Fluid Milk

SIC 2026

Industry report:

This industry encompasses establishments primarily engaged in processing fluid milk, cream, and related products that include cottage cheese, yogurt (except frozen), and other cultured milk products.

Industry Snapshot

The fluid milk industry is an important subsection of the nation's dairy business. Fluid milk producers are often huge, sophisticated, diversified operations with product lines crossing industry boundaries. They manufacture and market a mix of fluid milk products, cheeses, ice creams, butter, dairy ingredients, and sometimes extensive lines of nondairy products. This article focuses on fluid milk production.

In 2009, there were 9.2 million milk cows on U.S. farms. Each cow produced an average of 20,576 pounds milk annually for a U.S. total milk production of over 189 billion pounds. That year, California had the highest milk production (42.2 billion pounds), followed by Wisconsin (24.4 billion pounds), New York (12.4 billion pounds), Idaho (12.3 billion pounds), and Pennsylvania (10.6 billion pounds).

According to industry statistics, approximately 525 establishments operated in this category in 2009. Companies in this industry tended to be large with nearly 96 percent of industry sales being generated by firms that employ more than 100 workers. The overall fluid milk manufacturing industry was valued at $24.3 billion in 2009. The industry employed an estimated 42,498 people.

The sale of milk in bulk containers for in-home use is a mature and stable business and has little room for significant growth. However, the milk products industry continued to benefit from the increased popularity of specialty milks and products in convenience packaging. With a penetration level nearing 98 percent in U.S. homes, milk was struggling to hold ground due to oversupply and weak demand caused by a recessive economy. In addition, milk was finding it more and more difficult to compete with soft drinks, flavored waters, and other specialty beverages in the modern family of the early 2010s.

Organization and Structure

The highly regionalized fluid milk industry started on the dairy farm, where the raw milk was produced, and extended out to processors and manufacturing plants owned by dairy farm cooperatives, general food processors, and even by supermarket chains marketing private label product lines. These processing plants made a variety of milk products destined for retail outlets, foodservice and institutional markets, and, to a lesser degree, other countries. Milk is an extremely perishable commodity, and supply and demand can fluctuate unpredictably, depending on such variables as the output of individual cows, weather conditions, and even conditions on the roads driven by milk tanker trucks.

In the 1990s, changes in the dairy industry transformed the complex relationships between cooperatives and processors. Dairy cooperatives traditionally helped to reduce the impact of such fluctuations on milk handlers by coordinating supply arrangements and more efficiently routing raw milk supplies not needed for fluid milk. Dairy cooperatives assisting the producers in price setting have taken over all stages of dairy operations in many cases, including herd management and milking; management of fluid milk supplies and surpluses; development of competitive new products; fluid milk processing; and the manufacture and marketing of a broad range of dairy products and ingredients.

Government pricing regulations were another means of insuring market stability. The government regulated milk pricing to farmers through Federal Milk Marketing Orders authorized by the Agricultural Marketing Act of 1937 and the Agricultural Act of 1949, which established the ongoing dairy price support program for areas where producers had agreed to abide by it. Supervised regionally by the U.S. Department of Agriculture (USDA), prices were established geographically and according to the milk supply, fat content, weight, and the end use of the milk. From its inception, the support price fluctuated according to market conditions. In addition to the federal pricing structure, almost one-third of milk-producing states regulated milk pricing to farmers.

Milk Processing.
Cow milk is the principal source of fluid milk supply in the United States. It contains about 87 percent water and 13 percent solids, which are composed of solids-not-fat (SNF) and milk fat. Components of SNF are mostly protein (caseins and whey), lactose, and minerals important to human nutrition. An excellent source of calcium, phosphorous, and vitamins A and B-2, and a good source of vitamins B-1 and B-12, milk's nutritional components earned it the label of "most perfect food." It is, however, a poor source for iron, copper, manganese, nicotinic acid, and vitamins C and D. Since the 1920s, most milk sold in the United States has been fortified with vitamin D.

Class I fluid milk meets strict standards, which include regular inspections of the herd and herd housing facilities, dairy equipment, and milk storage units to insure that they satisfy health and sanitation requirements. Class I milk is used for human consumption or in manufactured milk products. Milk of manufacturing grade does not meet such strict standards and is priced lower.

