Via HuffPo, demand for organic milk is surging, so why doesn’t supply increase concomitantly? Purchasing contracts between organic dairies and wholesalers shift the risk of production costs onto the dairies, not the customers. I spotted this little gem of a quote with my super-special legal eyes:
The [organic] farmers’ plight illuminates an unusual feature of the U.S. dairy economy: Most farmers do not set their own milk prices. Organic farmers typically enter into contracts with processors. This provides stability compared with the month-to-month pricing of conventional milk, but it has caused problems once food and fuel costs took off.
Organic producers are decoupled from the commodity milk cycle, but must negotiate their own production contracts with organic milk wholesalers through their local cooperatives. Though they have the freedom to negotiate their own terms, the contracts they negotiate for themselves aren’t always favorable in the long term. The terms place all of the risk of input cost fluctuation onto the dairy. Not the best financial risk management strategy. Production contracts should not be entered into unless the prices are pegged to key input costs. Risk management begins with the contract. True for dairy and true for any other agricultural product.
The law continues to erode the effectiveness of the cow share arrangements that are designed to circumvent raw milk regulations. A federal judge has just enjoined Rainbow Acres Farm, a Pennsylvania dairy, from utilizing a cow share system to distribute milk across state lines into Maryland. The case opinion of Judge Lawrence Stengel, federal court judge in the Eastern District of Pennsylvania, is now available online.
Not only did the court refuse to acknowledge sharing arrangements as a means to circumvent federal regulation, it didn’t really entertain any argument to the contrary. Judge Stengel disapproved of the scheme via a mere footnote:
“15. The contract between Mr. Allgyer and persons entering into a cow share agreement is merely a subterfuge to create a transaction disguised as a sale of raw milk to consumers. The practical result of the arrangement is that consumers pay money to Mr. Allgyer and receive raw milk, which is transported across state lines and left at a “drop point.” As such, despite any artful language, the agreement involves the transfer of raw milk for consideration, which constitutes a sale and is lawfully regulated by the FDA.”
Usually, when a judge wants to make an important point in an opinion, he or she will call that point a ‘holding’ in the main body of the opinion, which is a way of saying ‘I think I just made an important legal judgment that might be applicable in other similar cases and I want my words to be a guidepost for subsequent decisions’. Invalidating Rainbow Acres distribution scheme in a footnote is another way of saying that a cow share is so transparent a sham that it is not really worth discussing at all. It’s the judicial equivalent of “whatevs”.
We are at the tail end of the long arc of the cow share. Raw milk was prohibited in the 80s. Cow share were first utilized on a very limited basis in the 90s. They gained popularity in the ‘oughts, and regulators and public health officials have only begun to push violators through the courts within the last 4 or 5 years. We are just starting to see state and federal courts come around to rendering their thoughts on them, and the news is not good for raw milk proponents. The worm has turned. It is time for raw milk advocates to rethink their activism strategy and transition from judicial intervention to legislative action.
My friend Matt DiScenna is back again with his thoughts on the recent Monsanto litigation:
With the Farmers vs. Monsanto lawsuit starting to garner the attention of foodies and farmers nationwide, it’s worth taking a look behind the scenes. Monsanto’s meteoric rise to the top of the food chain has been aided by a clever (albeit shrewd) legal strategy. They have pioneered the practice of patenting genetically modified seeds, giving themselves the sole legal right to use seed varieties that are concocted in their laboratories. These patents have been enforced in courts throughout the country against farmers whose fields have been found to contain seeds patented by Monsanto – even if brought to the field by the uncontrollable forces of wind or pollinators.This legal strategy has contributed in no small part to Monsanto’s startling growth despite the PR nightmare it has inspired. Emotionally-charged ethical and ecological issues aside, it is prime time to steal a trick or two from one of the agribusiness Goliaths.
As demand for local, clean food continues to increase, it will be to the benefit of farmers and local food entrepreneurs to develop legal and business strategies that will foster continued growth and stability for the local food economy. Such action will have the collective effect of cementing local foods into our economic framework and ensuring that it’s not just a short-lived trend. One option is for farmers to partner with processors or other value-added producers through mutually beneficial contracts. Such partnerships create jobs, publicity and most importantly, a fluid transfer of goods and cash between farmer and producer upon which both can rely. Another possibility is the development of agricultural cooperatives, through which resources and markets can be shared.
Opportunities abound for the formation of effective legal and business strategies that can create alternatives to monocultural row crop production. Developing these alternatives is the best long term strategy to rob Monsanto of its farmer customers. While many will be closely following the Farmers vs. Monsanto court case (myself included), it is worth considering that much can be accomplished outside the courtroom, as well, to begin to chip away at the Monsanto machine.
Barry Estabrook happily reports that Trader Joe’s has finally ceded to the demands of the Coalition of Immokalee Workers, a farmworkers rights group that has sought better wages and working conditions for agricultural laborers engaged in tomato and citrus picking.
