In the Dairy Wars, Dean’s Walmart Deal is a Major Blow

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Many of those officials talking about the real dairy crisis in Pennsylvania and other U.S. states tend to cite “reduced demand” and talk about low milk prices in general. It’s true that there’s a milk surplus – and it is a problem that a government board sets milk prices – but that’s not nearly all that local PA farmers are wrestling with as big ag puts small, local dairy farmers in peril.


One little-reported story of the last few months centers around a big, quick change by wholesaler Dean Foods, which recently told scores of farmers in Lancaster County, one of Pennsylvania’s most vibrant ag communities, that they had only 90 days to find other places to sell their milk.


The reason? A new Walmart plant in Indiana which is supposed to bottle 100 million gallons of milk each year and deliver to over 600 stores. Of course, Walmart has always been about bottom-scraping, low price gouging and the lowest common denominator, but this is a particular blow to an industry that’s already swaying under the pressure of low per-gallon prices – prices the farmers don’t get to set themselves.


If you need any further evidence that the deck is stacked against U.S. Small dairy farmers, just look at the costs that milk processors, under ridiculous commerce rules, are allowed to take out of farmers’ pocket for things like “advertising” – without any real accounting!


But to really understand the milk crisis, you have to look past the people who are talking vaguely about “supply and demand” and “falling prices” as if the prices set themselves according to any actual commodity rules.


You have to look at the concrete chains of decisions that push more local dairy farmers into selling their herds and setting off of greener pastures – and you have to understand that most of those herds are never coming back when the milk problem “gets better.”


The Walmart/Dean deal is an excellent example.


It’s one thing to lament the death of the family farmer – it’s another thing entirely to follow the money and ask why Dean Foods made the change.


Why did they make it? Money, of course!


But here’s a telling example of what you really see when you peer under the surface of this deal.


A recent Public Opinion piece talks about Dean’s decision, and then, in the very next paragraph, quotes a Walmart executive!


“By operating our own plant and working directly with the dairy supply chain in the Midwest, we’ll further reduce operating costs and pass those savings on to our customers so that they can save money,” said Tony Airoso, senior vice president of sourcing strategy for Walmart U.S, according to public opinion.


So Walmart builds a new plant – to cut costs – and Dean cancels milk contracts with Lancaster County farmers. In some ways, it’s really that simple. The mammoth low-price retailer calls the shots – at least, it seems that way.


Reports from various PA farms show how the Dean move shook up farmers already handling razor-thin margins imposed by market prejudice – but the problem could have been a lot worse without some advocacy from a state office.


Director of the Center for Dairy Excellence in Harrisburg Jayne Sebright spoke to Get To Know Your Farmer June 12 about how the office helped the majority of the affected farmers to find alternate markets as herd managers reeled from the sudden impact of Dean’s announcement, while conceding that some of the alternative markets were “less than ideal” for farmers.


“We just offered ourselves as a resource to the dairy farmers,” Sebright said.


Citing the surplus, she said her office is “hopeful” that small dairy will not get a lot more of this volatility in coming years.


Some farmers aren’t as hopeful.


Even if it wasn’t for deals that exclude the voices of family farmers, these Pennsylvania farms would still be in trouble – especially if they haven’t “kept up with the times.”


Here’s another rationale for why PA dairy farmers are closing up shop.


This Centre Daily News article June 9 starts out talking about a market flooded with supply – reporter Sarah Rafacz takes numbers from the ag census and the center for dairy excellence – noting that the industry consensus is that an “overabundance of milk” leads to “production .. outstripping demand,” quoting Penn State Extension associate director David Swartz.


The article points out how a surplus causes a “real issue with profitability” (a nice way to say crushing financial pressure) for the dairy farms. But take a look at this assertion from Swartz:


“In a market-based economy, when you’re producing a commodity product like milk, it’s always the least-cost producer that wins. So the people who innovate and find a way to produce milk at a lower cost are going to be profitable even in these challenging price situations,” he said. “Folks who haven’t innovated are faced with their higher costs because they’re still producing milk the same way they did years ago and as a result, they’re more in danger of having to liquidate their dairy operation.”


Read between the lines: it’s the small farms, the family farms, and the creative farms, the farms that don’t agree to “mechanize” that are going to get the axe. The way it sounds, it’s going to be robotic milkers in corporate milking halls, or nothing.


As for the economies of scale so often praised by corporatists, farming articles like this one cite “efficiencies” that farmers have collectively managed, so that dairy herd farmers in a sense have “worked themselves out of a job.” But again, don’t take your eye off the ball. With externally set milk prices, mechanization, factory farming and the death of the family farm is a choice – a political one.


Mad about milk? Think family farmers should be able to survive with a reasonable number of cows in safe, attractive, humane conditions? Keep an eye on Get To Know Your Farmer and get involved. We need you in the battle to beat factory farming and keep our food natural and sustainably grown!



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