39% of dairy farms disappeared in 5 years while co-ops got richer—here’s what really happened?

EXECUTIVE SUMMARY: Here’s what we discovered: The Fonterra strike “settlement” that made headlines last month? It changes nothing—workers at Bayswater are still getting paid less than colleagues doing identical work at other facilities. But that’s just the surface. The same cost-optimization tactics cooperative executives used to suppress those wages are being deployed against farmer-members worldwide, accelerating farm consolidation beyond what market forces alone would drive. USDA data shows 15,221 dairy operations vanished between 2017 and 2022, while operations over 2,500 cows increased by 120 farms, now controlling nearly half of all production. Meanwhile, mid-size farms (100-499 cows) dropped from 8,700 to 6,200—the backbone operations that built rural America. Regulatory immunity, afforded through laws like the Capper-Volstead Act, protects these modern cooperatives from antitrust scrutiny while they prioritize financial engineering over member equity. The data reveal a troubling pattern: cooperatives are using “farmer ownership” rhetoric to justify the systematic extraction of value that benefits management and large-volume suppliers at the expense of family operations. Smart farmers are already building alternatives—such as direct marketing, regional processors, and independent pricing — that deliver $2+ premiums per hundredweight for quality milk.

So I’m sitting here two weeks after watching the dairy trade press lose their minds over Fonterra’s Australian strike “resolution,” and… honestly? Made me wonder if these reporters actually looked at any numbers. Because what I found wasn’t a settlement at all.

It was basically a masterclass in how to screw workers while making it look like cooperation.

Look, here’s the deal. Those Fonterra workers at Bayswater? They’re still getting paid less than their buddies at Cobden and Stanhope for doing the exact same work. I mean, we’re talking identical cheese lines here, same equipment headaches, same problems with fresh cows coming in hot during summer months… Hell, they’re producing the same Perfect Italiano and Western Star sitting in every grocery cooler from Sydney to Perth.

Neil Smith—who serves as National Dairy Coordinator for the United Workers Union and actually knows what he’s talking about—has been documenting pay gaps between these facilities for months. And the gap is real. Not some accounting trick or regional cost-of-living thing. Real money.

That’s not what I’d call “resolved.” That’s systematic wage discrimination with some fancy PR paint slapped on top.

Now, I get it—cooperative labor disputes aren’t exactly groundbreaking news. But here’s why this matters to every single farmer reading this: the same tactics Fonterra used to suppress worker wages are being deployed by cooperatives worldwide to extract value from farmer-members. It’s not some grand conspiracy… it’s just good old-fashioned profit maximization disguised as “farmer ownership.”

Fonterra’s Playbook: Settlement Theater That Changes Nothing

Alright, let me back up and explain what Smith’s been documenting, because the union paperwork tells a story that management desperately doesn’t want farmers to understand.

We’re talking about workers doing identical jobs—running the same lines, dealing with the same maintenance issues, probably the same pain-in-the-ass equipment that breaks down right when you’re trying to get a load of milk processed before it goes off spec. But somehow, magically, the guys at Bayswater are making less than their counterparts at other facilities.

The union’s been tracking what they describe as significant pay disparities for months now, and it’s the kind of money that matters when you’re trying to keep up with the mortgage and feed your family.

And the recent “settlement”? Did absolutely nothing—and I mean nothing—to fix the underlying wage structure that creates these gaps.

Management threw around all this language about “collaborative workplace committees” and “modernized approaches.” You know the drill. Corporate speak that sounds great in press releases but doesn’t change what shows up in your paycheck. Meanwhile, these workers are still subsidizing Fonterra’s margin targets through suppressed wages.

Actually, you know what? Let me tell you about the timing here, because it reveals the deeper issue. These strikes erupted right while Fonterra was finalizing their massive $3.4 billion asset sale to Lactalis. Workers are fighting for basic pay equity while their “farmer-owned” employer is literally selling their jobs to French corporate control.

That’s where the rubber meets the road. When push comes to shove, cooperative management prioritizes financial transactions over both worker welfare and member interests.

The Legal Framework That Protects Systematic Exploitation

Here’s where things get really infuriating… New Zealand’s Dairy Industry Restructuring Act gives Fonterra regulatory immunity as long as they maintains “farmer ownership” status. I’ve been reviewing Commerce Commission submissions and industry reports on this framework, and the protection appears to be quite comprehensive.

This legal shield lets them set raw milk prices unilaterally, control supplier access, and coordinate supply volumes—all without the competition oversight any regular corporation would face. The Australian Competition and Consumer Commission approved Lactalis’ sale despite farmer warnings about reduced competition because cooperative structures supposedly protect agricultural interests.