CIW’s victory is impressive because of its labor law implications. One of its main objections has always been that its membership is still paid by the piece. Under the Fair Labor Standards Act, farm laborers are not entitled to minimum wage or overtime as a matter of law if they are employed in piece work. Trader Joe’s concession means that it will only enter into purchasing contracts with suppliers that eschew these exemptions and pay more than minimally required for their labor. CIW’s victory marks the rare occasion where agricultural activism has succeeded in forcing a company to do more than the bare minimum mandated by federal law. Trader Joe’s dramatic and long-overdue concessions will most definitely take the form of a boring legal document, a purchasing contract that stipulates how the producer’s workers will be paid.
Shamed into forsaking a perfectly legal but morally unethical labor law exemption, Trader Joe’s now lauds its course correction on the company’s website:
“Trader Joe’s is cherished by its customers for a number of reasons, but high on that list is the company’s commitment to ethical purchasing practices. With this agreement, Trader Joe’s reaffirms that commitment and sends a strong — and timely — message of support to the Florida growers who are choosing to do the right thing, investing in improved labor standards, despite the challenges of a difficult marketplace and tough economic times.”
Trader Joe’s fought for years to continue using the exemptions, reluctantly adopted better wage standards after a lengthy PR drubbing, then instantly enshrined its new ethical production standard all its future purchasing contracts. Putting an agricultural or a production ethos into legally enforceable terms was Trader Joe’s clearest path towards making a lasting promise to its conscientious consumers. Trader Joe’s learned how to do this reluctantly, but there is no reason why a more forward-thinking management cannot preemptively chart a course of corporate responsibility without all the lengthy arm-twisting CIW had to go through.
Some businesses, like the ones I profiled at the start of the new year, understand intuitively that they are only as good as the legally binding promises they make. Brooklyn Bouillon and Two Guys in Vermont have built their business models around how they treat their workers and the symbiotic deals they cut with their input providers because they are targeting conscientious consumers. More traditional companies may come around reluctantly after getting repeatedly beaten over the head with bad press, but the smaller companies are more nimbly leading the way.
Consumers are beginning to demand this kind of transparency from the people that make their food. Earlier in the week, the Humane Society and United Egg Producers got together to adopt more humane standards for laying hens. The Internets went bananas with the “bitter enemies – now best friends” angle, but I think everyone might have missed the more interesting point in both these stories. CIW and The Humane Society, along with the kinds of food entrepreneurs we like on this blog, are more perceptive than the corporate giants about the changes taking place in the market. Their ethos is more closely in line with how the public wants their eggs, tomatoes, and other foods produced. The corporate types understood (eventually) that the best way to keep up was to codify their newly enlightened ethics in their legal documents. It’s a lesson they could have observed from a contemporary food entrepreneur if they had been paying attention.
As a result of the exploding demand for Greek-style yogurts, processors like Chobani and Fage are dramatically expanding their processing facilities within New York State. I started to wonder if the state’s dairy farmers were doing better off as a result. Milk policy and pricing is terra incognita to me, so I had to lean on some friends to explain to me the relationship between aggregate demand and the prices which dairy farmers receive for their toil.
Doreen Barker of Barrows Farm did some fancy footwork in a recent blog post that answered some of my questions about what the near-term future will look for dairy farmers in the state
I also have to thank Lorraine Lewandrowski for sending me a series of articles that appeared last year in Farmshine, a weekly dairy publication available only in print. Authors Tammy Graves and Sherry Bunting did such a good job of reporting on the relationship between greek yogurt, milk policy, and dairy demand that it is a shame the articles are not widely available on-line. With their permission, I have put them up here in PDF format. Must read!
I cannot link to Part Two of The Good, The Bad, and The Ugly because the PDF size is over my meager limit, but here is a key quote:
Despite this news, New York’s mailbox milk prices, as report- ed by USDA, lag the U.S. average most months since 2008 (see graph). And, when central New York producers compare milk checks with colleagues elsewhere in the state, net returns do not fare well in the comparisons. Class I utilization and location dif- ferential zones are part of this equation. But putting it all togeth- er, New York’s mailbox milk price has lagged the U.S. average mailbox milk price beginning markedly in 2008 and continuing through the recent first quarter of 2011.
So far, it looks like the dairy farmers are not seeing any appreciable gain from the increased demand for their products. The “Greek Yogurt Effect?” There isn’t one.
Via NPR, Massachusetts is the latest locality to consider a sugar tax in order to curb the high levels of consumption which are a leading cause of obesity. Once again, we have a local government taxing consumers to not eat or drink a product that is already artificially cheap because it has been subsidized into overproduction by the USDA.
There is a common theme which undergirds these fat and sugar taxes, the Happy Meal bans, and salt limits. I am beginning to view them all as local repudiation of the excesses caused by the federal cheap food policy. Commodity crops are the raw ingredients for the feed that grows the salty chicken nuggets, the fatty-fatty beef in the fast food burger, and the HFCS that goes into everything else. These are precisely the products targeted by state and local regulators because their consumption has been so often linked to obesity.
