MILKING THE SYSTEM - Foodopoly: The Battle Over the Future of Food and Farming in America - page 134

Like the lack of transparency in the ownership of brands, pricing for milk can be a mystery to those
not familiar with the industry. Today's pricing system has its roots in the early decades of the twentieth
century. Beginning in 1925, processors were paying farmers for milk according to its use: fluid milk (for
drinking) or milk for manufactured products, such as cheese, butter, and ice cream. This concept, known
as “classified pricing,” is still in use today. Milk to be sold in cartons to drink is priced higher than milk for
manufacturing dairy products.
Milk prices for farmers have been on a roller-coaster ride. In the summer of 2007 prices reached a record
high, and as prices rose, large-scale dairies added more cows to capitalize on the higher price of milk. Over
the following two years, overproduction caused prices to fall by half. Although milk prices fell, production
costs did not: during 2008 the cost of feed rose 35 percent and the cost of energy rose by 30 percent. 27
Many dairy farmers were losing between $100 and $200 per cow every month in 2009. 28
According to Taylor:
Milk pricing has become increasingly unstable and erratic. For dairy farmers who have no control over what
they are paid, this has been disastrous. For the large milk processing firms who buy milk from farmers, and sell
to grocery stores there has been unprecedented profits and monopoly control. The instability in milk pricing is
due to increasing concentration to the point of near monopoly. America's dairy farmers were recently paid as
little as $12 per 100 pounds of milk while their cost of production was $17. They had to borrow and take on
new debt. 29
Fluid milk prices are especially vulnerable to manipulation by commodities traders. The market that
dairy farmers have to contend with is the Chicago Mercantile Exchange (CME), where commodity futures