Who Profits Off Factory Dairy Farms?

by Bill Du Bois

Who profits off large feedlot dairies? The answer may surprise you.

The European dairy farmers being imported had 50 to 75 cows back home. According to the London Daily Telegraph, South Dakota officials encouraged them to open 600 head dairies. They were told, “In South Dakota there is such a demand for milk and the costs are so low that farmers are able to dictate the price to their suppliers.” They were then talked into borrowing $10’s of millions to finance operations of 1,400 head or more. It was a classic case of “bait and switch.”

South Dakota Ag Producer Ventures (SDAPV) got $203,500 of taxpayer money to recruit people to build 2,500 head dairies. Legislator Joel Dykstra, now House Assistant Majority Leader, was CEO. Secretary of Agriculture Larry Gabriel and Christine Hamilton of Game, Fish, and Parks were board members.

SDAPV is a private investment club that promised $4,000 would yield $10,000 in five years. That’s a 49% annual return. They didn’t invest in running dairies. They made money advising other people to own them.

In the 1980’s farm crisis, banks and the cooperative extension service encouraged farmers to borrow money to EXPAND. Farmers who took the advice were young, college educated and seen as progressive.

When land prices went down, they took the fall alone.

Bankers and the extension service today are again encouraging farmers to borrow millions to EXPAND. Only this time, since giant dairy feedlots rely on local financing, local banks are also going to take the fall. Unfortunately, that will hurt us all.

Dairy insiders estimate 50% to 80% of the giant dairies will go broke at least once. Consultants tell me, it’s a game being run across Canada and the U.S. Once they’ve gone broke a couple of times, speculators buy them up for pennies on the dollar.

The giant dairy farmers themselves are in denial. They’re leveraged to the hilt and owe their soul to both the company store and the bank.

When government is in cahoots with bad business, the rest of us are in trouble. The only way industrial feedlots can turn a profit is by shifting costs and risks on to taxpayers.

Giant liquid manure lagoons are accidents waiting to happen. Taxpayers shouldn't have to bear the risks of giant feedlots doing businesses. Other businesses have insurance. Family farmers may incorporate for tax reasons but not to hide from responsibility. If giant feedlots are as safe as proponents say, it shouldn't be prohibitively expensive to be bonded.

This year, South Dakota legislators refused to require that limited liability corporations be bonded to cover clean-up and environmental damage. Large agribusiness front groups testified bonding would discourage factory farms from coming to South Dakota.

This year’s legislature also authorized $2.5 million for just one anaerobic manure digester. They’re the cookie monsters of manure, gobbling up manure and turning it into methane gas. Sounds great in theory but it doesn’t work out in real life. “How many anaerobic digesters are profitable without a government subsidy?” asks Bill Weida, former chair of Economics at the Air Force Academy. “The answer,” he says, “is zero.”

A recent study by Ohio State University added up economic benefits compared to costs over 30 years for large dairy feedlots in two counties. The total net benefits were $6,000 in one county and $33,000 in the other. Road repairs cancel out most benefits.

“It creates jobs,” cry dairy proponents. That was taken into account. However, the study didn’t include the cost of bilingual tutors school systems have to hire. It didn’t subtract for taxpayer subsidies to anaerobic manure digesters. Nor did it include the cost of the increased medical problems those within a three mile radius are likely to suffer or their loss of property values.

Studies show property values decrease 15% to 40%. Put a calculator on that. If land is worth $1,000 an acre, property values within a three mile radius drop by $4.7 million. If it’s worth $2,000 an acre, that’s a decrease of $9.4 million.

Taxpayers and neighboring farmers pick up the tab.

Agribusiness groups use our tax dollars and our check off dollars to promote these big outfits that are driving authentic family farms out of business. “EXPAND,” they say. They pretend it’s our only choice to save the family farm.

Not true. We could instead take the speculators out of farming. We certainly shouldn’t use tax dollars to line their pockets.