In most dairy operations, raw milk is piped from a milking machine to a refrigerated bulk storage tank before it is transferred to a tank truck for delivery to a plant. There it undergoes certain processing operations, including separation, pasteurization, and homogenization. In separation, the milk is split into cream (fat) and skim milk. The cream is then added back to the milk stream to achieve the desired fat content. In pasteurization, the milk is heated to destroy pathogenic bacteria and other undesirable organisms that might lead to spoilage. In continuous high-temperature short-time pasteurization (HTST), milk is heated to 161 degrees Fahrenheit (72 degrees Celsius) for a minimum of 15 seconds. Since about 1970, ultrahigh temperature pasteurization (UHT), through which milk is heated at temperatures as high as 265 degrees Fahrenheit (130 degrees Celsius) for three seconds, has been used with products such as heavy and light cream and half-and-half. This process has extended shelf life for several months. In homogenization, the fat globules in milk are broken up, forming a stable emulsion that does not separate. Most fluid milk is homogenized.

Fresh Milk.
Whole milk, low-fat milk, skim or nonfat milk, cream, half-and-half, and buttermilk are included in the fresh milk category. Whole milk contains not less than 3.25 percent milk fat and 8.25 percent solids-not-fat (SNF). Vitamin A may be added at levels of at least 2,000 International Units (IU) per quart, and Vitamin D may be added at levels of at least 400 IU. Flavoring ingredients may also be added. Low-fat milk contains milk fat at levels of 0.5, 1.5, or two percent, not less than 8.25 percent SNF, and has at least 2,000 IU of vitamin A per quart. If vitamin D is added, it must be present at a level of 400 IU per quart. Flavoring ingredients are also permitted. Skim or nonfat milk contains less than 0.5 percent milk fat and not less than 8.25 percent SNF. It must contain 2,000 IU of vitamin A per quart. If vitamin D is added, it must be present at a level of 400 IU per quart. Flavoring ingredients are allowed.

Cream, which is rich in milk fat, is made by separating out most of the skim milk. Light (coffee) cream contains between a minimum of 18 percent and a maximum of 30 percent milk fat. Heavy (whipping) cream contains at least 36 percent milk fat. Half-and-half, which is a mixture of milk and cream, contains between 10.5 percent and 18 percent milk fat. It is often preferred over coffee cream because of its lower fat and calorie content, as well as its lower cost.

Buttermilk is a by-product of churning cream into butter. Similar in composition to skim milk, it is condensed and dried for commercial use in baking and packaged cake mixes.

Cultured Milk Products
For centuries, people have known how to preserve the nutritional value of fresh milk for weeks or months by using bacterial cultures. Lactic acid-producing bacteria and certain characterizing ingredients may be added to fresh milk products and, depending on the level of milk fat, they may be labeled "cultured buttermilk," "cultured lowfat buttermilk," or "cultured skim milk (or nonfat) buttermilk." Yogurt, sour cream, dry curd cottage cheese, and cottage cheese are included in the cultured milk products category.

Yogurt is made by culturing a mixture of milk and cream with lactic acid-producing bacteria, Lactobacillus bulgaricus and Streptococcus thermophilus, and contains not less than 3.25 percent milk fat and 8.25 percent SNF. Often sweeteners, flavorings, and other ingredients are added. Low-fat yogurt contains no more than two percent milk fat, and nonfat yogurt contains less than 0.5 percent milk fat. Sour cream results from the addition of lactic acid-producing bacteria to pasteurized cream containing not less than 18 percent milk fat.

Dry curd cottage cheese is made by adding either lactic acid-producing bacteria or acidifiers to skim milk or reconstituted nonfat dry milk. Rennet or other enzymes may also be added to help curd formation. The soft, unripened cheese contains less than 0.5 percent milk fat and no more than 80 percent moisture. Cottage cheese is made by the addition of a creaming mixture to dry curd cottage cheese. It contains between a minimum of four percent milk fat and a maximum of 80 percent moisture. Low-fat cottage cheese contains two percent or less milk fat and no more than 82.5 percent moisture.

