This editorial originally appeared in The Washington Post.
Though hardly a household name, Dean Foods is a pillar of American business, a Fortune 500 company with 15,000 employees and net sales of $7.75 billion in 2018.
Well, Dean Foods was a pillar; it filed for bankruptcy protection on Tuesday and is seeking a buyer. There are implications not only for the sector Dean once dominated — milk processing — but also for long-standing federal policies shaping dairy production.
Dean went bankrupt for many reasons, but the fundamental one is this: Americans do not want its product as much as they used to. Fluid milk consumption has declined by 47 percent since 1970, from 273.8 pounds per person in 1970 to 146 pounds. Consumption of other milk-based products such as cheese and yogurt has offset that, but overall dairy use remained basically flat between 1974 and 2014, according to the Agriculture Department.
The aging of U.S. society means less demand for the quintessential kid’s drink; so does the simultaneous rise of soy milk, bottled water and veganism. Amazing but true: Americans eat substantially less ice cream per capita nowadays than they did in 1946.
Meanwhile, technological advances have enabled dairy farmers to produce more from each cow, sharpening the competition among them for a share of a shrinking market. Farms all over America are closing; since 2013, the number of licensed dairy herds has declined by 20 percent, from 46,975 to 37,468 in 2018, according to the USDA.
The policy lesson is that government can only do so much to promote a commodity in the face of overwhelming market forces. The USDA has supported dairy marketing efforts to persuade Americans to eat more cheese and drink more milk, most famously through the “Got Milk?” campaign (which gave way, in 2014, to “Milk Life”). At the same time, subsidies and price supports have attempted to protect producers from volatile prices (both for their product and for inputs such as feed), to the tune of $6 billion between 1995 and 2019, according to the Environmental Working Group, which tracks farm programs.
The 2018 cost of the main dairy safety-net program was almost $254 million; Congress sweetened it somewhat in the farm bill adopted last year. Arguably, by helping farmers delay an inevitable shakeout, federal policy made it that much more painful.
The goals of these programs were understandable. Dairy farms have been the backbone of many a rural community; their disappearance would represent a loss not only of jobs and income but also of social cohesion. Though Americans might like milk less than we once did, we surely value a stable and prosperous countryside, confident enough to reject demagogic politics. But the fact remains: Taxpayers have little to show for the money devoted to dairy support over the years. The country needs a new strategy for what seems an inevitable phase of consolidation and modernization. That new strategy must work with the market rather than against it.