WASHINGTON - A program run by dairy farmers' cooperatives to control milk production - and maintain higher prices for farmers - unfairly forces consumers to pay more for milk, a newly filed lawsuit alleges.
A group in California filed a class action lawsuit in federal court there charging that the Cooperatives Working Together program, which pays farmers to retire their herds, breaks anti-trust laws andarbitrarily raises the price of milk nationwide.
The lawsuit names three cooperatives with members throughout the north country - Dairy Farmers of America, Dairylea Cooperative Inc., and Agri-Mark Inc.It also names the National Milk Producers Federation, representing 31 cooperatives and 40,000 farmers as a trade group.
Dairylea, an affiliate of DFA, is based in Syracuse.
The plaintiffs include a Montessori school in Chicago that buys milk for students.
The CWT program's own analysis showed that ten rounds of herd retirements from 2003 to 2010 raised farm-level milk revenue by $9 billion. A total of 506,921 cows have been removed from production through the program, raising prices by as much as $1.66 per 100 pounds of milk for farmers in 2009, for instance.
Prices increases for farmers eventually work along the supply chain to consumers, the plaintiffs alleged, although there is some debate among economists about how much of farm-level increases are passed along by processors and retailers.
"By manipulating the supply of farm milk through herd retirement,price competition has been suppressed and, as a result, indirect purchasers of milk and fresh milk products have paid supracompetitive prices," the plaintiffs charged. "Moreover, prices have been supported at artificially high levels throughout the United States."
Farmers are paid for milk by plants based on minimum prices set by the federal government in marketing orders around the country. Northern New York is in the Northeast Milk Marketing Order.
Earlier this year, the NMPF announced that the program would conduct no herd retirements and focus instead on boosting exports of dairy products, which has also been an aspect of the program since its inception. About 70 percent of farmers participate in the program by paying fees into its operation.
The director of the CWT program, Jim Tillison, noted in a statement that the lawsuit was brought by a group with ties to the animal rights movement, a long antagonist of the large-scale farms many cooperatives represent.
"Cooperatives Working Together was created in 2003 as a self-help initiative to assist family dairy farmers and members of dairy cooperatives who were losing money producing milk. The program was designed and has always been operated in a manner fully consistent with the anti-trust laws of the United States," Mr. Tillison said.
The program was particularly active in 2008 and 2009, during a sharp downturn in milk prices. Four herd retirement rounds occurred in a 12-month stretch, representing an estimated 517 million pounds of milk.
Dairy cooperatives are generally protected from anti-trust provisions through a law called the Capper-Volstead Act, which allows farmers to organize to negotiate prices with processors. But the law has limits, and the plaintiffs said it does not apply to efforts to control production.
Cooperatives have faced other anti-trust lawsuits alleging that they organized and coordinated with processors to depress competition.