Background and Development

History.
The first cows landed at the Jamestown Colony in North America in 1611, and in 1624, cows were brought to Plymouth Colony. At that time, dairying was a family affair, and it was not until urbanization that dairy farms were established to supply nearby cities. In the industry's infancy, a large number of small local producers provided the milk for their immediate areas. With the introduction of milk preservation and sanitation methods, it became possible for large dairy processors, who were often far removed from raw milk sources, to supply ever more distant markets.

A creamery built in Goshen, Connecticut, in 1810 was one of the first formal business units established as a cooperative venture. Cooperative cheese rings and dairy cooperatives in eastern states soon followed, and the movement spread to Wisconsin and other Midwest states. It did not gain momentum, however, until after the Civil War, when the Grange and other farm organizations sponsored a number of experimental cooperatives. By 1900, there were approximately 1,000 farmer cooperatives. A period of dynamic growth occurred from 1915 to 1930, when cooperatives were placed under statute laws rather than common law. Passage of the Capper-Volstead Act in 1922 established the right of agricultural producers to band together in voluntary associations for mutual benefit in collective processing, handling, and marketing of agricultural products in interstate and foreign commerce.

Some milestones along the way included Louis Pasteur's experiments using heat to kill microorganisms in milk (1856); Gail Borden's first successful milk condensery in Burrville, Connecticut (1857); development of the milk bottle by Dr. Hervey D. Thatcher of Potsdam, New York (1884); introduction of tuberculin testing for dairy herds and Dr. S. M. Babcock's perfection of a fat content test for milk and cream (1890); introduction of commercial pasteurizing machinery (1895); perfection of the automatic bottle filler and capper (1911); the first use of tank trucks for milk transport (1914); successful sale of homogenized milk in Torrington, Connecticut (1919); introduction of vitamin D-fortified milk (1932); perfection of a vacuum pasteurization process (1946); introduction of ultrahigh temperature (UHT) pasteurization (1948); the start of nutrition labeling for fluid milk products (1974); widespread acceptance of UHT milks (1981); increased popularity of low-fat and skim milk, with sales surpassing whole milk for the first time (1988); and mandatory nutrition labeling under the Nutrition Labeling and Education Act (1991).

Breeding efficiency, the ability to improve the herds rapidly using artificial insemination techniques, was introduced in the 1940s, and the selection of superior sires brought milk production a long way from the mid-1800s, when cows produced an average of only 322 gallons annually. By 1991, nearly 10 million dairy cows yielded an annual average of 14,867 pounds of milk per cow. In 1991, fluid milk accounted for $24.7 billion, or 39.3 percent, of the total $62.8 billion in sales for the entire dairy industry. By the mid-1990s, however, per capita milk sales had experienced a decline of 15 percent since 1975.

Co-op Controversy.
In the late 1960s and early 1970s, dairy co-ops faced allegations of monopolistic practices and political contributions. Consumer advocate Ralph Nader accused the three largest dairy co-ops--Associated Milk Producers Inc. (AMPI), Dairymen Inc., and Mid-America Dairymen Inc. (Mid-Am)--of illegal contributions totaling $422,000 to President Richard Nixon's reelection campaign. Nader alleged that the co-ops were trying to influence the Nixon administration to enact higher price supports (passed in 1971) and to drop antitrust suits against the three co-ops.

Eventually, AMPI pleaded guilty to having made illegal contributions in 1968, 1970, and 1971. This, however, was not the end of AMPI's legal battles, and in 1989, the U.S. Supreme Court upheld an appeals court ruling, filed in 1971 by the National Farmers' Organization (NFO), that determined that AMPI had conspired to eliminate competitive milk producers.

Meanwhile, after decades of backing the industry through price support programs and the purchase of surpluses, the federal government gradually reduced its role, although no one predicted an immediate elimination of supports. As with many issues in the dairy industry, opinions were divided as to whether supports protected the dairy farmers or whether a free market would better serve them.

More Scandal in the Dairy Industry.
Computerized bid-analysis techniques uncovered conspiracies in the mid-1980s in Florida, where the court said that illegal bid rigging had raised the price of milk as much as 14 percent. The U.S. Department of Justice and a few other states began their own investigations, and by mid-1987, signs of illegal bid rigging extended into Georgia, Alabama, and Mississippi. The dollars involved were considerable. According to the Milk Industry Foundation, from 1981 to 1991, fluid milk sales to schools remained at a steady seven percent. By 1993, fines and settlements reached more than $100 million.

