We believe that USDA and the Market Order Administration should eliminate 

provisions of milk market orders that treat handlers differently depending on 

whether they are organized as cooperatives or proprietary firms. The provisions 

hurt producers who sell to proprietary firms by putting their buyers at a competitive 

disadvantage. The provisions enable unfair methods of competition and unfair 

trade practices. The resulting loss of potential buyers hurts all farmers by reducing 

competition for milk. 

Section 608c(5)(F) allows cooperatives to blend the net proceeds from sales and 

“distribute thereof to its producers in accordance with the contract between the 

association and its producers...” This flexibility has been interpreted to permit 

cooperatives to pool milk, and receive distributions from the pool, even though the 

farmers are paid less than the market order blend or minimum pool price. Farmers 

supplying milk to proprietary plants, in order for that milk to be eligible for pooling 

and distributions from the pool, must each be paid the market order blend or 

minimum price. 

At any time, this disparate treatment allows cooperatives to out-compete 

proprietary firms for superior quality farmers by paying them premiums derived by 

paying other farmers prices below the order minimums. Over the past year or 

longer, the disparity has been more extreme. Some cooperatives in Wisconsin 

openly announced that they would be paying their producers prices substantially 

below the order minimums. The cooperatives were still able to participate in the 

market orders and receive pool distributions. Handlers that are financed as 

proprietary firms either had to pay significantly higher prices to each producer – 

prices that were not supported by the value of the commodities produced from the 

milk – or they were ineligible for participation in the market order and could not 

receive payments from the pool. The value of this inequity could have been as 

much as $.15 per pound of cheese for the price of milk, and a couple cents per 

pound for the pool draw. 

Economic analyses have provided strong evidence that competition results in higher 

prices for farmers. The number of milk buyers has declined significantly over the 

past decades. Concentration among milk buyers is high nationally and practically 

non-existent in some parts of the country. Rules that enable only a subset of buyers 
to obtain a subsidy from the market orders, contribute to the decline in 

competition by making it harder for some buyers to compete. 

The Capper-Volstead Act provides opportunities for farmers to combine in 

cooperatives without running afoul of anti-trust provisions of the Sherman and 

Clayton Acts. Subsequent case law has made it clear that the exemption is not 

unlimited. Predatory acts and monopolization are still restricted. The market order 

is governed by 608c(7)(A) that market order provisions include terms and 

conditions that: “Prohibit... unfair methods of competition and unfair trade 

practices in the handling thereof.” The need for the Market Order Administrator to 

protect competition is further amplified by the provisions that enable the rules of 

the market orders to be adopted only by the producers, but allowing cooperatives 

to submit votes en masse (so-called “block voting”) on behalf of their members. 

Processors organized as cooperatives have the ability to set the rules of the market 

orders in ways that provide them unfair advantages over their competitors. 

While the requirement to prevent anti-competitive behavior is based in Federal 

Code, as noted, the implementation of regulations to carry out that intent is the 

responsibility of the Market Administrator. CFR 1000.86(b) and/or other provisions 

should be revised or implemented in a manner that assures individual market order 

provisions do not harm competition. 

Our request is for the Market Administrator to require market order rules to benefit 

farmers equally whether they sell their milk to a buyer who is organized as a 

proprietary firm or sell their milk to a cooperative. We believe this is supportive of 

competition for farm milk and will result in better prices for all farmers.