FOUR MULTINATIONAL COMPANIES control over 70 percent of fluid milk sales in the United States: Land O’Lakes, Foremost Farms, Dairy Farmers of America, and Dean Foods. Consolidation has forced many small- and medium-size dairy farms around the country into a corner: go into debt to get bigger, sell out to developers, or try to survive in a market flooded with cheap industrial milk.
In 2005, dairy giant Dean Foods shuttered a milk-processing facility in Wilkesboro, a town at the eastern edge of North Carolina’s Appalachian Mountains. Dean processes 35 percent of the fluid milk in the United States and Canada—roughly equal to the market share of its three biggest rivals combined. In my area of western North Carolina, Dean processes 100 percent of the fluid milk. Since there were no other USDA-approved processing plants around, the few remaining dairy farmers in the mountains faced a stark choice: pay to have their milk hauled an additional 55 miles to Winston-Salem, where Dean ran another plant, or exit the business.
In the tiny mountain town of Bethel, North Carolina—45 miles west of Wilkesboro—one such farmer took the second option, closing a 50-cow operation he had started in 1959. When he started his farm, Bethel had around a dozen dairy farms. Today it has none.
When I think of consolidation in the food industry—fewer and fewer companies controlling more and more production—I think of that small farm in Bethel.
In many ways, that small Bethel dairy farm embodied what many of us think of as sustainable agriculture. The cows there fed on ample, lush pasture in the temperate months, and on hay and corn grown on the farm in winter. The farmer rejected growth hormones and used antibiotics only on sick animals, not as a prophylactic. And rather than letting manure fester in a lagoon, he spread it back on the pasture, fertilizing the next season’s grass and feed crops.
And the farm enjoyed broad support within the community. I was among the ranks of people, probably four or five per day, who would show up at the milk house in the afternoon with empty jugs to buy rich, raw milk—delicious on its own, but even more wonderful in coffee or transformed into yogurt and cheese.
We did so illicitly. Under North Carolina law, unpasteurized milk can only be sold to consumers as animal feed; that’s why I’m withholding the farmer’s name. He charged us twice what he got per gallon from the processor, and we would have paid more.
Our support provided a nice income stream, but not enough to pay his bills. As in most localities throughout the United States, demand for local, delicious, responsibly grown food is growing briskly in western North Carolina. Yet only a limited number of people are willing to drive out of their way, bring their own containers, ignore hysterical warnings against raw milk, and defy the law just to support a local dairy. The path of least resistance leads to the supermarket.
So the farmer still relied on Dean Foods for a steady paycheck. He still needed to have his milk trucked away to a facility run by the nation’s largest dairy processor, where it would be mixed indiscriminately with milk from much larger, less pasture-based farms, pasteurized, homogenized, bottled, and sent to supermarkets throughout the Southeast.
To market their milk, farmers, not the processor, pay the trucking costs. When the Wilkesboro facility closed, farmers suddenly had to bankroll a trip more than twice as long as before. Around the same time, gas prices were surging, meaning that the farmer not only had to pay for 55 additional miles, but each mile became more expensive, making the operation no longer profitable.
We had growing demand for locally and sustainably produced milk and a farmer willing to supply it, but what could have been a thriving enterprise plunged into an abyss.
While the nation’s dairymen face dwindling options for their milk, American consumers face a similar dearth of choice at the grocery store. Consolidation has made it hard for farmers and consumers alike to avoid participating in the industrial food system. As small farms like the Bethel dairy die off, Americans inevitably have to buy their milk products from anonymous refrigerators at the grocery store.
Walking down the dairy aisle of the supermarket, dozens of distinct brand names pop out at us: Morning Glory, Golden Guernsey, Heritage, Lactaid, New England Creamery, Country Fresh, Alta Dena, Berkeley Farms, Meadow Gold, Shenandoah’s Pride, Horizon. We may think we have dozens of cute, independent dairy labels to choose from, but when we drill down to the source, a handful of industry giants emerge.
Just four multinational companies control over 70 percent of fluid milk sales in the United States: Land O’Lakes, Foremost Farms, Dairy Farmers of America, and Dean Foods.1 Their shareholders cash in while small dairy farmers struggle to make ends meet. Needless to say, premium paychecks reward executives for maximizing profits for the corporation, not for ensuring healthy milk, happy farmers, or safe, sustainable farming practices.
