N.Y. farm sues DFA, calling it a ‘monopsony’ in Northeast

A New York milk producer is suing Dairy Farmers of America, accusing it of being a monopsony due to its purchase of regional processing facilities that have driven the price of milk down for farmers across the Northeast, including Maryland and Delaware.

DFA, which receives almost two-thirds of the Northeastern milk market, has been aggressively driving down the price of Grade A milk and pushing its members to the “brink of insolvency”, the suit claims. S.R.J.F. Inc. in Stamford is the plaintiff.

“(DFA) is in kind of a weird situation where it’s trying to purchase milk at the lowest possible price to be competitive. … It’s almost like a conflict of interest,” said Nate Bruce, a farm business management agent at the University of Delaware Cooperative Extension. “It’s just such a unique lawsuit. I’ve been in agriculture a long time, and I’ve never seen anything quite like it.”

A monopsony is a market situation where there is only one buyer.

The lawsuit, filed in Vermont’s district court, claims DFA may control as much as 85 percent of the Northeastern milk market and that about 7,000 farmers who have sold non-organic, Grade A milk to the cooperative since May 2016 have been affected. Since 2017, the suit claims, the DFA has worked to quickly consolidate the regional milk industry, purchasing processing plants and absorbing producers, including the century-old St. Albans Cooperative Creamery in Vermont as it approached bankruptcy.

DFA responded to the lawsuit by saying its investment in processing across the region has preserved milk markets and improved its farmers’ standing.

“Any claim that a farmer-owned, farmer-governed cooperative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate,” said Kristen Coady, DFA’s senior vice president for corporate affairs.

DFA has faced a flurry of lawsuits recently as the national industry rapidly consolidates with the departure of thousands of farmers and other major buyers.
More than 5 percent of dairy herds were shuttered in 2021, though that was the slowest rate of decline in four years. An April antitrust lawsuit in New Mexico accused DFA of conspiring with a competitor to drive down the price of Grade A milk for farmers in the Southwest.

DFA also reached a settlement with Food Lion and the Maryland and Virginia Milk Producers Cooperative Association last year after their lawsuit claimed that DFA’s purchase of multiple Dean Foods production facilities created a monopoly in the North Carolina and Virginia dairy markets. DFA bought more than 40 of Dean Foods’ dairy facilities for nearly half a billion dollars in 2020 after it went bankrupt.

Calling its move into processing a “double-edged sword,” Bruce said that the DFA must now weigh its need to price milk competitively against its obligation to get its member farmers the best price for their milk.

“A co-op is trying to do the right thing for the producers to get a product out to more consumers, but when you go into processing, you become profit maximizing,” he said. “It’s very difficult to do both.”