Milk, Money, and Greed

Terry Etherton

Fix it.

That is what the dairy industry should do. The “stealing your milk money” ploy engineered by some in the cohort of dairy cooperatives, dairy processors and retailers to gouge consumers and cheat dairy producers by creating an organic-lite milk niche, rbST-free milk, continues.

There are two components to this. Since it is more costly to segregate two sources of milk – conventional and rbST-free – collected on the farm, some cooperatives have taken the tactic of persuading or pressuring producers who use rbST to give up the technology. The obvious intent is to manage one source of milk, which makes economic sense since this is cheaper. Once this achieved, the same milk can be sold as either conventional OR rbST-free for two distinctly different prices. The same milk being marketed as though it is different! And, based on national data, the rbST-free milk is being sold for about 60 to 90 cents a gallon more versus conventional milk.

Remarkable: sell the same milk for a whole lot more! It is clear that corporate social responsibility is nowhere to be seen. I have come to conclude that companies engaged in this “marketing” effort have increasing their profits as their first priority.

Another piece of this ploy is that a small premium is paid to a producer to “encourage” them give up the technology. Based on a survey done by Voices for Choices, 52% of producer respondents were offered a premium of up to 50 cents per hundred weight (cwt). In this survey, no premium was offered to 34% of the producers and 9% were charged a higher hauling charge or “deduct” if they didn’t give up rbST! What a deal for the folks “upstream” of the dairy farmer who process and sell the milk!

To frame this another way, let’s assume a premium of 50 cents per cwt of milk is paid to the producer to stop using rbST. This translates into an additional 4 cents per gallon being paid to the producer who is “strong-armed” into ditching the technology. If the markup at retail is 90 cents per gallon for rbST-free milk, an additional $10.44 per cwt is generated, of which the producer gets less than 50 cents!

There is another element to this reality. In some regions, milk marketers have converged the market. That is, conventional milk is no longer available in the store. They claim consumers want this….we know better. In this scenario, consumers have two rather than three milk choices, rbST-free or organic. More corporate social responsibility is tossed under the bus. The commodity milk becomes rbST-free. The difficult question to sort out at the retail level is: just what is the markup? If the comparator milk (i.e. conventional) is not even available in the store or on the regional market, this is difficult to determine. However, based on the national dataset, the markup is likely to be in the 60 to 90 cent/gallon ballpark.

What a stroke of genius – make milk more costly and, for some, unaffordable, effectively widening the health disparity gap. Oh yeah, guess what happens to the premium and sharing of profits with dairy farmers? That will be up in smoke.

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