But here’s what makes this relevant to U.S. farmers: similar regulatory protections exist here through the Capper-Volstead Act of 1922, which grants cooperatives antitrust immunity for “mutual help” activities. The problem is, there’s no clear definition of what constitutes legitimate mutual help versus profit extraction at member expense.

The Numbers Don’t Lie: How Cooperative Policies Accelerate Farm Elimination

Now, you might be thinking, “That’s Australia, what’s this got to do with my operation?” Fair question. Let me connect the dots with some hard data from the USDA’s 2022 Census of Agriculture that’ll make your head spin.

Between 2017 and 2022, farms selling milk dropped by 39%—that’s 15,221 dairy operations gone. We went from 39,303 farms down to 24,082. Meanwhile, operations with 2,500+ cows increased from 714 to 834 farms, now controlling nearly half of all production according to agricultural economists at institutions like the University of Wisconsin.

Here’s the thing that really gets me: this isn’t happening in a vacuum. U.S. cooperatives are deploying the same cost-optimization strategies I documented at Fonterra to favor large-volume suppliers over smaller members. It’s not necessarily malicious—it’s rational business behavior enabled by regulatory structures designed when the average dairy farm had maybe 20 cows.

Farms with 100-499 cows dropped from 8,700 to 6,200 during this period, based on the USDA census data. These mid-size operations face the worst of both worlds: too large to qualify for beginning farmer programs, too small to negotiate favorable processing terms with their own cooperatives.

The complexity here is real—some consolidation reflects genuine efficiency gains, technological advancement, and changing consumer preferences. Research from University extension programs consistently shows that larger operations often achieve better environmental outcomes per unit of production. But—and this is crucial—when cooperative structures systematically amplify these natural consolidation pressures through pricing policies that favor volume over member equity, they accelerate the elimination of family farms beyond what market forces alone would drive.

How Federal Pricing Policy Enables the Squeeze

Federal Milk Marketing Orders create the regulatory foundation that enables this value extraction, and I’ll use the Upper Midwest FMMO as an example since that covers a lot of dairy country.

According to USDA Agricultural Marketing Service data, the Class I differential in Minneapolis runs about $1.60 per hundredweight above the base Class III price, but farmers in that region typically see maybe 50-60 cents of that premium depending on their cooperative’s policies. Different FMMO regions have different formulas, but the pattern is consistent nationwide: farmers receive regulated minimum prices while processors capture value-added premiums.

This isn’t inherently problematic—until you factor in how cooperatives use their dual role as both farmer representatives and milk marketers. When your cooperative also owns processing facilities (like most major co-ops do), it benefits from keeping your milk price low while maximizing processing margins.

During the fall breeding season, when cash flow tightens for most operations, this pricing differential really hits home. You’re dealing with higher feed costs from drought conditions across corn-growing regions, trying to get cows bred back for next year’s production, and your co-op benefits from the margin between what they pay you and what they charge their processing operations.

When Cooperatives Choose Corporate Profits Over Farmer Members

Let me give you some specific instances where this plays out, because the pattern is documented across multiple organizations and court records:

Dairy Farmers of America faced a significant class action lawsuit in 2016 (Dahl v. Dairy Farmers of America), where plaintiffs alleged that DFA manipulated milk prices to benefit their processing operations at member expense. While DFA denied wrongdoing and the case was settled, the litigation revealed internal documents showing how cooperative leadership systematically balanced member returns against processing profitability—and processing usually won.

Land O’Lakes’ transformation illustrates this tension perfectly. In 2019, they restructured from a traditional farmer cooperative to a hybrid model where farmer-members own the dairy business but professional investors control the feed and agricultural technology divisions. This shift reflects how modern cooperatives struggle to balance member interests against growth opportunities that require outside capital.

More recently, Organic Valley producers have expressed concerns about pricing disparities between regions and organic premiums that don’t seem to reach farmer members consistently. While Organic Valley maintains public transparency about their pricing formulas, the complexity of their regional payment systems makes it difficult for individual farmers to verify they’re receiving equitable treatment compared to members in other areas.

I’m not saying these organizations are inherently evil—they’re dealing with genuine market pressures and competitive challenges that would break smaller entities. But the regulatory framework that grants them antitrust immunity was designed when cooperatives were simple milk marketing organizations, not vertically integrated food companies with complex financial structures and competing priorities.

