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.
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. 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.
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.
Editorial on 11/16/2019
Print Headline: Got milk?