Even as investigations and prosecutions proceeded, a report from the General Accounting Office (GAO) criticized the government for its share of responsibility for the schemes. Once bid rigging had been discovered, the USDA had the authority to halt federal funding to companies found guilty of bid rigging and to bar their future participation in the federally financed programs according to the GAO. In addition, under federal marketing and price-support programs, dairies were aware of competitors' minimum prices, creating a situation that provided opportunities for collusion. The USDA countered that the exclusion of private companies was inappropriate if the companies paid the penalties imposed and satisfied the federal agency's requirements.

Health Concerns Affect Industry.
As sales of fluid milk flattened and cottage cheese sales plunged in the 1980s, sales of cultured milk products increased. Yogurt sales soared 88 percent from 583 million pounds to nearly 1.1 billion pounds between 1980 and 1991, and sour cream and dips jumped 61 percent, from 408 million pounds to 657 million pounds. The growing popularity of ethnic foods, especially Mexican, in the late 1980s and early 1990s spurred growth in the $750 million sour cream and dip market.

In the early 1990s, industry analysts forecasted that fluid milk sales were likely to drop between one and 1.5 percent annually. In 1992, sales declined in every major milk product except yogurt, which posted a 5.8 percent gain. The figures illustrated the trend reported by the Milk Industry Foundation (MIF), which said that from 1974 to 1991, total fluid milk product sales (plain whole milk, low-fat milk, skim milk, flavored milk and drinks, and buttermilk) rose a scant 0.05 percent, from 52.48 billion pounds to 55.23 billion pounds. Sales of whole milk plummeted 43.7 percent in that period, from 36.77 billion pounds to 20.68 billion pounds, while low-fat milk sales jumped from 9.76 billion pounds to 25.22 billion pounds.

Per capita sales from 1974 to 1991 dropped 10.6 percent, from 245.9 pounds to 219 pounds for all milk products, and from 172.3 pounds to 82 pounds for whole milk. During the same period, low-fat milk sales more than doubled, from 45.8 pounds to 100 pounds per capita.

A report by Bozell Worldwide consultants detailed a 23 percent drop in per capita milk consumption for the 35 years from 1955 to 1990, and it noted a dramatic drop in milk drinking after age 17. At the time, 64 percent of the U.S. population was 25 or older. Still, nearly 95 percent of U.S. households purchased milk, usually from supermarkets, where milk posted 1991 sales of nearly $6.8 billion and accounted for 31.06 percent of dairy case sales. It was the most frequently purchased supermarket item for the year ending March 1992, just ahead of bread.

Nevertheless, milk's image as the most perfect and nutritionally complete food was slipping. Studies linked it to diabetes and certain infant allergies. Consumers also expressed concern about the fat in milk, although a 1990 Pennsylvania State University study found that more than half the survey's respondents did not know the fat content of whole and skim milks, and 40 percent did not know the fat content of low-fat milk. Even those who thought they knew milk's fat content tended to overstate it. A National Dairy Board study found that many Americans erroneously believed that reducing fat content also depleted milk's nutrients.

Consumers' health concerns about fat in their diets presented opportunities for the introduction of flavorful low-fat and skim milk products, and dairy companies worked to improve the taste of these products in order to compete with nondairy beverages like soft drinks, bottled waters, beer, juices, and sports drinks. At the same time, fluid milk producers began to take aggressive steps to improve the industry's outlook. A combination of consumer education, advertising and promotion, and consumer-responsive new products was seen as imperative to restoring consumer demand for and confidence in fluid milk and fluid milk products.

One of the efforts by the industry to counteract the downward trend in milk consumption involved the launching of national advertising campaigns, such as the "milk mustache" series of ads that featured well-known celebrities. The industry also petitioned the Food & Drug Administration (FDA) to eliminate strict labeling standards for milk and other products. In late 1996, the FDA announced a policy that would make labeling of dairy products consistent with that of other low-fat and nonfat foods. For example, under the new policy, two percent milk was to be renamed "reduced fat," one percent relabeled "lowfat," and skim milk as "fat free" or "nonfat." The new rules were applauded by the International Dairy Foods Association as opening the way for the industry to formulate more lower-fat products.

