Joe Kelsay’s family has been dairy farming for more than a century. He said President Martin Van Buren originally granted the family their land just south of Indianapolis, Indiana, in 1837, as part of a program to settle what was then considered “the West.”
But the milk business, like the broader agriculture industry, is struggling. It’s become more difficult for dairy farmers to turn a profit thanks to low prices for their product.
Last year, Kelsay Farms lost its biggest customer, dairy processor Dean Foods, which had bought and distributed their milk for 25 years. Dean would pasteurize the milk and then sell the finished, packaged product to retailers like Walmart. But Walmart decided to cut the middleman and build its own milk processing plant to serve its stores in the Midwest.
In November, Kelsay and his brother Russ sold their 370 cows to another farm. Watching the semi-trucks pull up to take their cows away was gut-wrenching.
“My family and I gathered in the barn and were watching our herd leave,” he said. “I’ve got three kids, and there wasn’t a dry eye in the house.”
Walmart’s new milk processing plant, a 250,000 square-foot facility in Fort Wayne, is the most recent and dramatic example of a decadeslong trend of consolidation and vertical integration in the agriculture industry. While other grocers, such as Kroeger, operate their own milk plants, and poultry companies have long controlled most aspects of production, experts said a retailer as large as Walmart has never built a plant as large as the one in Indiana.
Austin Frerick, an Iowa native and fellow at the Open Markets Institute, a think tank that advocates against concentrated corporate power, called it a harbinger of the future for small family farms ― unless the U.S. takes steps to limit the growth of huge agribusinesses. Big, efficient companies can keep prices low for consumers, but there may be negative tradeoffs for farmers, workers and rural communities overall.
“Do you want this much power in one family [the Waltons] or do you want family farms?” Frerick said. “That is kind of where the American economy is going unless we stand up and say, ‘Enough’s enough.’”
On Saturday, HuffPost is teaming up with Open Markets, as well as the Iowa Farmers Union and the Storm Lake Times, for the Heartland Forum, a discussion with 2020 candidates on rural issues.
Tune in to our livestream on HuffPost at 1 p.m. CDT Saturday to hear from four 2020 candidates ― former Housing and Urban Development Secretary Julián Castro, former Rep. John Delaney (Md.), Sen. Amy Klobuchar (Minn.) and Sen. Elizabeth Warren (Mass.) ― as well as Rep. Tim Ryan (Ohio), who has been considering a bid, about their vision for rural America.
Farm incomes have dropped nearly 50 percent since 2013, according to the U.S. Department of Agriculture, even as the broader economy has thrived. And for decades, production has been shifting to much larger farms, which doubled their share of American cropland between 1987 and 2012.
The companies that sell farmers things like seeds and fertilizer, and those that buy the food they grow, have been getting bigger and more consolidated, meaning smaller farmers are less and less able to get favorable prices. The four largest firms controlled 85 percent of the market for corn seeds in 2015, for example, and the four biggest companies controlled 70 percent of the hog slaughtering market.
There’s increasing support among progressive activists and Democratic members of Congress for curtailing the power of bigger agribusinesses. The Open Markets Institute says the federal government ought to impose a moratorium on new corporate mergers in the agribusiness sector and break up vertically-integrated firms, among other things. It’s an agenda that would require federal agencies to use antitrust power that has lain dormant for years, and Congress would have to step in with new legislation.
And Democratic presidential hopefuls are proposing plans to do just that. This week Sen. Elizabeth Warren (D-Mass.) announced legislation that largely resembles the Open Markets plan.
“I will appoint trustbusters to review ― and reverse ― anti-competitive mergers, including the recent Bayer-Monsanto merger that should never have been approved,” Warren wrote in a Medium post.
Sen. Cory Booker (D-N.J.) has also called for an agricultural merger moratorium, and Sen. Amy Klobuchar (D-Minn.) wants to give federal antitrust regulators more power to stop mergers.
Meanwhile, thousands of dairy farmers every year are giving up, despite strong sentimental attachment to a way of life many inherited from their parents. There were more than 80,000 dairy farms in 2003. In 2018, there were just 40,000.
Jim Goodman, a former dairyman in Wisconsin, wrote in a December op-ed that he couldn’t watch the trucks take away his cows last year after he milked them for the last time. He preferred “being able to remember them as I last saw them, in my barn, chewing their cuds and waiting for pasture, is all I have left.”
Wisconsin Farmers Union spokeswoman Danielle Endvick described saying goodbye to her family’s herd in a 2017 op-ed. “When the cattle trailer backed up beside the milkhouse, our big Brown Swiss, Brownie, was among the first to load,” Endvick wrote. “I paused to scratch her head one last time before nudging her across the gutter and out the door. One by one the cows filed out, closing a chapter on the farm.”
Part of the problem is that Americans are drinking less milk, but a bigger part is that there’s just too much supply, which pushes prices down and is a particular challenge for smaller farms. That’s why Wisconsin Farmers Union supports creating a system to limit the supply of milk on the market, which would boost its price. Congress considered such a policy in 2014 but backed off in the face of strong opposition from then-House Speaker John Boehner (R-Ohio), who called it “communism.”
Walmart’s new milk processing facility in Indiana is one of the largest in the U.S., producing white and chocolate milk for 600 Walmart and Sam’s Club stores across the country. It sources raw milk from 31 farms that are all within 210 miles of the plant, meaning the company is saving on freight.
“By operating our own plant and working directly with the dairy supply chain in the Midwest, we’ll further reduce operating costs and pass those savings on to our customers so that they can save money,” Walmart’s Tony Airoso said in a 2016 press release when the company announced it would build the plant.
As opening day approached, Dean Foods reportedly sent notices to more than 100 farmers in eight states that it would cease buying their milk. In a disclosure to investors Dean Foods said Walmart alone accounted for more than 17 percent of its business, and that now that Walmart has its own plant it will buy 125 million fewer gallons of milk annually from Dean Foods. The company declined to provide specific details about how many contracts it canceled.
Forty-two farmers in Pennsylvania received termination notices last year, according to Jayne Sebright of the Pennsylvania-based Center for Dairy Excellence, and seven or eight of those have since exited the industry while the rest found new markets for their milk.
Joe Kelsay may have inherited dairy farming from his forebears, but he threw himself into the work. He studied agricultural economics at Purdue University and used his farm to help make videos and teach tour groups about farming.
He said he called Walmart to ask if they would buy his milk, but they said already had enough. So did everybody else.
“We made every call that we could, more than a dozen to milk brokers, to co-ops, to other processors, and got one ‘maybe’ out of a dozen or 15 calls,” Kelsay said.
He and his brother still raise crops on their farm and are trying to figure out how to reorganize their business. Kelsay says he’s a fan of free markets and isn’t sure how much he wants government involved.
“From a conceptual standpoint I think that it’s dangerous to artificially hold a business up,” he said. “When it happens to you, it gets to be a little more difficult pill to swallow.”