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Dairy Price Gouging Investigated

POSTED: 09:00 PM ET, 05/19/2008 by Derek Kravitz

Federal regulators are investigating allegations that the nation's largest dairy cooperative, Dairy Farmers of America, has manipulated milk and cheese prices, The Wall Street Journal reported today.

And investigators are separately reviewing a transfer of $1 million in cash to Gary Hanman, a former director of the organization, as part of the latest investigation.

Most U.S. dairy farmers work within a rigid government system set up in the 1930s to give thousands of small dairies a guaranteed market for their milk and to even out prices for consumers.

A yearlong Post examination of farming subsidies in 2006 showed that most farmers who participate in regional pools operated by the federal government or states deliver raw milk to cooperatives or food processors.

It's long been acknowledged that dairy programs raise the retail price of milk, resulting in a type of price gouging. The watchdog group Citizens Against Government Waste estimates that the programs cost U.S. consumers at least $1.5 billion a year.

Dairy Farmers of America, a Kansas City-based co-op which controls a third of the U.S. milk supply, also faces antitrust lawsuits by farmers and retailers alleging it conspired to suppress prices it paid for raw milk in the Southeast, while raising prices to the region's retailers, the Journal reported.

By Derek Kravitz |  May 19, 2008; 9:00 PM ET
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