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Is It Time to Break Up Big Ag?

In the spring of 2020, Dairy Farmers of America, the nation’s largest dairy coöperative, purchased Dean Foods, the country’s largest milk processor, for four hundred and thirty-three million dollars. D.F.A. formed in 1998, out of a merger of four regional co-ops. Last year, its members, more than twelve thousand dairy farmers, sold fifty-six billion pounds of milk, about twenty-five per cent of the nation’s total, and the organization as a whole brought in nearly eighteen billion dollars in revenue. With the acquisition of Dean, D.F.A. gained unprecedented power as both a milk supplier and buyer. Pete Hardin, the editor and publisher of the dairy trade journal The Milkweed, told me, “It’s the poster child for agricultural concentration—and what Big Ag has become.”

For years, D.F.A. members and nonmembers alike have complained about the co-op’s growing market power. “The only reason I’m with D.F.A. is there’s no other place to go,” a dairy farmer from the Ozarks, who asked to remain anonymous, told me. “They have a ten-year exclusive contract with all the bottling plants within probably three hundred miles.” In other words, D.F.A. is the only available purchaser of his milk. An enterprise with a single buyer, called a monopsony, typically means lower prices for producers. He added that, when he started farming, in the early seventies, there were a dozen local plants that he could sell his milk to. “Over time, they kept getting squeezed out,” he said. “I’m set in steel now for ten years.”

Nationally, the four largest dairy co-ops now control more than fifty per cent of the market. They’ve been able to grow so big, in part, because of a 1922 law called the Capper-Volstead Act, which provides significant exemptions from antitrust laws for farmer-owned agricultural coöperatives. “The agricultural industry is different than other industries because Capper-Volstead allows them to combine in ways that other individuals would go to jail for,” Allee A. Ramadhan, a former Justice Department antitrust attorney who led an investigation into the dairy industry, told me.

The law’s protections were intended to give small, independent farmers the right to collectively bargain prices for processing and selling their goods, but many large co-ops, such as D.F.A., have increasingly come to resemble corporations. D.F.A. has dozens of affiliates and joint ventures, but according to its most recent financial report only about a quarter of the co-op’s profits were paid directly to its farmer-members. And, unlike publicly traded corporations, D.F.A. is not required to reveal how much its executives earn. Kristen Coady, a senior vice-president for D.F.A., told me that “out of respect for privacy” the co-op would not disclose any salary or compensation information for any of its employees. But, several years ago, the Times reported that Gary Hanman, D.F.A’s founder, had access to a private jet and earned thirty-one million dollars during the seven years that he was the co-op’s C.E.O. In 2017, D.F.A. moved into a new thirty-million-dollar headquarters, which includes a twenty-five-foot-tall sculpture of milk, bocce and basketball courts, and a fitness center. “Where does the money go?” Peter Carstensen, a former Justice Department antitrust attorney and dairy-industry expert, said. “There is no transparency with co-ops like D.F.A. It’s about as opaque as you can get.”

Meanwhile, D.F.A. has paid out large sums in fines and class-action lawsuits brought by its own members. In 2008, Hanman, D.F.A., and another D.F.A. executive agreed to pay twelve million dollars in fines for attempting to manipulate milk prices on the Chicago Mercantile Exchange. Five years later, D.F.A. paid a hundred-and-forty-million-dollar settlement for allegedly fixing milk prices in the Southeast. In 2016, it paid fifty million dollars to a group of members who alleged that the co-op was in an illegal conspiracy to restrain competition, fix and suppress prices, and control the buying and selling of raw milk in the Northeast; last year, it settled another lawsuit, for an undisclosed sum, with a separate group of Northeastern dairy farmers. Buying processors such as Dean, which benefit from paying farmers lower prices for milk, D.F.A.’s critics argued, created a conflict of interest. Einer Elhauge, a professor at Harvard Law School, testified that the alleged conspiracy in that case brought down prices by nearly eighty cents per hundred pounds of milk for all the dairy farmers in the region, and not only D.F.A. members. (As part of each settlement, D.F.A. denied any wrongdoing.) “D.F.A. was so powerful in the industry, no matter where you turned you were dealing with it,” Ramadhan told me. “Where they were present, there were complaints.”

The accelerating concentration of the agricultural economy is not confined to dairy. Since 1982, the four largest beef-packing companies went from controlling about forty per cent of the market to controlling more than eighty per cent. The four largest seed manufacturers increased their market share from twenty-one per cent in 1994 to sixty-six per cent in 2018. As a result, farmers are paying more for inputs—seeds, fertilizers—while selling their goods for lower prices and to fewer competitive buyers. “It’s as if farmers have become serfs again,” John Peck, the executive director of the nonprofit Family Farm Defenders, said. “They have no independence left, no autonomy—they’re owned by the lord.”

The pandemic has exposed the fragility of America’s consolidated food-supply chain. In April of last year, as restaurants and schools were forced to close abruptly, D.F.A. asked some of its farmers to dump their milk, resulting in millions of gallons being poured into manure lagoons. The sudden closure of slaughterhouses forced farmers to euthanize hundreds of thousands of pigs. And the cruelty was not limited to animals. Last spring, according to the Centers for Disease Control and Prevention, meatpacking plants were responsible for between six to eight per cent of all COVID-19 infections in the United States; at a Tyson pork-processing plant in Waterloo, Iowa, managers placed bets on how many workers would contract the disease.

Curt Meine, an environmental historian at the University of Wisconsin, Madison, believes that this transformation has inspired a political backlash. In the last election, Donald Trump won rural America by a greater margin than he did in 2016, capturing nearly two-thirds of its vote. “Concentration fed and fuelled the politics of resentment, entrenched corporate power, depopulated the landscape, and weakened the autonomy and agency of farmers, consumers, local governments, and communities,” Meine said. “I think this is at the very heart of the rural-urban political divide.”

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