Dairy - Structure of The Industry

Structure of The Industry

While most countries produce their own milk products, the structure of the dairy industry varies in different parts of the world. In major milk-producing countries most milk is distributed through wholesale markets. In Ireland and Australia, for example, farmers' co-operatives own many of the large-scale processors, while in the United States many farmers and processors do business through individual contracts. In the United States, the country's 196 farmers' cooperatives sold 86% of milk in the U.S. in 2002, with five cooperatives accounting for half that. This was down from 2,300 cooperatives in the 1940s. In developing countries, the past practice of farmers marketing milk in their own neighborhoods are changing rapidly. Notable developments include considerable foreign investment in the dairy industry and a growing role for dairy cooperatives. Output of milk is growing rapidly in such countries and presents a major source of income growth for many farmers.

As in many other branches of the food industry, dairy processing in the major dairy producing countries has become increasingly concentrated, with fewer but larger and more efficient plants operated by fewer workers. This is notably the case in the United States, Europe, Australia and New Zealand. In 2009, charges of anti-trust violations have been made against major dairy industry players in the United States.

Government intervention in milk markets was common in the 20th century. A limited anti-trust exemption was created for U.S. dairy cooperatives by the Capper-Volstead Act of 1922. In the 1930s, some U.S. states adopted price controls, and Federal Milk Marketing Orders started under the Agricultural Marketing Agreement Act of 1937 and continue in the 2000s. The Federal Milk Price Support Program began in 1949. The Northeast Dairy Compact regulated wholesale milk prices in New England from 1997 to 2001.

Plants producing liquid milk and products with short shelf life, such as yogurts, creams and soft cheeses, tend to be located on the outskirts of urban centres close to consumer markets. Plants manufacturing items with longer shelf life, such as butter, milk powders, cheese and whey powders, tend to be situated in rural areas closer to the milk supply. Most large processing plants tend to specialise in a limited range of products. Exceptionally, however, large plants producing a wide range of products are still common in Eastern Europe, a holdover from the former centralized, supply-driven concept of the market.

As processing plants grow fewer and larger, they tend to acquire bigger, more automated and more efficient equipment. While this technological tendency keeps manufacturing costs lower, the need for long-distance transportation often increases the environmental impact.

Milk production is irregular, depending on cow biology. Producers must adjust the mix of milk which is sold in liquid form vs. processed foods (such as butter and cheese) depending on changing supply and demand.