Producers, politicians agree: Few bidders, big problems
By Sherry Bunting, Farmshine, July 2, 2010
MADISON, Wis—With strong words for the dairy industry last Friday (June 25), U.S. Senators Herb Kohl and Russ Feingold—both representing the Dairyland State—stressed the need for market transparency and raised questions about the disparity between what consumers pay and what farmers receive. Both issues quickly rose to the top among two roundtables and three panels during the third in a series of USDA/Department of Justice (DOJ) hearings on consolidation and competition issues in agriculture.
The daylong workshop—specifically on dairy—drew 500 people to the Union Theater at the University of Wisconsin-Madison to hear testimony from producers, consumers, cooperatives, economists, law professors, attorneys, regulators, processor trade organizations, and others.
Among the video cameras set up in the center of the auditorium was a film crew planning a documentary on what is happening in the dairy industry today.
Kohl, who chairs the Senate antitrust subcommittee and ag appropriations subcommittee, described the problem as “few bidders and tough terms of sale. When processors gain too much market power or leverage, farmers suffer.”
“Since the spot cheese market moved to the CME (Chicago Mercantile Exchange), concerns persist,” he explained. “The CFTC (Commodity Futures Trading Commission) reports the volume of cheese traded on the CME is less than 1%. This is important because this spot market sets the price of milk directly and indirectly. It’s the tail wagging the dog, and it can be manipulated.”
Sen. Kohl’s comments gave hope for some immediate action. During the producer panel, he pledged to “undertake all necessary steps to see that the CME and CFTC operate effectively.”
“The dairy industry must have market transparency, with more frequent reporting that is expanded to include more products,” he said in his opening comments. “The USDA has the authority to do it, and Congress wants to work with USDA to make it happen.”
For the dairy producer board members of DPAC (Dairy Policy Action Coalition), who traveled to Wisconsin for the hearing, these words were a high point after six months of working with members of Congress and USDA in the quest for funding to implement section 1510 of the current Farm Bill.
Sen. Feingold echoed the need for market transparency, saying oversight and enforcement are good for markets and for producers. He identified what three panels would later delve into: The link between the widening farm-to-retail price spread and the increased consolidation within the industry.
“Something is amiss,” said Feingold. “Someone between the farmer and the consumer is making money, but given the complexity of the milk market it’s difficult to target a specific culprit.
