Sen. Bernie Sanders says Vermont dairy farmers are getting such low prices for their milk because Dean Foods Co. is a monopoly and is manipulating the price.

Flapdoodle, says Dean CEO and Chairman Gregg Engles (in effect; CEO’s don’t customarily talk that way), his company doesn’t set the price. The U.S. Government does.

Engles is wrong. The Government does establish a minimum price. But a year ago the actual price was some 40 percent higher than the $11.28 cents per hundredweight farmers are getting these days.

But Engles being wrong doesn’t necessarily make Sanders right. After all, a year ago, when the price was higher, Dean’s dominance of the market was roughly what it is now. Why weren’t they manipulating the price downward then?

It’s interesting that Engles did not say what big-shot dairy executives and their backers usually say when accused of manipulating the price – that the market, good old supply and demand, determined the price.

On the face of it, that would seem like a pretty good argument right now. There’s a recession, so it makes sense that people all over the world are drinking less milk and eating less cheese. If demand goes down, so will the price.

If demand is going down. Some say that it is not.

Either way, maybe Engles knows that the old, “the market did it” argument won’t fly anymore. By now, most people seem to understand that, in the words of John Peck of Family Farm Defenders, “there’s no free market in milk.”

And even if lower demand is one reason for lower prices, that doesn’t prove that Sanders (who didn’t claim that market manipulation was the only reason prices were low) is wrong in blaming Dean and calling for a U.S. Department of Justice anti-trust investigation into whether Dean is using its market power to suppress prices.

He has some powerful supporters and some persuasive – if by no means conclusive – evidence. In a letter to the Justice Department, Sanders and Democratic Sens. Charles E. Schumer of New York and Russell D. Feingold of Wisconsin say that three years ago the “career professionals in the Antitrust Division…recommended action against…Dean Foods” and other dairy firms.

The letter also states that “According to numerous complaints, Dean Foods and DFA (about which more in a moment) have repeatedly conspired to refuse independent farmers and small cooperatives access to bottling plants in order to force these entities to join DVF or market through DFA affiliates.

DFA (Dairy Farmers of America) is actually the company to which most Vermont dairy farmers sell their product. It isn’t Dean Foods. But then, it isn’t exactly not Dean Foods, either, and not just because it then turns around and sells almost all of what it buys to Dean for processing.

The two firms have all sorts of interconnections. For instance, after Dean merged with Suiza Foods in 2001 (Suiza actually bought Dean, but the combined firm took the Dean name), anti-trust regulators told the new company that its size made it a potential monopoly, and ordered it to sell 11 bottling plants.

So DFA and two former Suiza executives started a new company, National Dairy Holdings, and bought the plants from Dean, making NDH the second largest bottler of fluid milk in the country, after Dean itself. (DFA just sold NDH to Grupo Lala, a Mexican dairy firm). DFA also held a share in a Suiza subsidiary, Suiza Dairy Group, but subsequently sold its share to…Dean Foods.

Confused yet? If so, you’re in good company. The dairy industry is a bewildering concatenation of subsidiaries, partnerships, agreements, and brand names, all of which sound sort of alike. Just in New England, for instance, a customer in most stores might buy a container of milk from either Booth brothers or Hood.

Hood owns Booth Brothers.

Or that customer can buy milk from Garelick Farms, “New England’s Home Town Dairy,” except that Garelick is owned by none other than Dean Foods, whose home town is Dallas.

All those names and inter-locking arrangements almost seem designed to make it difficult for the average person to know who owns what.

Come to think of it, maybe they were.

In fact, going through all the Dean Foods corporate machinations and legal allegations would both take too much time and only stupefy most readers. For now, let’s deal with a few facts, plus a little speculation.

The facts:

–Dean (via DFA) is said to buy at least 70 percent of Vermont’s milk. Those who say this are hostile to the company, which has said the figure is too high. But it has not given its own figure, and did not respond to a request to do so yesterday;

–Dean Foods reported second quarter profits of $64.1 million, a 31 percent increase over the second quarter of 2008 even though total sales declined. Costs declined even more;

–In Wisconsin, where no one processing firm controls as much of the market, dairy farmers get 55 centers per hundredwieght more for fluid milk (after transportation and other costs are deducted) than do their peers in the northeast, according to John Bunting, an upstate New York farmer and farm advocate.

“When there’s more competition, you usually get a better price. That’s how economics works,” said John Peck, who said he teaches economics at a community college (though is doctorate is in another field).

Suggesting, of course, that the market – supply and demand – does have an impact on price. So if people are drinking less milk and eating less cheese because of the Recession, that could account for almost all of the price decline afflicting Vermont’s dairy farmers.

“There has been no fall in demand,” said John Bunting, a self-described “troublemaker” to the dairy establishment, but also a frequently consulted expert on dairy matters. Reading from what he said were data from Information Resources Incorporated, which tracks shipments to major retailers, Bunting said that American supermarkets were buying more dairy products this year than last year.

As to reports that Chinese had cut way back on dairy purchases, Bunting dismissed that as an “insignificant” decline in raw milk exports.

”They (dairy firms) could have taken care of that by taking 67-cents-a-hundredwieght (from the farmer’s milk price). Instead they took a billion dollars a month from farmers milk checks,” he said.

None of this proves that Dean is manipulating prices, or even that it’s a monopoly, however a monopoly is defined. Economists differ. One rule of thumb is that if four firms control 80 percent of a market (the “four-firm concentration ratio”) that market is said to be an “oligopoly.” By that standard, and if Dean really controls 70 percent of the Vermont dairy market, it might well be considered a monopoly.

And if it could control the price, it would be foolish not to. Corporations are not in business to compete. They are in business to earn as much money as possible. Buying cheap and selling dear is one good way to do that.

Michal Lunak, Extension Specialist and Assistant Professor at the University of New Hampshire Agricultural Extension Service, said of Dean Foods, “can they manipulate the price? Yes. Can you prove it? No. We do not have a competitive market. We used to have 14 independent processers in New England and the farmer got a good price. Now there’s one buyer and the farmer has to take his price.”

According to some experts, market domination is not the only means by which dairy prices are manipulated. John Bunting said the single most significant factor affecting dairy prices nationwide is “the trading of generic block Cheddar on the Chicago Mercantile Exchange,” which can be partially controlled by “a handful of elite players.”

What? Manipulate the Chicago Mercantile Exchange?

Well, the News Guy will examine this again at some time, though truth to tell, his first reaction was that this must be a paranoid populist pipe dream.

Except that eight months ago, the Commodity Future Trading Commission fined DFA and two of its executives $12 million “for attempting to manipulate the Class III milk futures contract” on the Chicago Mercantile Exchange.