An overview of the leading milk companies gives a sense of just how huge the dairy industry has become and just how little choice American consumers have. Land O’Lakes—America’s top butter supplier—has combined forces over the years with Cenex and Purina Mills. Land O’Lakes reported $159.6 million in profits in 2008.2 As of 2009, Dairy Farmers of America was producing close to 30 percent of the U.S. milk supply, with $11.7 billion of sales in 2008, while in 2007 DFA ranked twenty-ninth on Fortune magazine’s list of the thirty-five largest U.S. private companies.3
Dean Foods—the same company that controls the market in Bethel, North Carolina—sits atop the U.S. dairy pyramid, dominating milk sales across the country. Shoppers can find Dean Foods’ milk packaged within an array of seemingly independent labels: Adohr Farms, Alta Dena, Borden, Meadow Gold, Nature’s Pride, Shenandoah’s Pride, Sealtest, and dozens more. The company also owns Horizon Organic Milk and soymilk maker WhiteWave. This industry giant raked in $131 million dollars of profit in 2007.4 And while more than 100 dairy farmers throughout America go out of business every week—like the Bethel dairy farmer—Gregg L. Engles, the 51-year-old CEO of Dean Foods, made over $9,600,000 in 2008.5
Corporate takeover of the supply chain is not limited to the milk sector. The same conditions faced by small dairy farmers prevail through most of the U.S. food industry. Like most of the orange juice it produces, the U.S. food system is highly concentrated. University of Missouri researchers Mary Hendrickson and William Heffernan track market consolidation among food companies. Their April 2007 report tells a stark story.6
At the time of the Missouri study, just four companies—Tyson, Cargill, Swift & Co., and National Beef Packing—were slaughtering 83.5 percent of cows. In late 2007, Brazilian beef-backing giant JBS barreled into the market, snapping up Swift. Within months, JBS had bought the beef operations of pork giant Smithfield Foods, which had been the fifth-largest packer. Today, the Big four—Tyson, JBS Swift, Cargill, and National Beef—control well more than 80 percent of the market.
In hogs and chickens, the big are getting bigger too. In 2001, the top four companies (at the time, Smithfield, Tyson, Swift & Co., and Cargill) killed 59 percent of hogs. By 2008, that number had risen to 64 percent, although JBS had taken over Swift & Co. For chickens, just two companies—Tyson and Pilgrim’s Pride—were killing 47 percent of birds. The top four companies controlled 58.5 percent of the market, up from 50 percent in 2000.
The Obama administration has vowed to take a harder line on agriculture consolidation than its predecessors. Yet in October 2009, it approved JBS’s buyout of Pilgrim’s Pride.7 That deal left two companies—JBS and Tyson—with large positions in the Big Three of the supermarket meat case: beef, chicken, and pork.8
As these few companies engulf market share, they gain increasing power to dictate terms to growers. In meat processing, the companies wield a second weapon: captive herds. Smithfield, for example, is not only the nation’s dominant hog processor. In addition to slaughtering 27 million hogs per year, the behemoth also raises over 20 million hogs of its own (not including the 220,000 hogs it produces internationally)—more than any other operation by a factor of three.9 It also controls a huge portion of the hogs it slaughters indirectly, through contracts with large-scale growers.
Pork giants Tyson and Cargill also keep large captive herds and buy most of the rest of the hogs they slaughter under contract. They use their market might to squeeze prices, giving small, independent growers two options. They can get bigger, in hopes of making up in volume what they’re losing in price; or they can shut down. The result has been a nearly wholesale obliteration of small hog farms and an explosion in the size and geographical concentration of operations.
Iowa, the nation’s leading hog-producing state, tells the story. According to the Iowa Pork Producers Association, the total number of hog farms plunged from more than 59,000 in 1978 to around 10,000 in 2002, an 83 percent drop. Over the same time span, the total number of hogs raised per year jumped from 19.9 million to 26.7 million. That means the average number of pigs per farm soared from 250 to more than 1,500. And production, which had been broadly distributed across the state, shifted to just a few counties.10 North Carolina, the nation’s number two hog state, shows similar trends.11
Conventional vegetable farmers also face tightly consolidated markets. Power to influence vegetable prices rests with a few large middlemen selling to huge buyers like supermarkets and fast-food chains. Just five companies, led by Wal-Mart, control nearly half of U.S. supermarket sales, Hendrickson and Heffernan report. Because of the regionally fragmented nature of the industry, that number understates the situation. In any given region, three or four supermarket chains typically dominate sales, with Wal-Mart usually taking the number 2 or number 3 spot.
If you’re a farmer with, say, 100 acres of tomatoes in Florida, you take the price the big buyers are offering or watch your crop wither as buyers look south to Mexico for a willing seller.
How did a few corporations gain such dominance over food production and retailing? One response is: people want cheap food, and the market gave it to them. If low cost is the main goal of food production, consolidation makes sense. Big operations gain economies of scale. You can’t argue with the results—even with prices going up, the United States has the world’s cheapest food as a percentage of income.
But that reasoning is naïve. Agricultural markets don’t operate freely; they’re manipulated as a matter of course. As feedlot and slaughterhouse interests gained economic might, they also began to wield extraordinary political leverage. Local and state governments have been notoriously lax in forcing feedlot operations to clean up their considerable environmental messes.12 Authorities have also historically looked away from the industry’s brazen violations of labor code.13 Indeed, labor conditions in our corporate slaughterhouses have gotten so grim that Human Rights Watch recently saw fit to issue a scathing report.14 The ability to abuse the environment and labor with near impunity acts as a de facto subsidy, allowing industry giants to keep costs down as they gobble market share.
After fifty years of such trends, merely ending feed crop subsidies and forcing agribusiness giants to clean up their messes won’t rebuild more benign food production networks. Throughout most of the nation, local food infrastructure has withered away, and the few remaining small farmers aren’t making enough spare cash to make the necessary investments.15
To undo the damage of a half century of increasing consolidation, we’ll need to commit public funding to rebuilding that infrastructure—along with a vigorous dash of real antitrust enforcement. Only if we throw our support behind small farms can we hope that one day thousands of thriving family dairies and small milk processors in North Carolina will force industry giants like Dean Foods to shutter their windows.