Farmers have been forced to pay $900 million for marketing. Now they are teaming up with animal activists to find out how it was spent.
Cary Spivak, Milwaukee Journal Sentinel Published 9:57 a.m. CT Sept. 30, 2019
When it comes to strange political bedfellows, few groups could top the team pushing for a U.S. Senate bill aimed at reforming the controversial agriculture checkoff program.
It isn’t often the Humane Society of the United States aligns itself with dairy farmers, ranchers, environmental groups and the Heritage Foundation, a conservative think tank.
The team’s goal: Convince Congress to pass legislation requiring public disclosure of financial records showing how about $900 million paid by farmers into nearly two dozen mandatory checkoff programs is spent.
The sponsors of the bill are from opposite sides of the political spectrum. Lead sponsor Sen. Mike Lee, R-Utah, is joined by fellow conservative Sen. Rand Paul, R-Kentucky, and two liberal Democratic senators running for president — Elizabeth Warren of Massachusetts and Cory Booker of New Jersey.
"We know the only way that we succeed is by building broad-based coalitions of unlikely bedfellows," said Joe Maxwell, a hog farmer and executive director of the Organization for Competitive Markets, a Nebraska-based group representing farmers, ranchers and others.
Joe Maxwell, executive director of the Organization for Competitive Markets. (Photo: Organization for Competitive Markets)
"It’s an opportunity for Democrats and Republicans, conservatives, progressives, consumer groups, animal groups, farm groups to find work together."
Nevertheless, the proposal has died in Congress twice and has been opposed by some of the biggest players in agriculture, including major food processors, the National Cattlemen’s Beef Association, the National Pork Producers Council and the American Farm Bureau.
Opponents, which include some 40 groups, argued the proposal "will gut" the programs and "impose unnecessary, duplicative and counterproductive burdens" on them, according to a letter signed last year by the organizations.
The checkoff program requires farmers producing about two dozen commodities — from beef and eggs to avocados and Christmas trees — to pay a portion of their sales to organizations charged with marketing their products.
Dairy producers are, by far, the biggest contributors to the programs. Last year, dairy farmers paid about $420 million, or 47%, of all the checkoff money collected.
About $155 million of that went to Dairy Management Inc., based in Rosemont, Illinois.
In past years, much of the dairy money was used to produce marketing campaigns, such as the long-running "Got Milk?" effort. In recent years, Dairy Management has focused more on working with major retailers, such as Pizza Hut and McDonald’s, in the hope of getting them to use more dairy products.
Some operators of smaller farms complain they do not see the same benefits from the new emphasis as larger operations and giant co-ops.
"Big-time players can make a play that their checkoff dollars go to (projects that) directly benefit them," said Sarah Lloyd, a former Dairy Management board member who has about 400 cows on her Columbia County dairy farm. "I can’t do that. I’m a small ant."
There is additional frustration about the salaries paid to Dairy Management officials at a time when, faced with sagging milk prices and economic problems, scores of small farms are closing.
Thomas Gallagher, who has been Dairy Management’s CEO since the nonprofit was created in 1995, has been paid an average of $976,744 annually since 2010, the Milwaukee Journal Sentinel found.
The 10 top executives at Dairy Management were paid an average of $800,000 each in 2017 and two collected at least $1.19 million, according to IRS documents. That year, 1,600 dairy farms closed nationwide, including 503 in Wisconsin.
In 2014, Thomas Gallagher, second from right, of Dairy Management Inc. announced more than $500 million in fluid milk partnerships with seven major companies. The effort was launched to reinvigorate fluid milk sales, with special emphasis on extended shelf life and shelf stable fluid milk products that would be available when and where consumers want them. (Photo: Farm Journal)
Thomas Vilsack, joined Dairy Management days after he left his post as U.S. secretary of agriculture and was paid $800,557.
Push for disclosure
The checkoff boards are created by Congress and overseen by the USDA.
Unlike governmental bodies, however, financial records — such as detailed budgets and salary information — are not routinely made available for public inspection by the checkoff boards. The legislation would mandate public disclosure of budgets and spending by the boards.
"Sen. Lee believes farmers ought to have the right to know exactly how the checkoff dollars they are forced to pay are being spent," spokesman Conn Carroll said in an email. "Millions of dollars have been spent on questionable research partnerships with fast food giants and extravagant salaries for CEOs."
A second bill sponsored by Lee would make the checkoff program voluntary.
"There is no justification for forcing ranchers who don’t want to participate to do so against their will," Lee said in a statement sent by Carroll.
