USDA’s milk order rules are being manipulated by DFA to its own advantage. Locking in its role as a near-exclusive raw milk supplier to the nation’s two largest fluid milk processors cements DFA’s grip on raw milk marketers. It’s the law.

Enforce the Agricultural Fair Trade Practices Act of 1967. This simple, two-and- a-half-page federal law of nearly four decades ago, defines disallowed marketing practices of farm products. “Coercion” is one of the disallowed practices defined by this law. Citizens need merely to complain to the prevailing U.S. Attorney.

Enforce, indeed EXPAND, the existing Consent Decrees governing DFA. DFA has repeatedly violated binding provisions of the 1977 Consent Decree that was placed upon Mid-America Dairymen (and its successors), including the use of coercion and shifting of milk revenue between marketing regions.

Violations of provisions of a federal Consent Decree constitute felonies. Where’s Antitrust—which has been investigating complaints from competitors for much of the past seven to eight years? Honest competition in dairy not only needs enforcement of the existing rules, but I think Antitrust should have hearings at which other parties in the dairy industry should propose additional restraints upon this indebted monster.

INVESTIGATE DFA. DFA is the Enron of the dairy industry. The co-op’s questionable financial condition—featuring unposted losses, a $100-million+ gap in the retirees’ pension program, $400 million in “intangible” assets, and some $900 million in debts and notes … is not financially sustainable. What are the implications to both DFA’s farmer members, as well as non-member producers who’ve been coerced into DFA’s financial cash flow Ponzi Scheme, if DFA collapses.

If DFA’s financial condition is a calamity waiting to happen, then I suggest that the U.S. Department of Justice take over DFA’s operations, similar to how Justice took the Teamsters Union away from Jimmy Hoffa and his henchmen.

Change the Capper-Volstead Act, which enables agricultural marketing cooperatives, to require transparency, similar to those rules governing stockholder corporations. A key bit of information about DFA would be executives’ compensation. If dairy farmers knew how much DFA president/ceo Gary Hanman received in bonuses and compensation—information presently denied members— perhaps they’d more clearly understand what motivates this man.

In conclusion, we’re overdue to assert equity for dairy farmers, consumers and honest competitors in the U.S. dairy industry. Some powerful interests have hijacked this industry. And their redefining the distribution of funds and costs to buyers in a fashion to benefit their own venal interests.

This hijacking has taken place with the complete knowledge of the U.S. Department of Justice and its Antitrust Division. The hijackers are political friends of the Bush Administration … and its predecessors.

Friends … how to define appropriate behaviors and market shares in our nation’s dairy industry? Indeed … dairy’s market shares are redefining control of our ENTIRE FOOD industry. As goes dairy, so may go our entire food industry.

We’re entering a period of escalating costs for dairy and food products to consumers, as inflation threatens to destabilize our nation’s economy. It’s an unfair burden upon our taxpayers, consumers, and school children to allow these White House- friendly hijackers to unduly raise the costs of dairy products … as federal Antitrust authorities have done nothing to stop the Consent Decree violations by DFA and the massive market shares--80% …85% …90% … in various markets … and up to 100% of the school milk business in northern New Jersey!

As goes dairy, so may go our nation’s entire food industry. It’s time for citizens to reassert their valid equity in this issue, and we must do so with common strategies!