Local governments like New York San Francisco and Massachusetts have absolutely no control over the production spigot. The only thing they can do is swallow a spider to catch the fly, as the rhyme goes. Regulating local consumption within their jurisdiction is their only recourse against the torrent of cheap calories produced by federal subsidies.
This leaves public health advocates with the difficult task of convincing people not to eat the food we already paid farmers to overproduce. “Taxes!” is a facile argument and it is a far too local and ad hoc method of correcting a serious flaw in the food system. They should aim higher.
Price volatility makes dairy farming a notoriously tough business. It is not difficult to understand why an organization like Cooperatives Working Together would endeavor to mitigate some of the volatility on behalf of its membership, many of whom may feel ambivalence toward herd retirement, as does Ms. Barker.
CWT sought to manage that volatility, however, in a way that exposed it to legal liability. It could have hired a sales team to seek market for its members’ product, selling more milk to Fage/Oikos and foreign markets like China. Instead, CWT chose to press its Capper-Volstead anti-trust exemptions and tackle the issue of volatility from the supply side through herd retirement. This is a much more speculative strategy. Any organization that pushes the limit of anti-trust law runs the risk of litigation, and the outcome of litigation is never certain. You can’t chart a course like that without making a significant investment in legal research before you set off. Even still, some other smarty-pants lawyer from a public interest firm or the government could always disagree and mount a challenge. That uncertainty is risk, and it’s probably not the most stable foundation on which to maintain the financial well-being of your membership.
Fellow food lawyer and guest blogger David Jackson is back, this time to put his trade law expertise at your disposal to explain how a notorious feed additive threatens US pork exports. For some perspective on the use of ractopamine, it is banned in China, the country that makes children’s toys out of radioactive lava. Hit it, Dave:
“The long standing debate about the use of pharmaceuticals in animal feed in the United States has gone global according to one recent news story. This article notes that both China and the EU have banned U.S. meat imports if the animals were treated with ractopamine due to concerns about potential health risks. Ractopamine has been approved by the Food and Drug Administration for use in animal feed, especially for pigs. Materials safety data sheets which accompany the drug however, note that the drugs are not for use in humans. There are U.S. companies, such as Chipotle and Whole Foods, which also don’t sell meat treated with pharmaceuticals. Now the global pressure may add fuel to the debate already burning at home.
The import ban is now beginning to hurt the U.S. economy by limiting agricultural exports. In response, the U.S. government is working internationally to improve access for American meat products by promoting ractopamine in the Codex Alimentarius Commission (Codex), which is in charge of determining international food safety standards. There has been much reluctance to green-light the U.S. approach. There are both supporters and detractors for Codex approval of ractopamine in pork and other meat products. If Codex approves ractopamine, the U.S. could mount a stronger challenge to the import ban in the WTO. For U.S. advocates of less pharmaceuticals in livestock raised for food, for now they may find additional support from the rest of the world.”
Farming and foreign policy are inextricable. Instead of changing our laws or agricultural practices to accommodate the market, the official response is to alter the international perception of a controversial drug. Thanks for the run-down, Dave!
Back in October, Cooperatives Working Together, a national dairy cooperative, had been named in a civil anti-trust suit stemming from its Herd Retirement Program. The program paid cooperative members to turn healthy cows into Army meat retire their least productive dairy cows, which had the intended effect of limiting supply. The program coincided with a rare period of stabilization in national milk prices (though the ‘causation vs correlation’ thing is probably not certain yet). Once upon a time, CWT justified members’ participation in the program under the federal anti-trust exemption offered to cooperative members by the Capper Volstead Act.
A fantastic article appearing today in City Pages argues that CWT’s use of the Capper Volstead Act was in actuality an illegal attempt to manipulate the nationwide price of milk. It’s a long article, but a worthwhile read whether you are a farmer or a milk drinker.
Writers Andy Mannix and Mike Mullen did a superb job giving us a comprehensive understanding of the milk industry that doesn’t require an Ag Econ degree to understand. They also tracked down some great sources for the piece, too. “The law offers limited exemption from federal anti-trust laws, but it’s not a free pass to manipulate the market”, one handsome devil was quoted as saying.
For the law geeks in the crowd, this is a great Capper Volstead case to follow. Big coop cases are rare. As this train-wreck unfolds, we’ll get a Haley’s Comet opportunity to see who wins, and how.
Hypervocal, an on-line news aggregator, reports further on some key facts:
“The EPA, Texas Parks & Wildlife and Texas Environmental Crimes Task Force investigated the Columbia Packing Co. and found an underground drainage pipe, not linked to the city’s waste management system, discharging pig’s blood into the creek.”
That is potentially bad, awful, terrible news for the packing company. This discreet pipe is the definition of a point source under the federal Clean Water Act. Oh, and it is also a safe bet that PIG BLOOD is also a pollutant as defined by the Act:
“The term “pollutant” means dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water.”
Two very big strikes against the packing company. We’d probably need more facts in order to make a reliable determination that the packing company violated the CWA, but it looks pretty bad for them so far.