In 1999, the Beverage Marketing Corporation (BMC) issued its first report on the overall conditions of the top nine beverages in the United States. The categories included beer, bottled water, fruit beverages, soft drinks, spirits and wine, coffee, tea, and milk. These beverages had an overall volume growth of 2.4 percent from 1997 to 1998. Milk was the only one of the nine with lower volume--0.04 percent. However, milk was second in terms of wholesale dollars, with 16.8 percent, and second in per capita consumption, at 23.6 gallons, with soft drinks first in both categories.

The Farm Bills.
In the last decade of the twentieth century, the industry was poised to tackle changes in the fluid milk market in a united fashion and form a probable position of financial strength. A major development was the passage of the Federal Agricultural Improvement and Reform Act of 1996 (FAIR), which called for a phased elimination of government supports for dairy products. In 1996, the support price was $10.35 per hundred weight (cwt) level.

As part of the Farm Bill, the Northeast Interstate Dairy Compact (NIDC) was to have been a transitional system of dairy price supports to help dairy farmers in the northeastern United States. The NIDC was to have been phased out by April 1999, but Congress extended it until October of that year, while trying to come to a consensus regarding milk pricing. The NIDC eventually ended in late 2001. The dairy compact provided a floor to milk prices and guaranteed regional milk supplies. This left the heavily milk-producing states of the Midwest with a smaller market. The compacts were limited to contiguous states. The USDA countered by reducing the number of federal marketing orders from 33 in 1996 to 11 in 2000. This was further lowered to 10 federal milk marketing orders when the Western Federal milk marketing order was discontinued in 2004. The orders would still be responsible for setting milk prices.

Critics of the dairy compacts charged that they were a price-fixing scheme and eliminated all pretenses of market forces in the industry. Some claimed favoritism of farms in the compact and encouragement of overproduction, thereby reducing milk prices for all producers. The International Dairy Foods Association stated that the continuation of the compacts would cost consumers and taxpayers, who support Women, Infant, and Children (WIC) programs, between $571 million and $1.64 billion.

The biggest problem to dairy reform is that the legislators themselves often are challenged by the complexities of the industry. The U.S. senators from the upper Midwest opposed continuing the NIDC or creating new compacts, claiming that Wisconsin dairy farmers would lose $64 million in sales a year. Even a senator from Massachusetts, a beneficiary of the NIDC, opposed its continuation. The compact had resulted in higher prices to consumers to the tune of $74,000 per dairy farmer, yet farmers in Massachusetts received an average of only $3,000. The charge was that most of the money went to large farms in Vermont to protect them from competition. The smaller farmers were being bought out by the larger ones and were going out of business even faster--by 25 percent--than before the so-called protections.

Price supports were to have been eliminated altogether by 2000. However, the 2002 Farm Act extended them through 2007. In May 2008, the Food, Conservation, and Energy Act of 2008, which continued federal milk marketing orders, was passed into law.

Developments in the 1990s and Early 2000s.
Federal and local governments continued to have heavy hands in the dairy industry. California enacted legislation in 1962 requiring low-fat milk sold in that state to have added calcium and protein. The regulations, which supporters said were needed to protect the health of children and the elderly, effectively prevented out-of-state producers from selling milk in the state. In 1999, a California state appeals court ruled the state could not fine out-of-state milk producers for selling milk in California that meets federal nutritional guidelines.

Record-breaking floods and drenching rains left tens of thousands of acres in the Mississippi River Valley under water in the summer of 1993. Although damage measured in the tens of billions of dollars, many dairy farmers were spared. For example, although Minnesota farmers were unable to plant vast portions of acreage, the cows responded to cooler than usual temperatures by giving more milk. A Land O'Lakes spokesperson noted that this helped to offset higher feed costs and increased risk of udder infections from the sloppy conditions.

Milk production continued to rise. In the first three quarters of 1999, U.S. dairy farms produced 122.3 million pounds, which was up from 118.5 million pounds in the first three quarters of 1998, representing a 3.2 percent increase. There were 27.5 million milk cows, about the same as in 1998. The amount of milk per cow in the first three quarters of 1999 was 13,366 pounds, up 3.4 percent from the same time in 1998. The states with the largest production of milk in 1999 were California, Wisconsin, New York, Pennsylvania, and Minnesota. California, Indiana, Arizona, Florida, and Virginia recorded the greatest increases in production.

