The Evolution of Farmers, Their Cooperatives and the Capper-Volstead Act: Part 1
Posted on May. 3, 2013

The Capper-Volstead Act, 42 Stat. 388 (7 U.SC. §291) (“C-V” or “Capper-Volstead”) was passed in 1922. Some 90 years later farmers and their cooperatives continue to rely on the limited antitrust protection provided by C-V and other Acts passed around that time. The pertinent wording of C-V is as follows:

Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, that such associations are operated for the mutual benefit of the members thereof, as such producers, and confirm to one or both of the following requirements:….

Some argue today that because farms have grown much larger and some have vertically integrated and because cooperatives have grown larger and have become vertically integrated, they should no longer be able to rely on C-V, but should be governed by the same antitrust rules that apply to other businesses.

I respectfully disagree with those who want to restrict or eliminate C-V antitrust immunity for agricultural cooperatives. My view is that the C-V immunity is if anything even more critical to farmers today than when enacted in 1922. This article explains why there is an increased reliance by farmers and their cooperatives on C-V today.

My personal story will illustrate the growth of farms. I grew up on a dairy farm in southeastern Idaho during the 1940’s and 50’s. My family farmed about 100 acres where we grew hay, barley and silage corn to feed our herd of 25 milking cows and the accompanying dry cows, heifers and calves. There were several smaller dairies in our town and a few larger. It seemed like a lot of hard work to milk the cows twice a day, feed them, clean the barn and care for the equipment, and still do the other farm work. We had to do the first milking and the morning chores in time for me to clean up, have breakfast and catch the bus at 7:55 while school was in session.

Initially, we sold our milk to a proprietary condensed milk company some 15 miles away. However, we were not able to benefit from higher prices obtained by other dairymen who had access to the fluid milk plants in Salt Lake City, over 100 miles away. Then my Dad sought and obtained membership in a dairy cooperative which owned a fluid milk processing plant that served much of Utah. Membership in this cooperative enabled us to get a better price. The higher price and resulting increased revenues enabled us to upgrade our barn and facilities. Over time we also grew our herd to around 100 cows. Nevertheless, despite the success and (for the time) relatively substantial size of our family’s dairy farm, even then we were wholly reliant on the dairy cooperative to provide us a market.

When we could find no land to buy which would allow us to grow the dairy operation sufficiently for me to stay and earn a living on the farm, I decided to follow in the footsteps of an uncle into the legal profession.

Now as I visit my home county in southeastern Idaho I find about the same population of people, but a greatly increased population of dairy cows. In fact, I recently visited a dairy with over 3,000 cows only a few miles from our farm, which we have since sold to a neighbor so that he could expand his dairy. I found that this 3,000 cow dairy is wholly reliant on its cooperative for a market, just as my family’s farm had been. If the cooperative did not pick up the milk every day, process it, market it and pay for it, this 3,000 cow dairy could not last a month.

Dairymen do not have direct access to markets because they cannot afford to do their own processing and marketing. They must rely on their cooperatives or proprietary handlers. On my family’s farm, we soon found that the proprietary handlers would cut back on what you could ship if their market shrank, but that the cooperative would take all our milk every day and would put the excess supply into butter, powder or cheese to help balance supply of fresh milk to demand.

My experience on my family’s farm showed me, as confirmed years later by the experience of a 3,000 cow dairy farm in my home county and by many similar experiences, that without dairy cooperatives today we would have a vastly different and far more concentrated dairy industry. Cooperatives are critical to the economics of dairy farms. Since C-V is critical to the existence of dairy cooperatives, C-V immunity is critical to the economics of dairy farms. Similar economics in other agricultural sectors lead to the same conclusions about the need for farmers and ranchers in those sectors to rely on agricultural cooperatives to provide a market, and thus on the continuing need for C-V immunity to allow cooperatives to exist.

Dairy farmers in my view have become even more reliant on cooperatives to provide a market for their output, and cooperatives have had to grow accordingly, because of the massive growth of retailers and middlemen. While dairies were becoming fewer and larger we have seen the grocers, food service and other wholesale customers grow much more than the dairies. Today, a 3,000 cow dairy has no better chance to market its milk than we had with our small dairy 50 years ago. Our cooperative has had to also grow through mergers and acquisitions in order to meet the demands of today’s giant customers such as Kroger, Wal-Mart, Costco, Associated Foods, and others.

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