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Food & Power: In Wisconsin, Farmers Fight Effort to Weaken Cooperatives; GIPSA Rules Killed by USDA

In Wisconsin, some of the state’s biggest agricultural cooperatives want to weaken farmers’ control over their own cooperatives. Farmers in the state argue that the changes–in the form of amendments to the state agricultural laws–are simply meant to enhance the power of larger-scale cooperatives, and stray from the true intent and purpose of a farmer […]

October 19, 2017  |  by Open Markets

In Wisconsin, some of the state’s biggest agricultural cooperatives want to weaken farmers’ control over their own cooperatives. Farmers in the state argue that the changes–in the form of amendments to the state agricultural laws–are simply meant to enhance the power of larger-scale cooperatives, and stray from the true intent and purpose of a farmer cooperative.

Assembly Bill 353 was introduced in May, and companion Senate Bill 281 was introduced in June. The bills would allow cooperatives to have up to 2 voting board members who are not members of the cooperative. The bills would also allow cooperative holding companies, of which there is one is Wisconsin, to assign voting rights to members based on size and patronage, rather than the existing one member, one vote system. The bills also remove an existing 8% cap on dividends, and restrict cooperative members’ access to historical financial and other records.

The proposed changes “fly in the face of the principles” of cooperatives, says Oren Jakobson, a vegetable farmer and chair of the board of the Stevens Point Area cooperative. He says that the bills serve only the biggest cooperatives in the state, and seem “almost exclusively geared toward consolidation.”

The state Assembly held a hearing on its bill on September 27, and the state Senate held a hearing on October 12. Supporters of the bills include Cooperative Network, a cooperative association whose membership includes the dairy mega-cooperative Land O’ Lakes. Many farmers and farmer advocates spoke out against the bills.

Some farmers are particularly concerned about not being able to access historical financial records and other information about their cooperatives. “Accountability and transparency is one of the most effective tools to maintain good leadership and good administration of a cooperative,” says Jakobson. If members’ access to records is restricted, he says it will be much harder to hold board members accountable and for aspiring board members to access information that could help them unseat incumbents. 

When discussing record-keeping concerns during his testimony at the Senate hearing, John Robison, vice president and general counsel of Foremost Farms, said that his cooperative is “a different organization than some of the smaller cooperatives…we operate more like a corporation.” Foremost Farms supports reforming the state laws.

Sarah Lloyd, a dairy farmer and special projects coordinator for the Wisconsin Farmers Union, took issue with Robison’s comment. She says that Robison’s sentiment “[erodes] the core principles of cooperatives,” including protecting small-scale farming and economic democracy for members. A cooperative “is a business that is providing a service or services for its members,” she says. “[Cooperatives are] really a way to keep the economy closer to the ground and closer to the people.”

Milk production in Wisconsin has stayed relatively stable in recent years, but the size of milk cow herds has grown. According to the Wisconsin Milk Marketing Board, in 2016 there were 1,279,000 dairy cows in Wisconsin on around 9,500 dairy farms. In 2007, there were almost the same number of dairy cows in the state but around 14,000 farms.

The state has maintained a relatively competitive dairy industry, but powerful cooperatives are moving in on the state’s farmers. In April, nearly 60 Wisconsin farmers lost their contracts with Grasslands Dairy Products, Inc., a dairy processor, during trade negotiations with Canada. Just a few weeks later, most of those farmers had signed contracts with Dairy Farmers of America, a giant dairy cooperative that has repeatedly faced allegations of collusion, monopolizing regional markets, and depressing farmers’ wages. 

Dairy Farmers of America and Foremost Farms are also working together to open a cheese and whey facility in Michigan.

GIPSA RULES KILLED BY USDA

The Department of Agriculture on October 17 withdrew the “GIPSA rules,” a set of interim final rules written late in the Obama Administration that would have empowered farmers to combat consolidation in the poultry and livestock industry. The rules would have been enforced by the Grain Inspection, Packers, and Stockyards Administration (GIPSA), an agency at USDA that works to uphold competition in the livestock sector and that enforces the Packers and Stockyards Act. The rules would have become effective on October 19.

Farmers have advocated for the GIPSA rules since at least the 2008 Farm Bill debates. The rules were developed after the USDA and Department of Justice announced a joint effort to combat consolidation in the food and farming economy. The rules would have been particularly effective for contract poultry farmers who are paid in an opaque “tournament system” by multinational poultry companies. USDA released the rules in December 2016.

In withdrawing the rules, USDA admitted that the rules would have brought “broader protection and fair treatment for livestock producers, swine production contract growers, and poultry growers,” and potentially “more equitable contracts,” as well as “improvements to the parity of negotiating power.”

Nevertheless, the agency decided that withdrawing the rules was “the best option” because the agency’s cost-benefit analysis projected around $50 million in spending associated with implementing the rules.

The USDA also cited “serious legal and policy concerns” mostly to do with whether the courts would give deference to the rules. Most of the other concerns discussed in its memo were from industrial agriculture interests, such as “a livestock packing industry association,” “a major poultry trade association,” and trade associations for the pork and beef industries, and mostly cited technicalities with how GIPSA was written or its comment period administered.

As part of a broader USDA reorganization, GIPSA was recently moved to the Agricultural Marketing Service, an agency that oversees promotion of agricultural products and marketing programs, such as checkoff taxes. Many food policy advocates are concerned that the move will compromise GIPSA’s regulatory function, given that AMS works closely with the livestock industry. Before joining GIPSA, the current Acting Administrator of the agency, Randall D. Jones, worked at AMS for 7 years.

WHAT WE’RE READING 

  • Walmart acquired Parcel, a logistics and delivery company, so it can offer same-day delivery for groceries and other perishable items. Amazon already offers same-day grocery delivery in some areas through its Amazon Fresh program. 
  • The American Antitrust Institute, Food & Water Watch, and the National Farmers Union earlier this month sent a joint letter to the Department of Justice detailing the groups’ continued concerns about the pending Bayer-Monsanto merger. The concerns include the potential of vertical integration of traits, seeds, and chemicals under one company, and also the combined company’s ability to collect and monetize farm data. The merger is currently under review in Europe. 
  • Aramark, one of the largest food service companies in the country, acquired a procurement company and a uniform company for a combined $2.35 billion. The Philadelphia-based company holds contracts with universities, hospitals, jails, and other institutions. 

Photo from chefranden on Flickr

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