Dean Foods Under Scrutiny

Many in the food industry have welcomed the greater activism by the Obama administration into areas like food safety.

But now there is growing pressure to look at some of the anti-competitive practices: Senator Bernie Sanders (Democrat from Vermont) has asked the U.S. Department of Justice to investigate mega dairy company Dean Foods for what he contends are monopolistic practices that harm dairy farmers.

According to the senator, Dean Foods buys approx. 70% of the fluid milk in New England, recording historic profits of $184MM while farmers are scraping by. Dean hasn’t limited its activities to the US, either. Dean recently purchased Alpro, the European soy-based beverage and food arm of Vandemoortele, for €325m. Europe’s farmers want the milk quota increased by 5% to go along with several measures already enacted by the EU government, including reintroducing export subsidies. The US, Australian, and New Zealand governments are angry at this move, saying it runs counter to the G20 agreement to avoid protectionism during the current financial crisis. Protectionism is widely believed to have significantly worsened the Great Depression of the 1930s.

As Dean’s profits have soared, milk prices are tumbling from $19.50 per 100 pounds one year ago to below $11 by June of 2009. Dean’s profits for the quarter shot up from $30MM in 2008 to $76.2MM during the same period. The company denies anything illegal, pointing out the USDA (Department of Agriculture) usually sets milk wholesale prices, and that "supply and demand" are keeping the price low.

The senator is also pressuring U.S. Agriculture Secretary Tom Vilsack to prop up the price paid to dairy farmers. More than the cost of milk is at stake, both in the US and Europe, where dairy farmers have demonstrated in Strasbourg at the EU Parliament demanding action against low prices and deregulation that has hurt farmers while aiding large middlemen.

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