Report Details Three Decades of Dairy Devastation

Met with rising milk production per cow and declining milk consumption per person, the U.S. has long faced a growing oversupply of milk. Some farmer advocates have urged the government to deal with this surplus by adopting policies to manage supply, such as market access fees, production quotas, and government food reserves. But instead, policymakers have pursued a different course: massive dairy export promotion. A new report by Food & Water Watch outlines how this path has devastated small- to mid-sized dairies and padded pockets of dairy processors.

On average, Americans drink 37% less milk per capita than they did in 1970, yet overall U.S. milk production has only increased. To deal with the surplus, policymakers have predominantly turned to trade liberalization policies to promote dairy exports and find global buyers for excess U.S. milk. “That’s what we’re using as the pressure release, dumping a bunch of low-value stuff into the export market,” says Wisconsin dairy farmer Sarah Lloyd. Between 2000 and 2020, U.S. dairy exports increased eight fold, according to Food & Water Watch’s analysis. More than 14% of U.S. dairy production gets exported and the U.S. is the third-largest global dairy exporter today.

At the same time, Congress repealed dairy price support policies such as the Milk Price Support Program, through which the government purchased and stored dairy products during supply gluts to maintain a price floor. Congress also repealed the Milk Income Loss program in 2014, which paid farmers for the difference between the milk market price and an established price floor for their first 2.4 million pounds of milk. This volume cap prevented the government from subsidizing overproduction by larger farmers. Today, farmers can buy insurance that pays out if their profit margins fall below an agreed-upon value, so large farms can guarantee profit margins on all their milk.

Export promotion in combination with subsidies for overproduction have served the interests of large, monopolistic milk processors but harmed just about everybody else.  Greater export sales have not prevented a collapse in farmgate milk prices, which have been below most farmers’ break-even point for six years. The average dairy farmer managed to turn an annual profit just twice between 2000 and 2021, the report found. To survive on low prices and compete in low-value export markets, farmers have had to get big or get out. Nearly two-thirds of family-scale U.S. commercial dairies went out of business between 1997 and 2017, while the number of massive dairies with more than 5,000 cows grew 23 times in a similar time frame, from just 8 farms in 1992 to 189 by 2017, the report found. These larger confined dairy operations pose public hazards by producing concentrated liquid manure lagoons that release methane and pollute surrounding air and water systems.

Nor have low farmgate prices translated into proportional savings for consumers, as concentrated milk processors are quick to raise prices when their costs goes up but slow to lower them when costs come down. The report found that when farmgate milk prices fell 40% between October 2014 and April 2016, consumer whole milk prices only declined 16% and cheddar cheese prices only 3%.

Despite this manifest policy failure, a strong lobby, led by the U.S. Dairy Export Council, supports the status quo in the interest of dairy processors, who profit from low farmgate prices and greater global sales. Perversely, the Council gets most of its funds from the very dairy farmers that its policies hurt. As a part of the federal checkoff program, dairy farmers pay a tax on every hundredweight of milk they sell to fund programs ostensibly aimed at promoting the dairy industry. This includes supporting the U.S. Dairy Export Council, which received $16.4 million in checkoff funds in 2015 compared to a mere $1.5 million in corporate member dues, Food & Water Watch found. These funds pay lavish salaries for organization leaders, including nearly $1 million in 2018 to current Secretary of Agriculture, Tom Vilsack, who served as the U.S. Dairy Export Council’s CEO between the Obama and Biden administrations.

In a statement sent to The Guardian, the U.S. Dairy Export Council said that it aims to expand dairy exports “on behalf of dairy farmers of all sizes” asserting that “export sales help bolster farm-level milk prices.” But Lloyd disagrees. “If the logic says that the more we export the better it is for dairy farmers, then why are we losing thousands and thousands of farmers when we see this increase in exports?”

Lloyd argues that it does not make sense for small- to mid-sized producers to compete in low-value export markets and she’d rather see more policies that build higher-value local and regional dairy markets. As a part of the Dairy Together campaign, Lloyd and other dairy farmers have also advocated for policies to manage dairy growth and address milk oversupply.

Dairy Together wants Congress to pass a federal policy that charges farmers a market access fee if they want to expand beyond an established production base, with larger farms paying higher fees. Dividends from these fees would be distributed to farmers that do not expand. An economic study by the University of Wisconsin found this proposal would increase income for all dairy farmers (even large ones), increase prices paid to farmers, reduce price volatility, and reduce government spending on the dairy safety net. Another farm advocacy organization, the National Family Farm Coalition, has proposed a similar growth management policy that would charge a market access fee for milk exporters, establish milk price floors based on herd size, and penalize farms that produce above an established production base.

The big question is: will raising prices paid to farmers increase consumer milk prices? After all, we recently saw how a 47% spike in raw milk prices and slightly lower milk production contributed to a 15% increase in dairy prices and a 31% increase in butter prices between 2021 and 2022. (Though a key caveat to the butter story is that the U.S. exported a record amount of butter in 2021 and 2022, tightening domestic supplies.)

Retail prices will likely rise under growth management policies, but not nearly so steeply. The economic study of Dairy Together’s proposal estimated that consumers would pay an extra 9 to 15 cents per gallon of milk if it was enacted. The study also assumes that processors and grocers will mark up retail costs in direct proportion to the rising costs of raw goods. However, it begs the question of whether dairy processors or grocers could cut into their profits to pay farmers a fair price before passing all increased costs to consumers. If processing and grocery markets were more competitive, perhaps they’d feel pressure to do just that.  

“Dairy is going off the cliff and we need major intervention in the fairness of the markets,” Lloyd says. “I would hope that we don’t fall into that trap of trying to pit the farmer and the consumer against each other when it’s the monopolistic corporate interests and the corporately purchased politicians that are keeping us from having sound, sensible policies and price systems.”