According to figures from Information Resources Inc., reported by Dairy Field, total milk sales in traditional venues (supermarkets, drug stores, and discounters) totaled $10.9 billion for the 12 months from September 2001 to September 2002. Revenues from refrigerated skim milk led with sales nearing $6.8 billion. Although often maligned for its high fat content, whole milk still managed to generate $3.2 billion in sales. However, both skim and whole milk product sales reflected a year-on-year decline, with skim falling a fraction (0.2 percent) and whole falling 1.8 percent.

Innovative approaches to packaging added new energy to the industry in the early 2000s. Consumer demand for convenience drove the market, and milk product manufacturers responded with a widening range of single-serve offerings. Flavored and unflavored milk, cottage cheese, dairy-based dips, sour cream, cream cheese, and cheese snacks have all become available in single-serve packaging.

In addition to consumer demand for convenience, the industry met a growing demand for flavored milk, particularly for the teenager market, which had been one of its weakest sectors. Chocolate remained the leading flavored milk, but the variety in offerings and package sizes had increased. Other flavors that were challenging the well-established chocolate milks for shelf space in the early 2000s included strawberry, banana, and coffee-infused milks.

During the 2005 season, about 16.8 billion pounds of whole milk were sold, down from the 2004 total of 17.4 billion pounds. Meanwhile, two percent milk sold more than 17.5 billion pounds, a slight decrease from 2004, though one percent milk had a minimal increase to nearly 6.4 billion pounds. Skim milk sales rose modestly to nearly eight billion pounds. Flavored whole milk sales dropped dramatically from one billion pounds sold in 2003 to 754 million pounds sold in 2005.

According to the International Dairy Foods Association, in 2007, 41 percent of the milk produced in the United States was used to make cheese, whereas 23 percent went to fluid milk, cream, and related products; 18 percent was used for butter, and eight percent went into ice cream and other frozen dairy products. Total revenues from the fluid milk sector of the dairy industry were $39.7 billion in 2008, according to Dun and Bradstreet.

Current Conditions

Although in 2008, milk production in the United States reached 189.9 million pounds, up from 186.2 million pounds in 2007 and 181.8 million pounds in 2006, the dairy industry in general was in a recession by 2009, along with the rest of the U.S. economy. High feed prices, reductions in herd sizes, and low milk prices continued to affect on the industry during 2009 and 2010, according to the USDA. Production per cow was also predicted to be lower as the nation headed into the second decade of the twenty-first century. A drop in domestic demand as well as a decrease of exports worked to lower milk prices in 2009.

By 2010, the industry was reeling. During 2007 and 2008, many milk operations had increased production capacities due to increased domestic and export demand and higher prices. However, as the United States slid into a recession in 2008, demand dried up and prices fell precariously low. Some industry insiders were pointing a finger at the government for poor planning. "Across the nation, dairy operations are going bankrupt as under-pressure farmers point to price manipulation and poorly designed government programs as chief culprits," David Bennett wrote in Farm Press in June 2010.

A new farm bill is due for debate in 2012. Whether smaller operations could hold out that long was a matter of debate. Total industry receipts in 2009 fell by one-third, from $35.7 billion and $35.1 billion in 2007 and 2008, respectively, to just $24.5 billion in 2009. However, in August 2010, the National Milk Producers Federation's Board of Directors announced a variety of changes in federal dairy policies in an attempt to better protect dairy producers against the increasingly volatile global market. The changes revamp a plan that works as an insurance safety net tied to the margin between cost of production (i.e., feed costs) and revenues (price of milk). The plan also includes a stabilization component that works as a signal to the industry when an imbalance between feed costs and milk prices widens to create low-level margins for producers.

In the late 2000s, the milk industry competed with dozens of new products on the market in the beverage category. The challenge the industry faced was making consumers aware that milk has no more calories than a can of regular cola and is far more nutritious. Consumers tended to save milk for breakfast products, such as cereal. At close to 20 gallons, the per capita consumption rate was actually lower when the milk used on cereal and in cooking is taken into account.