The Complexity That Cooperative Executives Don’t Want You to Understand

Look, I need to acknowledge something here that makes this whole situation more frustrating. The consolidation we’re seeing isn’t just about cooperative policies; it’s also about effective governance. Consumer preferences, retail concentration, environmental regulations, labor costs, and technology adoption—all these factors interact in ways that make simple explanations inadequate.

Some large operations genuinely achieve better environmental outcomes per unit of production. University of Wisconsin research consistently shows that farms with over 1,000 cows often have lower carbon footprints per pound of milk than smaller operations. Some small farms struggle with basic food safety compliance, which is increasingly expensive to maintain as regulations tighten.

Technology investments, such as robotic milking systems, precision feed management, and automated monitoring, require capital investments that make more economic sense for larger herds, where fixed costs can be spread across more production.

But here’s what really burns me up—when cooperative structures systematically amplify these natural consolidation pressures through pricing policies that favor volume over member equity, they accelerate the elimination of family farms beyond what market forces alone would drive. The Fonterra case matters because it shows how “farmer-owned” cooperatives can prioritize financial engineering ($3.4 billion asset sales) while using settlement theater to avoid addressing fundamental inequities in how they treat different groups of members.

Smart Farmers Are Finally Fighting Back

Here’s where I see some encouraging developments that give me hope—producers are getting smarter about distinguishing between legitimate cooperative functions and value extraction disguised as member services.

Some are quietly shifting portions of their volume to independent processors as bargaining leverage. A producer I know in central Wisconsin—a guy’s been farming for thirty years, runs about 400 head—started sending 30% of his milk to a regional cheese plant that pays a $2-per-hundredweight premium for high-quality milk with low somatic cell counts. His cooperative suddenly got very interested in “working with him” on pricing adjustments when they realized he had alternatives.

Others are building direct marketing channels that capture more of the consumer dollar. Regional cheese plants and smaller processors are seeing increased interest from farmers who want transparent pricing relationships where they can actually see how their milk gets valued.

The common thread? Farmers who stop accepting “that’s just how cooperatives work” and start demanding accountability for how their organizations actually serve member interests versus management interests.

The Bottom Line

I’m not advocating for dismantling the cooperative system—when it works properly, it provides crucial market power for individual farmers who couldn’t negotiate processing terms on their own. However, the current regulatory framework needs to be updated to reflect the realities of modern agricultural markets, where cooperatives have evolved into major food companies.

Document everything. Compare your cooperative’s pricing with every regional alternative during both peak production periods in late spring and when milk’s tight during summer heat stress. Calculate the real cost of membership by looking at opportunity costs, not just obvious fees and deductions.

Demand transparency. Push for detailed financial reporting that shows how cooperative operations actually benefit members versus enriching management or processing divisions. Ask for specific data on how pricing premiums flow through to member payments and why pricing varies between regions or facility types.

Build alternatives. Direct marketing, regional processors, and farmer-controlled marketing groups all provide competitive pressure that keeps cooperatives honest. Even if you don’t switch completely, having alternatives changes the negotiating dynamic with your current co-op.

Support policy reform. Antitrust immunity should require demonstrable member benefit, not just cooperative structure. When cooperatives become major food companies with processing operations competing against other processors, they should face the same regulatory scrutiny as other corporations.

The farms that survive this consolidation wave will be those that recognize the difference between legitimate cooperative functions and systematic value extraction. The Fonterra settlement shows exactly how the latter operates—fancy press releases about “collaborative approaches” while fundamental inequities remain unchanged.

Your cooperative isn’t automatically your ally just because you own shares in it. Judge them by results, not rhetoric. The numbers don’t lie, even when the press releases do.

What’s it gonna take for you to start asking the hard questions about your own cooperative membership?

KEY TAKEAWAYS:

• Document your losses: Calculate monthly pricing gaps between your co-op and regional alternatives—some producers discovered they’re leaving $2,000+ on the table monthly by staying locked into cooperative pricing that favors volume over quality
• Leverage competitive alternatives: Central Wisconsin producers using partial volume shifts to independent processors gained immediate $2/cwt premiums and forced their cooperatives to negotiate better terms within 90 days
• Demand transparency now: Push for detailed financial reporting showing how pricing premiums flow to members vs. processing divisions—cooperatives hate this question because it exposes where your milk money really goes
• Build exit strategies: Direct marketing channels and regional cheese plants are paying significant premiums for high-quality milk (low SCC, high butterfat) while cooperatives suppress prices to feed their processing operations
• Support policy reform: Antitrust immunity should require demonstrable member benefit—when cooperatives become major food companies competing against other processors, they should face the same regulatory scrutiny as corporations

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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