"We need to reform the checkoff programs to root out corruption," Warren wrote in March on the Medium website. "I support legislation that will make the checkoff program voluntary and ensure that Boards cannot engage in anti-competitive practices or lobby the government."
The Organization for Competitive Markets has been in a public records court fight since 2014 with the USDA in its efforts to obtain financial and audit records regarding the beef checkoff program. The government has released some records, but the organization contends it is withholding thousands of other public records.
Last year, the Organization for Competitive Markets posted its "Top 10 Most Egregious Checkoff Program Abuses."
Among the abuses claimed: The misuse of millions of checkoff dollars, including an attempt by the American Egg Board to kill sales of a vegan mayonnaise product; a $2.6 million embezzlement by a then-employee of an Oklahoma checkoff program; alleged illegal lobbying and the USDA’s failure to file on a timely basis required financial reports.
"We have a common goal and that is to curb the abuse of the USDA checkoff," said Marty Irby, executive director of Animal Wellness Action, a group lobbying for the bill.
Marty Irby, executive director of Animal Wellness Action. (Photo: Animal Wellness Action)
To Gallagher, the head of Dairy Management, the involvement of animal-rights groups is more sinister.
"What do all of these strange bedfellows have to do with winning the anti-animal (farming) activist issues," Gallagher asked in a Sept. 17 speech to Dairy Management board members. "What does that have to do with their agenda, which is get rid of farmers all together?"
Gallagher claimed the groups want to kill the checkoff program entirely — an allegation denied by the Humane Society and other supporters of the legislation.
"The anti-animal agriculture people, they’re married to other people who may or may not understand what the real agenda is," Gallagher told the dairy board members.
Gallagher did not specifically mention checkoff legislation. His staff would not allow a Journal Sentinel reporter to interview him after the speech at the Rosemont Hilton.
Colin Woodall, CEO of the National Cattlemen’s Beef Association, echoed Gallagher’s remarks. His group receives about $27 million in checkoff funds a year.
Colin Woodall, CEO of the National Cattlemen’s Beef Association. (Photo: National Cattlemen’s Beef Association)
"They don’t like animal agriculture. They don’t like animal beef production," Woodall said in an interview. "Whatever they can do to make it harder on us, that’s what they’ll do."
Gallagher said dairy farmers must team up with others, such as nutritionists and the foodservice industry, to fight animal-rights activists.
"That’s part of the underpinning of the Fuel Up to Play 60 program," he said referring to a program involving Dairy Management and the NFL. "That’s an important component to get to kids about the animal production industry now when they’re young."
Dairy Management paid the NFL more than $25 million from 2013 to 2017 for a variety of things, IRS records show.
Uphill fight in Congress
Proponents acknowledge they have an uphill fight in Congress, but their confidence was boosted last year when an amendment that would have attached the transparency proposal to the farm bill received 38 favorable votes.
Republican U.S. Sen. Ron Johnson of Wisconsin voted yes; Democrat Tammy Baldwin voted no.
“Pushing for greater transparency in checkoff programs is an important step Congress should take to ensure Wisconsin farmers’ hard-earned money is being used wisely," Johnson said in a statement issued by his office.
Baldwin opposed the measure because she did not believe it had input from Wisconsin dairy farmers and that it "doesn’t have widespread support from dairy farmers and groups," her spokesman, John Kraus, said in an email.
Bill proponents say their goal is not to kill the checkoff program, but to make it more transparent and more favorable to the small family farmer.
"The Humane Society of the United States is opposed to the industrial model of animal agriculture," said Scott Beckstead, rural outreach director for the group. "If the program were reformed, it would be more closely aligned with the original purpose — that is, to promote and support responsible, sustainable agriculture."
Beckstead, who said he grew up on a small farm in Idaho where his family raised cattle, said the Humane Society is not opposed to animal agriculture if it’s done properly.
"We just want to allow the farmers to see the books and see where their money is going," said Irby, the head of Animal Wellness Action.
"Look, I’m not a vegetarian," he said. "I have a New York strip steak from Whole Foods every Sunday…. it’s my favorite food."
More on the dairy crisis
To read the Milwaukee Journal Sentinel’s Dairyland in Distress series, which examines the plight of Wisconsin’s dairy industry, go to jsonline.com/dairycrisis.
About this series
This story is part of a yearlong effort by the Milwaukee Journal Sentinel and USA TODAY NETWORK-Wisconsin to examine the plight of the state’s dairy industry. Journalists from newsrooms across the state are exploring how sagging milk prices, economic factors and global forces are driving hundreds of farmers out of one of the state’s most important industries.
The Dairyland in Distress series is produced with the support of the Pulitzer Center. Officials from the organization played no role in the reporting, editing or presentation of the project.