In 2008, the U.S. Dairy export industry was valued at $3.83 billion, according to the U.S. Dairy Export Council. Exports totals 2.55 billion pounds, or 10.6 percent of U.S. milk production. Almost all exports (99 percent) were for commercial consumption. Although global demand was down in 2009, mid-2010 export totals were trending higher from the previous year.

Industry Leaders

Dallas, Texas-based Dean Foods was the leading U.S. dairy producer, with 2009 sales of $8.5 billion in its fresh dairy division, which accounted for about 76 percent of total revenues. Dean's milk processing plants bought raw milk directly from farmers and processed it into skim milk, half-and-half, whipping cream, yogurt, sour cream, buttermilk, and cottage cheese. Typically, some 75 percent of plant output was marketed to supermarkets and other retail food outlets. Specifically, Wal-Mart and Sam's accounted for 19 percent of Dean's business and the company's top five customers accounted for 31 percent of its business. The rest was supplied to restaurants, hotels, schools, hospitals, military installations, and fast food chains. Industrial sales accounted for a relatively small portion of Dean's business.

Kansas City, Missouri-based Dairy Farmers of America Inc. (DFA) was another leader in the industry. One of the country's largest dairy co-ops, DFA had 17,000 members in 48 states. Sales in 2009 reached $11.2 billion. Other leaders included Quality Chekd Dairy Products Association of Naperville, Illinois, with 27 members and 59 manufacturing facilities; and Prairie Farms Dairy Inc., a private cooperative based in Carlinville, Illinois, which had nearly $1.2 billion in 2008 sales and 1,800 employees.

Workforce

The U.S. Department of Labor Bureau of Labor Statistics reported 2009 employment for the dairy product manufacturing industry at 129,500 workers, with the average hourly wage of a production worker in the industry at $15.99 an hour.

Jobs in the dairy industry requiring a college degree included farm and processing plant management, quality control, and research. Training for herd management, milk production, processing, distribution, and sales could be obtained from secondary and vocational schools.

Research and Technology

There was consternation and divided opinion among dairy farmers and processors beginning in the late 1980s on how, and whether, they would make use of bovine somatotropin (rBST), even though it had been found safe for human consumption by the National Institutes of Health and approved by the FDA. rBST is a genetically engineered version of a hormone that occurs naturally in cows and increases milk production as much as 15 percent. It was first marketed by its producer, Monsanto, under the trade name Posilac. In 2008, Eli Lilly and Company announced plans to purchase the Posilac brand from Monsanto for an estimated $300 million.

Proponents argue that milk from rBST-treated cows is indistinguishable from milk produced by ordinary cows. Critics, however, note that cows that have been treated with rBST (or BGH-bovine growth hormone, as it is also known) are more likely to contract mastitis, an udder infection. The hormone has been rejected by Canada and countries in Europe.

Growing consumer concerns related to the synthetic hormone's safety led to a backlash against its use. The California Dairies Inc., a large dairy cooperative responsible for 14 billion pounds of annual milk shipments, instructed its members to stop injections of rBST on herds by August 1, 2007. Although members were later given the option to use rBST, they were required to pay extra for the cleaning of tanks and trucks that was necessary to haul their milk, according to president of the co-op, Richard Cotta. They were also given an option of an early release from their contracts with California Dairies.

The trend against milk from rBST-enhanced cows continued to spread throughout the country. In 2008, for example, almost all the members of the Michigan Milk Producers Association signed an agreement stating they would not inject their cows with the hormone, in exchange for a premium price from processors.

The hormone was the subject of a labeling debate as well, with ongoing discussion about whether milk from rBST-treated cows should be labeled as such. Some questioned where this might stop: If milk products produced from rBST-treated cows are required to be labeled as such, they argued, similar requirements for other undisclosed substances in foods, such as pesticides and antibiotic residues, could follow. Others insisted consumers had a right to know what was in their milk. Michigan handled the problem by producing new labels advertising milk as "hormone-free" but including the disclaimer "No significant difference has been shown between milk derived from rBST treated or non-rBST treated cows." The controversy continued to wage on in the legislatures and courtrooms of Kansas, Ohio, Pennsylvania, Indiana, Missouri, and Montana as the first decade of the twenty-first century neared a close.

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