Dairy co-op is target of a federal investigation

Dairy farmers were allegedly deliberately underpaid

By TOM KANE

NATION — The Dairy Farmers of America (DFA) could be mixed up in the back-room manipulation of prices for local milk.

The DFA, which has been roundly criticized recently by farmers in this area, is the largest milk cooperative, or co-op, in the country, which collects and markets milk for 80 percent of the dairy farms in New York, Pennsylvania and other states.

Federal regulators are investigating allegations that the co-op has manipulated milk and cheese prices for its own benefit, and are separately reviewing a secret transfer of cash to a former director of the organization.

Inquiries made to the Federal Commodity Trading Commission, the agency that is conducting the investigation, did not result in answers because it is the policy of the agency not to reveal any information about a judicial investigation.

According to articles in the Wall Street Journal and The New York Times, the co-op faces antitrust lawsuits by farmers and retailers alleging it conspired to suppress prices it paid for raw milk, while raising prices to the region’s retailers.

“Such tactics could have the effect of boosting the co-op’s profits as a middleman,” the Journal said in an article appearing on May 19.

“Nothing would surprise me about the DFA,” said Brian Smith, a dairy farmer.

“What has most riled dairy farmers is the co-op’s disclosure to its members on May 7 of a secret $1 million payment to a former board member, Herman Brubaker, for reasons that remain a mystery,” The New York Times said in an article appearing on May 18. The current CEO of DFA, Richard Smith, said that former CEO, Gary Hanman, arranged an improper and unauthorized transfer of money.

The U.S. Justice Department was briefed on the incident in mid May, and is preparing to start its own probe.

One of the suits brought by DFA member dairymen last July alleges that the co-op conspired with Dean Foods, one of the nation’s largest bottlers of milk, to keep prices paid to farmers lower than they would be in a competitive market.

“The corrupt façade at the DFA has finally been cracked open,” said The Milkweed, a dairy newspaper located in Brooklyn, WI.