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Farm News: Family Dairies GM Sounds Off At NFO ConventioncommentsPosted: 01.28.2011
Antitrust topics peppered remarks by David Cooper, general manager of Family Dairies USA, headquartered in Madison.
Cooper made his comments during annual national meeting of the NFO in Kansas City. during a Jan. 19 panel discussion addressing the 2010 USDA – Department of Justice listening sessions about agriculture industry consolidation, at National Farmers Profit More 2011 national convention in Kansas City, Mo. Cooper’s comments related to the 2010 USDA-Department of Justice listening sessions that looked at consolidation in agriculture. Cooper was one of five panelists discussing the groundbreaking listening sessions. Cooper told producers that U.S. Attorney General Eric H. Holder said vigorous and appropriate enforcement is an important component to ensure market fairness.
Related to Holder’s comment, Cooper presented National Farmers members, and independent producers in general, with a few questions and a challenge.
Cooper asked producers how they felt about such comments made by an official of Holder’s stature. “Do you feel they’re just words, or do you feel like some action is going to happen? Do you hold those individuals accountable for the workshops they provided, and those commitments they made…
“Are we going to do our part to make sure communication and dialog continue? As a producer group and as people engaged in agriculture, we have to continue to press forward and hold folks accountable for those opportunities,” he said.
Cooper was encouraged by information at the sessions that the Department of Justice representatives didn’t express antitrust concerns regarding cooperatives, and the DOJ was not pursuing co-ops. Cooperatives share common ground with National Farmers in their reliance on the Capper-Volstead Act to allow for their business models.
At the Madison, Wis., listening session many attendees ask why mergers happen at all. Cooper highlighted three main reasons:
When it comes to antitrust laws, Cooper said, “It may not be difficult to find the issue or the problem, but it may be very difficult to prosecute.” He also cautioned that such cases are mired in court systems for long periods of time, giving an example of a case in Wisconsin.
He also reminded panel discussion participants and those in the audience at National Farmers’ convention, that for a merger to be approved, the companies must show that it creates efficiencies or cost savings, and that those are passed on either to consumers or to farmers.
But he expressed caution about this, too. “It’s difficult to define what gets passed on. Oftentimes, mergers require companies to spin off other investments,” he said. “How do you really measure those investments in terms of what you bring back to the pie?”
Cooper reiterated concerns outlined in the listening sessions. Senator Herb Kohl, D-Wis., at the Madison, Wis., meeting, pointed out that CFTC numbers indicate Chicago Mercantile Exchange from 1997-2006 trading of barrel cheese represented just one percent of cheese produced, and two buyers there represent 74 percent of the sales at the CME.
“That’s a problem,” Cooper said. “I think they’ve identified that. They made that very clear at the Madison hearing. I don’t know if there’s an easy solution.”
Cooper noted several mechanisms remain in play for price discovery, one being the NASS survey, and one the CME spot price. But a University of Wisconsin study found there is a 98 percent correlation between prices paid, and prices that sellers charge. Basically, those two numbers are tied together, he explained.
“Do we have two buyers or do we have a multitude that are dictating the price?” He noted activity earlier this month on the exchange “bears a lot of witness to what is happening in the marketplace. A lot of it doesn’t make sense at this point. Hang on for the ride. At least, right now, the ride is trending upward. Which is positive, but at the same time, doesn’t solve the problem.”
Cooper also noted large gaps in the dollar amount of sales between the country’s largest retailers and dairy cooperatives. In 1994, the four largest retailers accounted for 17.5 percent of U.S. grocery sales. In 2009, that had about doubled to 37 percent.
Land O’Lakes, the largest U.S.-based dairy cooperative is worth $10.4 billion in sales, of that, $3.2 billion of their business is in farm supplies. “That doesn’t match up to Walmart’s $408 billion, Kroger’s $77 billion or Kraft’s $40 billion,” Cooper added. This puts cooperatives at a disadvantage.
Foreign interest in agriculture also becomes an issue as large companies participate in production level agriculture. Wisconsin has over 12,000 farms that produced 25 billion lbs. of milk in 2010.
“What would happen to our communities if that $25 billion was produced by 250 entities rather than 12,000?” Cooper asked. “. . .The issue of foreign interest would be entering the picture in that case.”
Interest outside the U.S. and what affect that has on our markets is a concern, he said.
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