Agriculture Secretary Tom Vilsack last week told the National Council of Farmer Cooperatives that the Obama administration's ongoing probe into anti-competitive practices in the ag industry won't focus on the antitrust exemptions granted to co-ops.
Although we are enthusiastic supporters of farm co-ops, and do not support revocation of their antitrust exemptions, legitimate complaints against specific co-ops should be part of the USDA-Justice Department probe.
The Capper-Volstead Act of 1922 gives farmer-owned cooperatives limited exemption from antitrust laws. The idea was to give farmers a bit of clout against large corporations when it came time to sell their crops, increase their collective buying power and help raise their profit potential. Without the exemption, two or more farmers who tried to jointly market their crop in order to get a higher price would be guilty of collusion and price-fixing.
It's been a pretty good deal for farmers. Memberships in various cooperatives have allowed farmer-owners to buy inputs at a better price, have a stable market for their crops and realize profits from processing operations.
When Clapper-Volstead was passed, farm cooperatives were small, local concerns. The decisions were made by board members who most, if not all, of the farmer-owners knew by name.
According to the National Council of Farmer Cooperatives, the more than 2,500 co-ops in the United States did $191 billion in business in 2008, and held assets valued at $57 billion. More than 250,000 people work for farmer cooperatives, with a total payroll of more than $8 billion.
Just as farms have become bigger over the years, so have cooperatives. Like other businesses, cooperatives have found it advantageous to merge to increase operational efficiency. In the process, some have become quite large.
Dairy Farmers of America, for example, had its genesis in the merger of four large, regional dairy cooperatives in 1998. It has since merged with four other cooperatives and has more than 17,000 farmer-owners. It is a national player in the dairy products business, operating 20 manufacturing plants and maintains several successful brands.
In 2009, it had sales of $8.1 billion and net income of $65.6 million. DFA is certainly among the biggest, but cooperatives with sales of hundreds of millions of dollars a year are not uncommon. They are very large businesses.
We do not subscribe to the theory that automatically equates being large with being bad. We concede, however, that the larger an organization becomes the more distant its management becomes, increasing the likelihood that decisions made for the greater good of the co-op will conflict with the interests of some individual members. The more clout a co-op has, the greater chance non-members will perceive that they aren't getting a fair shake.
These types of disputes are inevitable, and aren't proof of any wrong-doing. But the complaints should be aired.
Again, cooperatives have been a pretty good deal for farmers. They were set up to give the little guy -- the farmer-owners -- a bit more power in a market dominated by corporate interests. Farmers in general have a legitimate interest in making sure they are not being taken advantage of by cooperatives that have in many cases become the dominant players.