Judge’s Ruling Fuels Meltdown in Organic Dairy Industry

The outcome of the pending suits will not only impact consumers but many organic dairy farmers whose livelihoods are now threatened by the giant corporate dairy marketers.

10/06/09 A slowdown in the sales of organic milk and dairy products, attributed in recent articles by the New York Times and other media outlets to the weakened economy, has organic dairy farmers from coast to coast at or near financial collapse. But a worsening scandal in the industry might be doing more to economically injure organic family farmers than the flattening of demand for organic dairy products.

Since 2005, a handful of giant factory farms, each milking thousands of cows, have been accused of skirting strict federal organic regulations and creating a surplus of cheap "phony" organic milk flooding the market and driving down profit margins for legitimate industry participants. The Cornucopia Institute estimates that as much as 30-40% of organic milk is now coming from giant industrial operations, milking as many as 7000 cows each.

Last week, a judge in federal district court in St. Louis, rejected 19 class-action lawsuits filed by consumers who are claiming fraud in the sale of “organic” milk coming from one of the giant operations. In 2007, federal investigators found the Aurora Dairy had "willfully" violated 14 different federal organic regulations. Consumers in 40 states sued, alleging fraud in the manufacture of organic milk sold as storebrands in Wal-Mart, Target, Safeway, Costco and other national chains served by Aurora.

Lawyers representing consumers involved with the class-action lawsuits vow that they will appeal the judge’s initial ruling, especially in light of a recent Supreme Court decision that clearly gives citizens the right to sue corporations that allegedly act illegally even though federal regulatory agencies provide statutory authority over certain industries.

According to Mark Kastel, the Senior Farm Policy Analyst for The Cornucopia Institute, the dismissal was particularly distressing “because Bush Administration officials had substantially softened USDA penalties recommended by enforcement staff for Aurora’s organic transgressions.” Cornucopia first alerted the USDA to Aurora’s violations by filing formal legal complaints with the agency.

"The very essence of the checks and balances system in our three branches of government provides for citizens to seek remedy, when regulatory agencies fail to enforce laws passed by Congress" said Gary Cox, a Columbus, Ohio-based attorney with experience in the organic industry. "It is our contention that a judicial review of the alleged misconduct by these giant corporations, and the lack of enforcement by the USDA, is not only appropriate but imperative"

The outcome of the pending suits will not only impact consumers but many organic dairy farmers whose livelihoods are now threatened by the giant corporate dairy marketers. A glut of organic milk on the market now has the nation’s organic processors attempting to reduce their supply and cutting prices paid to farmers. Dean Foods, the nation’s largest milk processor, and owner of the Horizon Organic brand, and H. P. Hood, a giant Boston-based milk bottler, that controls the Stonyfield milk label, have both terminated contracts with farmers or allegedly attempted to strong arm some of them out of business.

"I have invested my life in building this dairy farm, and Hood encouraged many dairy producers to make major investments and ramp-up for organic production, now my entire livelihood and the financial future of my family is at risk" said Kevin Poetker who milks 200 cows near Waterloo, IL, 24 miles SE of St. Louis.

Even Organic Valley, the farmer-owned cooperative that is second only to Dean Foods in organic milk sales, has cut prices to their members and asked them to reduce their milk production by 7%. "Farmers who build their herds make long-term financial and management decisions, and just shutting off even 7% of their milk is no easy task" Kastel said.

Thousands of letters, mostly from organic farmers, have been sent to president Obama and USDA secretary Tom Vilsack asking them to immediately intervene and undertake aggressive enforcement of organic regulations, something lacking during the past administration.

The USDA’s handling of the Aurora violations is not the only instance where its enforcement actions have gone awry. Other alleged violations have gone uninvestigated by agency staff. Cornucopia has filed several additional complaints, based upon direct observation of practices employed on other huge feedlot dairies owned by Aurora and Dean Foods.

"Either the USDA refused to investigate or, when they actually found violations, they have allowed illegal activities to continue" Kastel lamented. "We are now appealing to the Obama administration for a more ethical approach to enforcement in these matters. Congress gave the USDA the responsibility of overseeing the organic industry and now we are happy that some on Capitol Hill are considering launching an investigation into, seemingly, favorable treatment for some corporate players"

If there is good news for consumers, it’s that they have alternatives in the marketplace. “Consumers seeking authentic, nutritionally superior organic milk have many choices and we hope they will support the family farmers, the heroes who built the organic industry" stated Ronnie Cummins of the Organic Consumers Association.

A multi-year research study by The Cornucopia Institute created a scorecard, posted on its website (www.cornucopia.org), rating all 110 organic brands based on their ethical and legal approach to milk production. The study indicates that 90% of organic milk, cheese, butter and yogurt marketers are clearly subscribing to both the "spirit and letter of the organic regulations"

"These giant factory farms are a bad aberration. Unfortunately they are associated with a couple of the largest participants in the industry. We need consumers to step up and make careful choices in the supermarket so they reward the true heroes in this industry and send a strong message to the bad actors" Kastel said. "Some organic farmers out there desperately need the help and support of consumers"