What’s one way to keep milk prices from going down? Cut down on the number of cows producing that milk. An dairy industry group representing around 70% of the milk we buy has agreed to pay $52 million to settle an antitrust complaint alleging that industry illegally inflated milk prices by paying farmers to slaughter cows prematurely.
The lawsuit [PDF] was originally filed in Sept. 2011 against Dairy Farmers of America, Land O’ Lakes, DairyLea, Agrimark, and Cooperatives Working Together (CWT), a program of the National Milk Producers Federation (NMPF).
The CWT’s now-shuttered “Herd Retirement” program paid farmers who voluntarily exited the dairy farming field. The program worked by allowing farmers to bid on selling their herds of dairy cows to CWT. The cows and their records were inspected and winning bidders received payment for cows that were then marked to be slaughtered for their beef.
The organization paints Herd Retirement as a way to help with “preserving family farms” and preventing “farmers from financial ruin due to unstable economic conditions.”
However, the lawsuit takes a very different view of the program.
“The purpose and effect of the herd retirement program was to reduce the supply of raw farm milk in order to increase its price, which in turn increased the price paid by consumers for milk and other fresh milk products,” argued the complaint.
It quotes then-NMPF president Jerry Kozak as explaining in 2005 that when the number of cows — and the production per cow — rises, “Experience tells us that can be a formula for dramatic milk price drops. That’s why we initiated this most recent herd retirement.”
Then in April 2009, facing a drop in dairy prices, the complaint notes that Kozak assured the industry that “CWT will help shorten the price plunge farmers are facing, and speed the recovery.”
That same year, University of Missouri professor Dr. Scott Brown did an analysis [PDF] for CWT on the impact of the organization and, more precisely, the herd retirement program. He concluded that in 2008, “The herd retirement program added $0.78 per [hundredweight (100 pounds)] to milk prices.”
The complaint also quotes Dr. Brown as saying that “the evidence is clear that this program has raised the price that all farmers have received since it first began removing cows at the end of 2003,” and “the milk price impact has grown with each herd retirement program.”
However, in an affidavit [PDF] filed on behalf of the dairy industry defendants by University of Wisconsin professor Dr. Robert Cropp, he counters that the herd retirement program was too small to have any effect on the overall milk supply.
“At all times during the relevant period from 2003 until the present, there has been an excess of supply of raw milk for Class I [beverage milk] and Class II [soft cream product] uses and no reduction in supply of milk for those classes occurred,” writes Cropp, arguing that because the government requires a full supply of these two classes of milk, any reduction in milk production would not have impacted milk prices, but would have affected the availability of milk for use in cheese and butter production.
After five years of back and forth in this case, the parties reached a preliminary deal [PDF] in late August and announced the $52 million settlement this week.
“The biggest dairy producers in the country, responsible for almost 70 percent of the nation’s milk, conspired together in a classic price-fixing scheme, forcing higher prices for a basic food item onto honest consumers and families,” said Steve Berman, managing partner of Hagens Berman, the attorneys representing the plaintiff class. “We’re pleased that this settlement will return some of what consumers lost due to this massive fraud perpetrated for ill-gotten gains.”
Meanwhile, the NMPF — which admits no wrongdoing and continues to defend the merits of the now-retired retirement program — tells Bloomberg that the settlement was “the most sensible and responsible course of action.”
Am I Eligible To Make A Claim?
The true intention of herd retirement may never be sorted out in a courtroom, but the two sides have agreed to a $52 million settlement of the class action, representing anyone who purchased milk or other fresh milk products (cream, half and half, yogurt, cottage cheese, cream cheese, or sour cream) since 2003 while living in any of the following:
• Arizona
• California
• Kansas
• Massachusetts
• Michigan
• Missouri
• Nebraska
• Nevada
• New Hampshire
• Oregon
• South Dakota
• Tennessee
• Vermont
• West Virginia
• Wisconsin
• Washington, D.C.
If that describes you, you may be eligible to get a few cents from the $52 million settlement. To stake a claim, go to boughtmilk.com before Jan. 31, 2017.
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