US dairy policies drive small farms to ‘get big or get out’ as monopolies get rich

The average American dairy turned a profit only twice in the past two decades despite milk production rising by almost 40%, according to analysis by Food and Water Watch (FWW) shared exclusively with the Guardian.

More milk has not meant more profits for most farmers – or cheaper prices for American shoppers – because production costs have risen while milk prices have remained low so US exporters can compete on the global market.

In the past 20 years, US dairy exports rose eightfold – more than almost any other commodity – which has coincided with rapid consolidation across the industry, according to the FWW report.

The US Dairy Export Council (USDEC) claims booming exports have helped farms of all sizes, but two-thirds of family-sized commercial dairies were lost between about 1997 to 2017 as factory farms, exporters and a handful of powerful cooperatives came to dominate dairy. Trade association executives are making huge salaries as ordinary farms go under.

Dairy monopolies are also bad news for the climate. Even though the number of cows remains stable, planet-warming methane emissions from dairy manure have more than doubled since 1990, thanks to the way factory farms manage waste, the FWW report found.

It warns of a vicious circle in which economic hardship caused by low and volatile milk prices is driving family-scale farmers to “get big or get out”. In other words, the only way for many ordinary farms to survive is to expand their herds and factory farm which increase greenhouse gas emissions and endanger air and water quality – or sell-up to mega-dairies that do the same.

Curbing overproduction is crucial as current state and federal dairy policies are driving family-scale farms to extinction while fueling the climate crisis, according to the FWW report, Economic Cost of Food Monopolies: The Dirty Dairy Racket.

“The big picture of the economic cost of dairy consolidation is that it’s a story filled with the incredibly orchestrated and devastating farmer loss and hardship, and a worsening environmental outlook,” said Rebecca Wolf, food policy analyst at FWW. “But it wasn’t always this way, and it doesn’t have to be this way … we have to reject false solutions and instead reform policies to support farmers, the environment and the US economy.”

Consolidation in the US dairy industry has occurred at a faster pace than in every other agricultural sector apart from hog and egg production. It’s happening at both the farm level – fewer farms, more mega-dairies – and at the processing level – fewer but larger corporations and cooperatives that purchase, process and market dairy products.

Nationally, the total number of US dairy farms fell by more than half between 1997 and 2017, while the average number of cows per farm increased by 139%, according to analysis of USDA data. More than 70% of US milk is produced on farms with at least 500 cows, with the largest dairies boasting herds of more than 25,000.

Larger farms are less likely to graze their cattle, instead relying on purchased feed – the single largest source of greenhouse gases from industrialised agriculture. In addition, factory farms store manure in liquid form which encourages the release of methane – unlike field cattle whose manure decomposes with minimal emissions.

Methane is a short-lived but powerful heat-trapping gas that accounts for about a third of the rise in global temperature since the pre-industrial era – and nearly 45% of warming today. Livestock – through cattle burps, manure management and the cultivation of feed crops – is responsible for nearly a third of the global manmade emissions.

In recent years, as scientists have warned about the oversized role played by industrial farming in global heating, agribusinesses including dairy have looked towards unproven industry-led fixes like carbon offset markets and feed additives to lower the methane content in cow burps, rather than addressing the main problem, which is factory farming large herds.

A factor driving dairy farm consolidation is declining returns.

Farmers have struggled to break even due to production costs rising faster than milk prices – which were slightly lower in 2021 compared with 2000. This is partly due to a major shift in US dairy policy away from price stabilization achieved through minimum price guarantees and buying and storing excess milk that would be donated or resold to manage oversupply, to one that encourages production and expanding export markets.

The policy shift – which includes promotion of dairy products in developing countries – helped the US become one of the largest dairy exporters in the world. As exports rose, so did price swings, and in order to stay competitive, US milk prices stayed low.

“This lined the pockets of agribusinesses while leaving farmers captive to volatile international markets … Clearly, export-focused policies have not improved the welfare of the average US dairy farmer,” according to the FWW report.

The dairy industry – which includes individuals and Pacs linked to farmers, manufacturers and cooperatives – made $5.1m in federal campaign contributions during the 2020 election cycle, according to Open Secrets, the transparency watchdog. In the same year, the industry spent $6.9m to influence Washington, lobbying hard to protect corporate subsidies among other benefits in the farm bill.

“The get big or get out push from our political and industry leaders has come true, and enabling this concentration has led to the withering of small and medium farms – and had a crushing impact on rural communities across the US,” said Sarah Lloyd, a dairy farmer in Wisconsin who helps run the family’s midsize farm with 450 cows. “Farms that have hung for a hundred years can no longer keep their heads above water due to this boom and bust system, opening up more space for consolidation … It’s a vicious cycle.”

In the past 20 years, spiralling debts and bankruptcies have been linked to farmer suicides and the decline in rural populations. “We cannot export or consume our way out of this problem, we need policies to better manage supplies to reflect actual demand so that dairy farming can go back to being a viable livelihood,” said Lloyd.

But dairy farmers are forced to pay into corporate schemes that work against their interests. FWW estimates that between 2005 and 2018 dairy farmers paid around $4bn into the mandatory Dairy Checkoff program which funds campaigns pushing US milk, butter and creamers to consumers and fast-food firms that mostly benefit mega-dairies.

At the state level, at least $75m in New York taxpayer dollars has flowed to a handful of corporate and cooperative entities in the last 20 years, with the promise of a few thousand jobs – some of which were quickly lost when dairy plants closed.

A spokesperson for the USDEC, which is mostly funded by the federal checkoff program and USDA, said it focused on expanding exports “on behalf of dairy farmers of all sizes across the country and is driven by the reality that export sales help bolster farm-level milk prices … the current federal safety net program for dairy is an insurance system that allows farmers to help mitigate the impacts of price volatility.”

“The sector prides itself on its commitment to sustainability” and is moving towards its 2050 goals of net zero emissions and better water management, the spokesperson added in a statement.

The agriculture secretary, Tom Vilsack, was appointed chief executive of USDEC after leaving the Obama administration, where he reportedly made more than $900,000 in 2020 – more than 3,000 times the median farm income. Since returning to the USDA under Biden, Vilsack has continued to prioritise expanding US agricultural exports.

A USDA spokesperson said it had implemented a range of new economic and technical support for small and mid-sized farms, including organic dairies which currently account for 2% of milk production, and was working to establish more competitive markets, and strengthen local and regional food systems under the Biden-Harris administration. “Together, these actions will help ensure small and mid-sized producers have more, new and better income opportunities they can take advantage of to strengthen their bottom line, receive a fair return for their products, and combat consolidation.”